| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation and Principals
of Consolidation The Company’s consolidated financial
statements include the financial statements of the Company and its wholly-owned subsidiary, True2Bid, Inc. (“True2Bid”)
up until the dissolution of True2Bid on July 2, 2015, at which point the financial statements were no longer consolidated. All
intercompany accounts and transactions have been eliminated in consolidation Going Concern The financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in our accompanying consolidated financial statements, the Company had net income and net
cash used in operating activities of $278,188 and $15,364, respectively, for the year ended March 31, 2017. The net income was
primarily attributed to the gain from the change in fair value of derivative liabilities. The Company had accumulated deficit,
stockholders’ deficit and working capital deficit of $10,267,849, $1,022,703 and $1,022,703, respectively, at March 31, 2017.
The Company had no revenues for the year ended March 31, 2017. Our notes payable and certain convertible notes are currently in
default. Management
believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve
months from the issuance date of this report. Management cannot provide assurance that
we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital.
Management believes that our capital resources are not currently adequate to continue operating and maintaining its business strategy
for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional
debt and/or equity financings to fund its operations in the future. Although the Company has historically raised
capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue
to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects
that the Company will need to curtail or cease operations. These consolidated financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. Use of Estimates The preparation of the consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Significant estimates during the years ended March 31, 2017 and 2016 include assumptions used in assessing estimates of deferred
tax valuation allowances and the valuation of derivative liabilities. Fair Value of Financial Instruments and Fair Value Measurements FASB ASC 820 - Fair Value Measurements
and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value
of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of
financial instruments are based on pertinent information available to the Company on March 31, 2017. Accordingly, the estimates
presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of
the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable
inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy
are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2—Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3—Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. The carrying amounts reported in the consolidated
balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate
their fair market value based on the short-term maturity of these instruments. Assets or liabilities measured at fair
value on a recurring basis included conversion options in convertible notes and warrants with their exercise price containing a
down-round provision (see Note 6) were as follows at March 31, 2017 and 2016:
At March 31, 2017 At March 31, 2016
Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Derivative liabilities — — $ 80,165 — — $ 800,973 A roll forward of the level 3 valuation
financial instruments is as follows:
For the Year Ended March 31,
2017 2016
Balance at beginning of year $ 800,973 $ 1,088,085
Initial valuation of derivative liabilities included in debt discount — 211,250
Initial valuation of derivative liabilities expensed — 192,151
Reclassification of derivative liabilities to equity upon conversion of debt — (188,327 )
Reclassification of derivative liabilities to gain on debt extinguishment upon conversion of debt* — (75,357 )
Gain from change in fair value of derivative liabilities (720,808 ) (426,829 )
Balance at end of year $ 80,165 $ 800,973
* The derivative liabilities related to the note conversions were reclassified were reclassified to equity during the period prior to the three months ended March 31, 2016 and to gain on debt extinguishment during the three months ended March 31, 2016. The Company believes the accounting for these conversions under debt extinguishment accounting is preferable. ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The
fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If
the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings
at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments. Cash and Cash Equivalents For purposes of the consolidated statements
of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date
and money market accounts to be cash equivalents. At March 31, 2017 and 2016, the Company did not have any cash equivalents. The Company maintains its cash in bank
and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC
insured levels as of March 31, 2017 and 2016. The Company has not experienced any losses in such accounts through March 31, 2017. Inventory Inventories are stated at the lower of
cost or market value. Cost is determined using the cost to acquire inventory and is valued using the first-in, first-out method.
During the year ended March 31, 2017, the Company determined that the inventory of $570 was impaired and was written off. As of
March 31, 2017 and 2016, the Company’s inventory was not significant as the Company was inactive during year ended March
31, 2017. Derivative Liabilities The Company has certain financial instruments
that are embedded derivatives associated with capital raises and certain warrants. The Company evaluates all its financial instruments
to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately
accounted for in accordance with ASC 815-10 – Derivative and Hedging – Contract in Entity’s Own Equity In July 2017, FASB issued ASU No. 2017-11,
Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part
I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain
financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing
whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The adoption
of this guidance is not expected to have a material impact on the Company’s financial statements. Revenue Recognition In May 2014, FASB issued an update Accounting
Standards Update, ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent
ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim
and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity to recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services and also requires certain additional disclosures. adoption of this guidance
is not expected to have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition
from customers. The Company did not have revenues from operations for the year ended March 31, 2017 and 2016. Stock-Based Compensation Stock-based compensation is accounted for
based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of
the cost of employee and director services received in exchange for an award of equity instruments over the period the employee
or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires
measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award. In June 2014, the FASB issued Accounting
Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the
Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB
Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based
payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite
service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite
service period is treated as a performance condition. For all entities, the amendments in this Update are effective for annual
periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective
date is the same for both public business entities and all other entities. The Company early adopted ASU 2014-12 during the period
ending June 30, 2016. The adoption of ASU 2014-12 did not have any material impact on the Company’s financial statements. Pursuant to ASC 505-50 - Equity-Based Payments
to Non-Employees, all share-based payments to non-employees, including grants of stock options, were recognized in the financial
statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected
to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until
service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense
recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to
Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment
transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions
for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15,
2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting
the new revenue recognition guidance in ASC 606. The adoption of this guidance is not expected to have a material impact on the
Company’s financial statements. Income Taxes The Company accounts for income tax using
the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will
be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset
net deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of
the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or
loss in the period that includes the enactment date. The Company follows the accounting guidance
for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes Basic and Diluted Income (Loss) Per
Share Pursuant to ASC 260-10-45, basic income
(loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding
for the periods presented. Diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number
of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially
dilutive common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible
notes and common stock issuable. These common stock equivalents may be dilutive in the future. The following potentially dilutive
equity securities outstanding as of March 31, 2017 and 2016 were not included in the computation of dilutive income (loss) per
common share because the effect would have been anti-dilutive:
March 31,
2017 2016
Stock warrants 5,273,315 5,273,315
Convertible notes 58,495,484 53,621,314
Total 121,066,143 58,894,629 The following is a reconciliation of the
numerator and denominator used in the basic and diluted earnings per share calculations for the year ended March 31, 2017:
March 31,
Numerator:
Net income $ 278,188
Add: Interest expense 229,560
Less: Gain from change in fair value of derivative liabilities (720,808 )
Adjusted net income (loss) $ (213,060 )
Denominator:
Weighted-average shares of common stock 62,570,659
Dilutive effect of convertible notes 58,495,484
Diluted weighted-average of common stock 121,066,143
Net income (loss) per common share:
Basic $ 0.00
Diluted $ (0.00 ) Related Parties Parties are considered to be related to
the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under
common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties with which the Company may deal with if one party
controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting
parties might be prevented from fully pursuing its own separate interests. Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13 —Fair
Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement Removals
1. The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy
2. The policy for timing of transfers between levels
3. The valuation processes for Level 3 fair value measurements
4. For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period. Modifications
1. In lieu of a roll forward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.
2. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.
3. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additions
1. The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period.
2. The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. In addition, the amendments eliminate at
a minimum an entity shall disclose at a minimum Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s
financial statements. |
