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EX-32.2 - NuSTATE ENERGY HOLDINGS, INC.ex32-2.htm
EX-32.1 - NuSTATE ENERGY HOLDINGS, INC.ex32-1.htm
EX-31.2 - NuSTATE ENERGY HOLDINGS, INC.ex31-2.htm
EX-31.1 - NuSTATE ENERGY HOLDINGS, INC.ex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2017

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________.

 

Commission file number 000-25753

 

NUSTATE ENERGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Florida   87-0449667
(State of Incorporation)  

(IRS Employer Identification No.)

 

401 E. LAS OLAS BOULEVARD, SUITE 1400

FORT LAUDERDALE, FL 33301

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (954) 712-7487

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ]   Accelerated filer [  ]
     
Non-accelerated filer [  ]   Smaller reporting company [X]
(Do not check if a smaller reporting company)    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

The aggregate market value of the common equity voting shares of the registrant held by non-affiliates on December 31, 2016 was $100,575, at a share price of $0.0042 on that date. For purposes of this calculation, an aggregate of 23,946,318 shares of Common Stock were held by non-affiliates of the registrant on December 31, 2016 and have been included in the number of shares of Common Stock held by affiliates.

 

The number of the registrant’s shares of Common Stock outstanding as of September 28, 2017: 2,208,756,170

 

In this Annual Report on Form 10-K, the terms the “Company,” “NuState,” “we,” “us” or “our” refers to Nustate Energy Holdings, Inc., unless the context indicates otherwise.

 

 

 

 

 

 

WARNING CONCERNING FORWARD LOOKING STATEMENTS

 

CERTAIN STATEMENTS IN THIS ANNUAL REPORT CONTAIN OR MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED UTILIZING NUMEROUS ASSUMPTIONS AND OTHER FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, OUR ABILITY TO IMPLEMENT OUR BUSINESS MODEL, RAISE SUFFICIENT CAPITAL TO FUND OUR OPERATING LOSSES AND PAY OUR ONGOING OBLIGATIONS, ECONOMIC AND MARKET CONDITIONS AND FLUCTUATIONS, GOVERNMENT AND INDUSTRY REGULATION, COMPETITION, AND OTHER FACTORS. MOST OF THESE FACTORS ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. YOU SHOULD CONSIDER THE AREAS OF RISK DESCRIBED IN CONNECTION WITH ANY FORWARD-LOOKING STATEMENTS THAT MAY BE MADE HEREIN. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS AND READERS SHOULD CAREFULLY REVIEW THIS ANNUAL REPORT IN ITS ENTIRETY, INCLUDING THE RISKS DESCRIBED IN PART I. DESCRIPTION OF BUSINESS - RISK FACTORS. EXCEPT FOR OUR ONGOING OBLIGATIONS TO DISCLOSE MATERIAL INFORMATION UNDER THE FEDERAL SECURITIES LAWS, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO ANY FORWARD-LOOKING STATEMENTS, TO REPORT EVENTS OR TO REPORT THE OCCURRENCE OF UNANTICIPATED EVENTS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND YOU SHOULD NOT RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE RISKS AND UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS.

 

 2 
  

 

NUSTATE ENERGY HOLDINGS, INC.

2017 ANNUAL REPORT ON FORM 10-K

 

Table of Contents

 

PART I 4
   
Item 1. Business. 4
Item 1A. Risk Factors. 4
Item 1B. Unresolved Staff Comments. 6
Item 2. Properties. 6
Item 3. Legal Proceedings. 6
Item 4. Mine Safety Disclosures. 6
   
PART II 6
   
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 6
Item 6. Selected Financial Data. 7
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 11
Item 8. Financial Statements and Supplementary Data. 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 11
Item 9A. Controls and Procedures. 11
Item 9B. Other Information. 12
   
PART III 13
   
Item 11. Executive Compensation. 14
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters. 15
Item 13. Certain Relationship and Related Party Transactions, and Director Independence. 15
Item 14. Principal Accountant Fees and Services. 17
   
PART IV 18
   
Item 15. Exhibits and Financial Statement Schedules. 19

 

 3 
  

 

PART I

 

Item 1. Business

 

Overview

 

NuState Energy Holdings, Inc. is a technology company specializing in providing pertinent, real-time information to the worldwide transportation and security industries. NuState’s proprietary software, GPSTrax, is built on an Open Architecture platform for the logistics and telematics industries.

 

We believe there are many opportunities to leverage and monetize our software technology by licensing it to companies that provide green technology solutions to medium and large logistics companies.

 

NuState is launching a new GPSTrax Value-Added Reseller (VAR) Program, focusing on opportunities in consumer-based solutions such as asset tracking. The VAR Program will increase awareness, availability and support of the GPSTrax solution at a time when a growing number of companies are looking to update and optimize their solutions. We expect to generate revenues from this Program during fiscal 2018.

 

Our software technology provides validation and verification of fuel cost consumption reporting and fuel tax credits to logistics companies. The software also is designed to document the exact amount of reduction of harmful emissions that results from the alternative energy products. This data will enable users in certain countries to generate emissions credits that are tradable under the protocol of the Kyoto Treaty.

 

Through our existing relationships in the country of Suriname, NuState is evaluating several projects in the alternative renewable energy market in Suriname. NuState has been in discussions with AMPS, NV (“AMPS”), based in Paramaribo, Suriname, to enter into a license agreement in relation to the purchase of GPSTrax© for their multi-million-dollar alternative energy projects. AMPS focuses on providing engineering, procurement and construction management (EPC) services, Power Transmission & Distribution, Renewable and Conventional Energy as well as Power Management Systems to Suriname and its fellow Caribbean Community members.

 

Employees

 

At September 28, 2017, we had 1 full time employee.

 

Our principal offices are located at 401 E. Las Olas Boulevard, Suite 1400, Fort Lauderdale, FL 33301. Our telephone number is (954) 712-7487.

 

Our common stock is quoted on the OTC Pink under the symbol “NSEH”.

 

Item 1A. Risk Factors

 

The common shares of our Company are considered speculative. You should carefully consider the following risks and uncertainties in addition to other information in this annual report in evaluating our Company and our business before purchasing our common shares. Our business, operating or financial condition could be harmed due to any of the following risks:

 

Management and our auditors have raised substantial doubts as to our ability to continue as a going concern.

 

Our financial statements have been prepared assuming we will continue as a going concern. Since inception we have experienced recurring net losses which losses caused an accumulated deficit of approximately $43.4 million as of June 30, 2017. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

We currently have a working capital deficit and negative cash flow from operations, and are uncertain if and when we will be able to pay our current liabilities.

 

Our working capital deficit was approximately $4.9 million as of June 30, 2017. This deficit consists of $2,313 in current assets, offset by $4,931,643 in current liabilities. In addition, we had negative cash flow from operations for the year ended June 30, 2017 of approximately $278,993. We do not have any liquid or other assets that can be liquidated to pay our current liabilities while we continue to incur additional liabilities to our officer and certain service providers who are working to prepare the documents required to be filed with the Securities and Exchange Commission to enable our common shares to be registered for trading. Since we currently have limited operations, the only ways we have of paying our current liabilities are to issue our common or preferred shares to our creditors or to issue unsecured promissory notes which may include certain features such as convertibility into common or preferred shares or warrants to purchase additional common or preferred shares in the future.

 

We currently do not have sufficient capital to finance the anticipated recurring costs of being a publicly-traded company.

 

As of September 28, 2017, we had minimal cash on hand. We anticipate incurring incremental annual costs of approximately $180,000 related to being a publicly-traded company. We will need to raise additional capital to support our public-company-related activities.

 

 4 
  

 

We had $4,086,051 of convertible notes, notes payable, and accrued interest payable as of June 30, 2017, of which of this amount $3,430,448 currently past due, and do not have the funds necessary to pay these obligations.

 

In addition to funding our operating expenses, we need capital to pay various debt obligations totaling approximately $3.6 million as of June 30, 2017 which are either currently past due or which are due in the current fiscal year. Currently, there is $1,682,714 principal amount of the convertible notes payable which is past due, $270,241 principal of the notes payable which is past due, and $1,493,014 of accrued interest which is past due. The interest on the past due principal amounts will continue to accrue monthly at their stated rates. Holders of past due notes do not have a security interest in our assets. The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our operations.

 

In the event we consummate a transaction with a profitable company, we may not be able to utilize our net operating loss carryover which may have a negative impact on your investment.

 

If we enter into a combination with a business that has operating income, we cannot assure you that we will be able to utilize all or even a portion of our existing net operating loss carryover for federal or state tax purposes following such a business combination. If we are unable to make use of our existing net operating loss carryover, the tax advantages of such a combination may be limited, which could negatively impact the price of our stock and the value of your investment. These factors will substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

Economic conditions may affect our ability to obtain financing and to complete a merger or acquisition.

 

Due to general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will need. In the presence of these economic conditions, we may have difficulty raising sufficient capital to support the investigation of potential business opportunities, and to consummate a merger or acquisition. These factors substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

There are a number of factors related to our common stock which may have an adverse effect on our shareholders.

 

Shareholders’ interests in our Company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities. In the event that we are required to issue additional shares, enter into private placements to raise financing through the sale of equity securities or acquire business interests in the future from the issuance of shares of our common stock to acquire such interests, the interests of existing shareholders in our Company will be diluted and existing shareholders may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we do issue additional shares, it will cause a reduction in the proportionate ownership and voting power of all existing shareholders.

 

We have certain provisions in our Articles of Incorporation and Bylaws, and there are other provisions under Florida law, that may serve to make a takeover of our Company more difficult.

 

Provisions of our articles of incorporation and bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders. Provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of Florida law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation’s disinterested stockholders.

 

Our common stock is quoted in the over the counter market on the OTC Pink.

 

Our common stock is quoted on the OTC Pink. OTC Pink offers a quotation service to companies that are unable to list their securities on an exchange or for companies, such as ours, whose securities are not eligible for quotation on the OTC Bulletin Board. The requirements for quotation on the OTC Pink are considerably lower and less regulated than those of the OTC Bulletin Board or an exchange. Because our common stock is quoted on the OTC Pink, it is possible that even fewer brokers or dealers would be interested in making a market in our common stock which further adversely impacts its liquidity.

 

The tradability of our common stock is limited under the penny stock regulations which may cause the holders of our common stock difficulty should they wish to sell their shares.

 

Because the quoted price of our common stock is less than $5.00 per share, our common stock is considered a “penny stock,” and trading in our common stock is subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a “penny stock,” including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities and this limited liquidity will make it more difficult for an investor to sell his shares of our common stock in the secondary market should the investor wish to liquidate the investment. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

 

 5 
  

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2. Properties.

 

We rent our principal executive offices from an unrelated third party on a month-to-month basis for a monthly rental of $196.

 

Item 3. Legal Proceedings.

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Our common shares are quoted on the OTC Pink Quotation System under the symbol “NSEH,” but trade infrequently.

 

The high and low bid prices of our common stock for the periods indicated below are as follows:

 

Fiscal Year Ended June 30, 2017  High   Low 
         
Quarter Ended September 30, 2016  $0.0417*  $0.0049*
Quarter Ended December 31, 2016  $0.0128*  $0.0031*
Quarter Ended March 31, 2017  $0.0026*  $0.0004*
Quarter Ended June 30, 2017  $0.001*  $0.0002*

 

Fiscal Year Ended June 30, 2016  High   Low 
         
Quarter Ended September 30, 2015  $0.1493*  $0.1493*
Quarter Ended December 31, 2015  $0.1493*  $0.0015*
Quarter Ended March 31, 2016  $0.1493*  $0.0015*
Quarter Ended June 30, 2016  $0.1493*  $0.0051*

 

* close price adjusted for splits

 

Stockholders

 

As of September 28, 2017, there were 442 stockholders of record of our Common Stock.

 

Dividend Policy

 

We have not paid any cash dividends since 2008 and do not anticipate or contemplate paying dividends in the foreseeable future.

 

Unregistered issuance of Securities

 

On August 15, 2016, the Company issued 20,000,000 shares of its common stock to its former CEO, Kevin Yates, as compensation. The shares were valued at $0.03 per share, the market price of the common stock on the date of issuance for a total value of $600,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related Party Transactions.

 

On August 15, 2016, the Company issued 5,000,000 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares were valued at $0.03 per share, the market price of the common stock on the date of issuance for a total value of $150,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related Party Transactions.

 

On August 15, 2016, the Company issued 2,000,000 shares of its common stock to its former CEO, Kathleen Roberton, pursuant to a settlement agreement, for unpaid wages. Per agreement, the shares were valued at $0.04 per share for a total value of $80,000. See Note 8 – Related party transactions.

 

On December 12, 2016, the Company issued 5,000,000 shares of its common stock to its former CEO, Kevin Yates, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $20,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On December 12, 2016, the Company issued 5,000,000 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $10,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On December 12, 2016, the Company issued 10,000,000 shares of its common stock to a company controlled by its former CEO, Kevin Yates, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $20,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On January 11, 2017, the Company issued 25,000,000 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $50,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On January 11, 2017, the Company issued 100,000,000 shares of its common stock to a company controlled by its former CEO, Kevin Yates, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $200,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

During the fiscal first quarter, the Company issued 4,799,504 shares of its common stock upon the conversion of $18,597 of principal of its outstanding convertible notes, at an average price of $0.0039 per share.

 

During the fiscal second quarter, the Company issued 11,492,635 shares of its common stock upon the conversion of $13,454 of principal of its outstanding convertible notes, at an average price of $0.0012 per share.

 

During the fiscal third quarter, the Company issued 423,247,653 shares of its common stock upon the conversion of $86,740 of principal of its outstanding convertible notes, at an average price of $0.0002 per share.

 

During the fiscal fourth quarter, the Company issued 880,261,864 shares of its common stock upon the conversion of $51,047 of principal of its outstanding convertible notes, at an average price of $0.000058 per share.

 

Share Repurchases

 

None.

 

 6 
  

 

Item 6. Selected Financial Data.

 

Not Applicable.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following information should be read in conjunction with our financial statements and accompanying notes included in this Annual Report on Form 10-K.

 

Overview

 

The Company was incorporated in Nevada as Jaguar Investments, Inc. during October 1987. During March 2003, a wholly owned subsidiary of the Company merged with Freight Rate, Inc., a development stage company in the logistics software business. During May 2003, the Company changed its name to Power2Ship, Inc. During October 2006, the Company merged with a newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc., a Nevada corporation, with the Company surviving but its name changed to Fittipaldi Logistics, Inc. effective November 2006. During December 2007, the Company merged with a newly formed, wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada corporation, with the Company surviving but renamed NuState Energy Holdings, Inc. effective December 2007.

 

On February 12, 2009, the Company filed Form 15 to terminate registration of its common stock under section 12(g) of the Securities Exchange Act of 1934 and subsequently has not submitted any filings to the Securities and Exchange Commission. During the period from February 2009 through April 2010, the Company had several changes to its officers and directors and moved its offices twice. The Company’s Chairman and President since April 2010, and its Chief Executive Officer from July 2010 to April 2017, and then reappointed as Chief Executive Officer on September 25, 2017, is Kevin Yates. The Company’s headquarters is located at 401 E. Las Olas Boulevard, Suite 1400, Fort Lauderdale, FL 33301. Since April 2010, the Company’s current management developed, and began implementing, the following strategic plan designed to increase the Company’s shareholders’ value:

 

  1. Improve the Company’s balance sheet by reducing liabilities and regaining use of certain of its intellectual property and software,
     
  2.

Settle litigation (there is no currently no threatened or pending litigation),

     
  3. Identify potential merger or acquisition candidates with whom the Company could enter into a transaction upon the Company achieving items 1 and 2 above, and
     
  4. License its intellectual property and software, also known as My Driver’s Seat, which it regained in April 2010.

 

This strategic plan has resulted in the following material events:

 

Results of Operations

 

Selling, General, and Administrative Expenses

 

For the year ended June 30, 2017, selling, general and administrative expenses were $2,056,854 as compared to $719,868 for the year ended June 30, 2016, an increase of $1,336,986 or approximately 186%. For the years ended June 30, 2017 and 2016 selling, general and administrative expenses consisted of the following:

 

    2017     2016     Increase/(Decrease)     % Change  
Accounting expense   $ 75,400     $ 100,889     $ (25,489 )     (25.3 )%
Consulting fees     105,650       195,536       (89,886 )     (46.0 )%
Salaries     720,000       343,125       (376,875 )     (109.8 )%
Stock-based Compensation     1,080,000       49,900       1,030,100       2,064.3  
Legal fees     64,000       -       64,000       N/A  
Travel     732       -       732       N/A  
Other     11,072       30,418       (19,347 )     (63.6 )%
    $ 2,056,854     $ 719,868     $ 1,336,986       185.7 %

 

The increase in selling, general and administrative expenses during fiscal 2017, when compared with the prior year, is primarily due to an increase in stock-based compensation, offset primarily by decreases in accounting expenses, consulting expenses, and salary expense.

 

Gain on Change in Derivative Liability

 

   Years ended 
   June 30, 
   2017   2016 
Gain (loss) on change in fair value of derivative liabilities  $636,096   $189,712 

 

Changes in fair value of derivative liabilities results from the changes in the fair value of the derivative liability due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The increase in fair value of derivative liabilities recognized during fiscal 2017 is primarily due to a change in accounting estimate related to the accounting for derivative liabilities. Due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, the convertible notes were determined to have no basis for applying a derivative liability to the conversion of these notes. As a result, the Company recorded a change in accounting estimate which resulted in a gain on change in derivative liability of approximately $636,000..

 

Interest Expense

 

   Years Ended     
   June 30,   % 
   2017   2016   Change 
Interest Expense  $339,351   $456,546    (25.7)%

 

Interest expense represents the stated interest of notes and convertible notes payable as well as the amortization of debt discount. The decrease in interest expense during fiscal 2017 is primarily due to lower amortization of debt discount of $74,583, along with a decrease in the average interest rate on interest-bearing liabilities.

 

7 
 

 

Derivative Liability Expense

 

   Years Ended     
   June 30,   % 
   2017   2016   Change 
Derivative Liability Expense  $-   $265,000    N/A%

 

During fiscal 2017, the Company’s management had a change in accounting estimate related to the accounting for derivative liabilities. Due to the Company’s current share price and lack of trading liquidity in the Company’s common stock, the convertible notes were determined to have no basis for applying a derivative liability to the conversion of these notes. The Company entered into thirteen unsecured convertible promissory note agreements totaling $752,400. These notes bear interest at rates between 0% and 9%, and are convertible into shares of common stock at a discount rate of 50% of the average 10-day closing bid price of the Company's stock.

 

During fiscal 2016, the Company entered into sixteen unsecured convertible promissory note agreements totaling $265,000. These notes bear interest at rates between 8% and 14%, and are convertible into shares of common stock at a discount rate of 50% of the average 10-day closing bid price of the Company’s stock. Derivative liability was recognized at the issuance dates of each note and totaled $265,000, with a corresponding charge to debt discount of $265,000 and $265,000 to derivative liability expense.

 

Gain on Troubled Debt Restructuring

 

During fiscal 2016, the Company entered transactions with noteholders and other vendors to settle amounts owed through the issuance of the Company’s Series A $0.001 preferred stock. The table below summarizes the shares issued and the gain realized from this troubled debt restructuring.

 

   Year Ended 
   June 30, 
   2017   2016 
Exchange of outstanding Series B preferred shares for Series A preferred shares   -   $(2,917)
Exchange of outstanding Series C preferred shares for Series A preferred shares   -    (37)
Exchange of outstanding Series I preferred shares for Series A preferred shares   -    300 
Exchange of outstanding Series J preferred shares for Series A preferred shares   -    (20)
Exchange of outstanding Series Y preferred shares for Series A preferred shares   -    (339)
Exchange of convertible notes payable for shares of Series A convertible preferred stock   -    1,504,865 
Issuance of Series F and Series H preferred stock in exchange for accrued compensation   -    396,075 
Gain on restructure of troubled convertible notes   -    - 
   $-    1,897,927 

 

Gain (Loss) on Settlement of Debt

 

   Years Ended     
   June 30,   % 
   2017   2016   Change 
Loss on settlement of debt  $-   $(12,135)   112.5%

 

On October 9, 2014, the Company entered into a Settlement Agreement with IBC Funds, LLC (“IBC’). This agreement was approved by the Manatee County, Florida Court on October 10, 2014. Pursuant to the Settlement Agreement, the Company agreed to settle approximately $259,000 of outstanding liabilities (the “IBC Claim Amount”) by issuing IBC 572,667 shares of its common stock at a price per share equal to fifty percent of the lowest sales price of the common stock during the fifteen-day trading period preceding the request of payment. In the event the Company was delinquent on issuance of the Company’s shares upon request by IBC, the discount would be increased by five percent and by an additional five percent for each additional delinquency until all settlement shares had been received. At no time could IBC and its affiliates collectively own more than 4.99% of the outstanding shares of common stock. During October 2014, IBC paid an aggregate of $66,000 to various Company creditors. On February 12, 2016 IBC issued a letter of default to the Company. The Company issued to IBC an additional 286,247 common shares valued at $116,874.

 

Liquidity and Capital Resources

 

   Balance at June 30, 
   2017   2016 
Cash  $2,313   $1,806 
Accounts payable and accrued expenses   565,468    550,308 
Accrued compensation   280,125    190,325 
Notes, convertible notes, accrued interest, and settlement payable to ASC Recap, LLC  4,086,051   3,225,047 

 

 

8 
 

 

At June 30, 2017 and 2016, 100% of our total assets consisted of cash.

 

We do not have any material commitments for capital expenditures.

 

The objective of liquidity management is to ensure that we have ready access to sufficient funds to meet commitments and effectively implement our growth strategy. Our primary sources are financing activities such as the issuance of notes payable and convertible notes payable. In the past, we have mostly relied on debt and equity financing to provide for our operating needs.

 

We were unable to generate sufficient funds from operations to fund our ongoing operating requirements through June 30, 2017. As of September 28, 2017, we had approximately $500 on hand. We may need to raise funds to enhance our working capital and use them for strategic purposes. If such need arises, we intend to generate proceeds from either debt or equity financing.

 

We intend to finance our operations using a mix of equity and debt financing. We do not anticipate incurring capital expenditures for the foreseeable future. We anticipate that we will need to raise approximately $180,000 per year in the near term to finance the recurring costs of being a publicly-traded company, and $120,000 to implement a plan of operations, with additional funding necessary to pay our outstanding obligations. In the long-term, we anticipate we will need to raise a substantial amount of capital to complete an acquisition. We are unable to quantify the resources we will need to successfully complete an acquisition. If these funds cannot be obtained, we may not be able to consummate an acquisition or merger, and our business may fail as a result.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis. The Company has used net cash in its operating activities of approximately $278,993 and $424,300 during the years ended June 30, 2017 and 2016, respectively, and has a working capital deficit of approximately $5.0 million and $4.6 million at June 30, 2017 and 2016, respectively. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future, once a merger with an operating company is consummated. Management plans may continue to provide for its capital requirements by issuing additional equity securities and debt and the Company will continue to find possible acquisition targets. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.

 

    Years Ended  
    June 30,  
    2017     2016  
Cash flows from operating activities:                
Net income (loss)   $ (1,760,109   $ 634,090  
Non-cash Adjustments:                
Loss on debt settlement             12,135  
Stock based compensation     1,080,000       49,900  
Amortization of debt discount     81,667       156,250  
(Gain) loss on change in derivative liability     (636,096 )     (189,712 )
Derivative liability expense     -       265,000  
Convertible note issued for consulting expense     480,000       -  
(Gain) loss on troubled debt restructuring     -       (1,897,927
Changes in assets and liabilities                
Accrued interest     257,684       300,296  
Accrued compensation     264,302       259,573  
Accounts payable and accrued expenses     (46,442 )     (13,929
Net cash used in operations     (278,993 )     (424,324 )
                 
Cash flows from financing activities:                
Proceeds from sale of preferred stock     -       85,000  
Repayment of note payable     -       (5,000
Proceeds from issuance of short term note payable     30,000       25,000  
Proceeds from issuance of convertible notes payable     249,500       315,000  
 Net cash provided by financing activities     279,500       420,000  
                 
Net variation in cash   $ 507     $ (4,323

 

9 
 

 

Year ended June 30, 2017

 

Net cash used in operations in fiscal year 2017 decreased by $185,389 or 44% from fiscal year 2016. This cash was obtained through the sale of $249,500 of convertible promissory notes and the sale of $30,000 of short term notes payable.

 

Year ended June 30, 2016

 

Net cash used in operations in fiscal year 2016 increased by $245,389 or 137% from fiscal year 2015. This cash was obtained through the sale of $340,000 of convertible promissory notes and the sale of $85,000 of preferred stock.

 

Capital Raising Transactions

 

Issuance of Convertible Notes Payable

 

We generated proceeds of $279,500 and $340,000 during fiscal 2017 and 2016, respectively, from the issuance of convertible notes payable and promissory notes.

 

Convertible Notes Payable

 

The Company had convertible promissory notes aggregating approximately $2.2 million and $1.6 million outstanding at June 30, 2017 and 2016, respectively. The accrued interest amounted to approximately $1,493,000 and $1,235,000 at June 30, 2017 and 2016, respectively. The Convertible Notes Payable bear interest at rates ranging between 10% and 18% per annum. Interest is generally payable monthly. The Convertible Notes Payable are generally convertible at rates ranging between $1.875 and $0.75 per share, at the holders’ option. At June 30, 2017, all convertible promissory notes have matured.

 

   Balance at   Balance at 
   June 30, 2017   June 30, 2016 
Convertible Notes Payable  $2,201,914   $1,609,349 
Discount on convertible notes   (27,083)   (108,750)
Notes Payable, net of discount  $2,174,831   $1,500,599 

 

Additionally, upon conversion, the holders of $192,000 of convertible promissory notes are also entitled to 12,800,000 warrants, exercisable at a rate of $37.50. The warrants expire 3 years from the date of issuance.

 

Notes Payable

 

The Company had promissory notes aggregating approximately $270,000 at June 30, 2017 and $240,000 at June 30, 2016. The related accrued interest amounted to approximately $222,414 and $199,590 at June 30, 2017 and 2016, respectively. The notes payable bear interest at rates ranging between 8% and 16% per annum. Interest is generally payable monthly. All promissory notes have matured as of June 30, 2017.

 

Warrants

 

As of June 30, 2017, we had no outstanding warrants.

 

Derivative Liability

 

The Corporation recognizes all derivative financial instruments on its balance sheet at fair value. As of June 30, 2017, the Company had $2,202,000 in notes that are convertible into the Company’s common stock, at variable conversion prices resulting in derivative liability accounted for initially. For the year ended June 30, 2017, the Company recorded a gain on the change in fair value of derivative liabilities of $636,096. This was due to management’s change in accounting estimate during the year ended June 30, 2017. The Company determined that all of the underlying notes were past due and in default, and that there was no active market for the Company’s common stock. Because of this lack of liquidity and market value, there was no derivative liability associated with these convertible notes.

 

10 
 

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Climate Change

 

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

 

Critical Accounting Policies

 

The Company’s critical accounting policies are as follows:

 

Convertible Instruments - The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815.

 

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments in accordance with EITF 00-19. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional (as that term is described).

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with the provisions of ASC 470 20 “Debt with Conversion Options” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

The Company believes the certain conversion features embedded in convertible notes payable are not clearly and closely related to the economic characteristics of the Company’s stock price. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation is most appropriate for the instrument (e.g., Black Scholes), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 8. Financial Statements and Supplementary Data.

 

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer, who at June 30, 2017 was also our principal executive and financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Chief Executive Officer concluded that, as of June 30, 2017, our disclosure controls and procedures were not effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our Chief Executive Officer to allow timely decisions regarding required disclosure.

 

11 
 

 

Management Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2017. In making this assessment, our management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.

 

During our assessment of the design and the effectiveness of internal control over financial reporting as of June 30, 2017, management identified the following material weaknesses:

 

  While we have processes in place, there are no formal written policies and procedures related to certain financial reporting processes;
     
  There is no formal documentation in which management specified financial reporting objectives to enable the identification of risks, including fraud risks;
     
  Our Board of Directors consisted of only one member and we lack the resources and personnel to implement proper segregation of duties or other risk mitigation systems.

 

A material weakness is “a significant deficiency, or a combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by us in a timely manner.” A significant deficiency, is a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.

 

We intend to gradually improve our internal control over financial reporting to the extent that we can allocate resources to such improvements. We intend to prioritize the design of our internal control over financial reporting starting with our control environment and risk assessments and ending with control activities, information and communication activities, and monitoring activities. Although we believe the time to adapt in the next year will help position us to provide improved internal control functions into the future, in the interim, these changes caused control deficiencies, which in the aggregate resulted in a material weakness. Due to the existence of these material weaknesses, our management, including our Chief Executive Officer, concluded that our internal control over financial reporting was not effective as of June 30, 2017.

 

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit smaller reporting companies to provide only the management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

12 
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

The following table sets forth the names, ages and principal position of our executive officers and directors as of June 30, 2017:

 

Name   Age   Position
Kevin Yates   51   Chairman of the Board and Chief Executive Office
Scott Wroblreski   48   Former Chief Executive Officer

 

Business Experience

 

Mr. Kevin Yates has served as Chairman of the Company’s Board of Directors since April 2010 and as the Company’s Chief Executive Officer, Treasurer and Secretary since July 2010. Mr. Yates resigned as Chief Executive Officer and Chief Financial Officer in April, 2017, and was reappointed as Chief Executive Officer and Chief Financial Officer in September 2017. Mr. Yates formally served as Chief Operating Officer of the Company in 2006-2007.

 

For the past nine years, Mr. Yates has served as President and Director of PocketMD. Mr. Yates has also served as Director of Mobile Software Team, LLC from August 2008 through July 2012, and C3I Services, LLC from July 2012 to present.

 

Mr. Yates’ devotes approximately 90% of his time to the business and affairs of our Company. Mr. Yates experience in working with public companies’ operational strategy and market plan makes him an asset to the Company.

 

Mr. Scott Wroblreski,

served as Chief Executive Officer from April to September 2017, and has over 25 years of experience in the aerospace/aeronautical fields, oil and gas industry working direct or as a consultant for many of leading companies such as Boeing, Lockheed Martin, Northrop Grumman, Orbital Sciences and Safran (formerly Snecma). He has held Secret and Top Secret Clearances with an Extensive Background Investigation (EBI, SSBI) by the United States Federal Bureau of Investigation (FBI). He was deputy Director of Launch Nuclear Safety at Lockheed Martin Astronautics for the NASA New Horizons satellite that recently flew by Pluto onto the Kuiper Belts. In addition, Mr. Wroblreski has worked on many prestigious and exciting projects such as the recent Pluto Mission, the Defense Department’s High Speed Superconductivity Project, Boeing 727, 737 & Fokker Passenger to Freighter Conversions, the Conestoga Launch Vehicle, Ariane 4 & 5 Launch Vehicle (European Rocket System), the Atlas 5 Launch Vehicle, the Taurus Launch Vehicle and the Hubble Space Telescope Repair Mission. He has also worked on many commercial aircraft and military projects such as the Airbus A380, the Boeing 777, Boeing’s B-1 Bomber, Boeing’s Chinook Helicopter, and multiple classified and unclassified satellites. Mr. Wroblreski graduated from the Pennsylvania State University with a Bachelor of Science Degree in Aerospace Engineering in 1986 and attended graduate studies in the Engineering Science and Mechanics Department. has over 25 years of experience in the aerospace/aeronautical fields, oil and gas industry working direct or as a consultant for many of leading companies such as Boeing, Lockheed Martin, Northrop Grumman, Orbital Sciences and Safran (formerly Snecma). He has held Secret and Top Secret Clearances with an Extensive Background Investigation (EBI, SSBI) by the United States Federal Bureau of Investigation (FBI). He was deputy Director of Launch Nuclear Safety at Lockheed Martin Astronautics for the NASA New Horizons satellite that recently flew by Pluto onto the Kuiper Belts. In addition, Mr. Wroblreski has worked on many prestigious and exciting projects such as the recent Pluto Mission, the Defense Department’s High Speed Superconductivity Project, Boeing 727, 737 & Fokker Passenger to Freighter Conversions, the Conestoga Launch Vehicle, Ariane 4 & 5 Launch Vehicle (European Rocket System), the Atlas 5 Launch Vehicle, the Taurus Launch Vehicle and the Hubble Space Telescope Repair Mission. He has also worked on many commercial aircraft and military projects such as the Airbus A380, the Boeing 777, Boeing’s B-1 Bomber, Boeing’s Chinook Helicopter, and multiple classified and unclassified satellites. Mr. Wroblreski graduated from the Pennsylvania State University with a Bachelor of Science Degree in Aerospace Engineering in 1986 and attended graduate studies in the Engineering Science and Mechanics Department.

 

There are no family relationships among our directors or executive officers.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires that our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Such executive officers, directors and ten percent stockholders are also required by the SEC rules to furnish to us copies of all Section 16(a) reports that they file. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that they were not required to file a Form 5, we believe that, during the fiscal year ended June 30, 2017, our executive officers, directors and ten percent stockholders complied with all Section 16(a) filing requirements applicable to such persons.

 

Code of Ethics

 

We have adopted a Code of Ethics and Business Conduct to provide guiding principles to our principal executive officer, principal financial officer, and principal accounting officer or controller of our company in the performance of their duties. Our Code of Ethics and Business Conduct also strongly recommends that all directors and employees of our company comply with the code in the performance of their duties. Our Code of Ethics and Business Conduct provides that the basic principle that governs all of our officers, directors and employees is that our business should be carried on with loyalty to the interest of our stockholders, customers, suppliers, fellow employees, strategic partners and other business associates. We believe that the philosophy and operating style of our management are essential to the establishment of a proper corporate environment for the conduct of our business.

 

Generally, our Code of Ethics and Business Conduct provides guidelines regarding:

 

  conflicts of interest,
     
  financial reporting responsibilities,
     
  insider trading,
     
  inappropriate and irregular conduct,
     
  political contributions, and
     
  compliance with laws.

 

A copy of our Code of Ethics has been filed with the Securities and Exchange Commission as an exhibit to this annual report. We will provide a copy, without charge, to any person desiring a copy of the Code of Ethics, by written request to us at our principal offices.

 

13
   

 

Committees of the Board of Directors

 

Our Board of Directors has not yet established any committees, including an Audit Committee, a Compensation Committee or a Nominating Committee. We plan to expand our Board in the future and we will seek to establish an Audit Committee and a Compensation Committee, but this will depend on our ability to attract and retain new directors. The typical functions of such committees are currently being undertaken by the entire Board as a whole. Our Board currently consists of only one member, Mr. Yates.

 

Audit Committee Financial Expert

 

Currently no member of our Board is an audit committee financial expert. We do not currently have the resources to recruit a Board member who would also be a financial expert. We may start our recruiting process for such Board member during fiscal 2017 if our financial position improves.

 

Item 11. Executive Compensation.

 

The following table sets forth, for the last two completed fiscal years, all compensation paid, distributed or accrued for services rendered to us by (i) all individuals serving as our principal executive officer or acting in a similar capacity during the last completed fiscal year, regardless of compensation level; (ii) our two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at the end of the last completed fiscal year and whose total compensation exceeded $100,000; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to (ii) above but for the fact that the individual was not serving as our executive officer at the end of the last completed fiscal year:

 

Summary Compensation Table

 

Name and
Principal Position
  Year     Salary
($)(2)(3)
    Bonus
($)
    Stock
Awards
    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Non-Qualified
Deferred
Compensation
Earnings
    All Other
Compensation
($)(1)
    Total ($)  
Kevin Yates,     2017       240,000       -       860,000       -       -       -       555,500       1,655,500  
Former Chief Executive Officer     2016       240,000       -       -       -       -       -       97,841       337,841  
                                                                         
Scott Wroblreski,     2017       40,000       -       -       -       -       -       -       40,000  
Chief Executive Officer     2016       -       -       -       -       -       -       -       -  
                                                                         
Mark Lucky     2017       27,500       -       220,000       -       -       -       -       247,500  
Chief Financial Officer     2016       -       -       -       -       -       -       -      

 

-

 

 

 

  (1) Other compensation for Mr. Yates during fiscal 2017 and 2016 represented funds paid to C3I Services, LLC, a related party by means of common ownership and management to the Company. The related parties provided assistance to Mr. Yates in his duties. In addition, Mr. Yates was issued a convertible note in the amount of $480,000 during fiscal 2017 in conjunction with his severance pay related to his resignation as Chief Executive Officer.
     
  (2) Amounts represent accrued compensation for Mr. Yates. Actual amounts paid totaled $70,200 for the year ended June 30, 2017.
     
  (3)

Amounts represent accrued compensation for Mr. Wroblreski. Actual amounts paid totaled $0 for the year ended June 30, 2017.

 

Employment Agreements

 

Kevin Yates’ employment agreement

 

On May 6, 2010, we entered in an executive employment agreement with Kevin Yates, as our President. The agreement provides for the following, among other things:

 

  Base annual salary of $240,000;
     
  Base salary may increase from time to time with the approval of our Compensation Committee;
     
  Grant of options convertible in 60,000,000 shares of our common stock and exercisable at $0.0025 per share;
     
  Termination clause: upon death, retirement or permanent disability of Kevin Yates, or at any time by us, or upon thirty-day notice by Kevin Yates
     
  If the employment is terminated by Kevin Yates for good reason, as defined, or by us, other than for cause, as defined, death, retirement or permanent disability of Kevin Yates, Kevin Yates is entitled to two years base salary (currently, the equivalent of $480,000) and unpaid bonuses or incentive compensation, if any.

 

On April 1, 2012, we entered in a consulting agreement with C3I Services, LLC (‘C3I Services”). Kevin Yates, our Chairman of the Board is also a managing member of C3i Services, LLC. The agreement provides for the following, among other things:

 

  Base annual consulting fee of $120,000;
     
  Termination clause: the earliest of July 1, 2013 the date we become a reporting company, or upon 30-day written notice by each party. C3I Services used proceeds from the consulting agreement to pay certain of our operating expenses. This agreement has been informally renewed on a year-to-year basis, through December 31, 2017.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our Board in the future.

 

Outstanding Equity Awards at Fiscal Year-End

 

There are no outstanding equity awards held as of June 30, 2017 by our Executive Officers and Directors.

 

Director Compensation

 

Our Board of Directors is comprised of Mr. Yates, who is also an executive officer of our company, and does not receive any compensation specifically for his Board services.

 

14
   

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

 

At September 28, 2017, we had 2,208,756,170 shares of our Common Stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our Common Stock as of September 28, 2017 by:

 

each person known by us to be the beneficial owner of more than 5% of our Common Stock;
our director;
each of our executive officers named in the compensation tables in Item 11; and
all of our executive officers and director as a group.

 

    COMMON STOCK      
NAME   

AMOUNT OF

BENEFICIAL OWNERSHIP

    % OF CLASS    % OF VOTING CONTROL (1) 
                
Kevin Yates   133,406,666    

6.3

%   

6.3

%

 

(1)

Percent of Voting Control is based upon the number of issued and outstanding shares of our common stock on September 29, 2017. On that date, we had 2,208,756,170 outstanding shares of common stock with one vote per share.

 

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our stockholders as well as any equity compensation plans not approved by our stockholder as of June 30, 2017.

 

Plan category   Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights (a)
    Weighted-average
exercise price of
outstanding options,
warrants and rights (b)
    Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a)) (c)
 
Equity compensation plans approved by security holders                        
2012 Employee Stock Compensation Plan     -       -       -  
Equity compensation plans not approved by security holders     -       -       -  
Total     -       -       -  

 

Item 13. Certain Relationship and Related Party Transactions, and Director Independence.

 

Other than compensation arrangements, we describe below, transactions during our last fiscal year, to which we were a party, in which:

 

  The amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years; and
     
  Any of our directors, executive officers, or holders of more than 5% of our common stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.

 

Common Stock

 

During fiscal 2017 we issued shares of our common stock as follows:

 

On August 15, 2016, the Company issued 20,000,000 shares of its common stock to its former CEO, Kevin Yates, as compensation. The shares were valued at $0.03 per share, the market price of the common stock on the date of issuance for a total value of $600,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related Party Transactions.

 

On August 15, 2016, the Company issued 5,000,000 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares were valued at $0.03 per share, the market price of the common stock on the date of issuance for a total value of $150,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related Party Transactions.

 

15
   

 

On August 15, 2016, the Company issued 2,000,000 shares of its common stock to its former CEO, Kathleen Roberton, pursuant to a settlement agreement, for unpaid wages. Per agreement, the shares were valued at $0.04 per share for a total value of $80,000. See Note 8 – Related party transactions.

 

On December 12, 2016, the Company issued 5,000,000 shares of its common stock to its former CEO, Kevin Yates, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $20,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On December 12, 2016, the Company issued 5,000,000 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $10,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On December 12, 2016, the Company issued 10,000,000 shares of its common stock to a company controlled by its former CEO, Kevin Yates, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $20,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On January 11, 2017, the Company issued 25,000,000 shares of its common stock to its former CFO, Mark Lucky, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $50,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

On January 11, 2017, the Company issued 100,000,000 shares of its common stock to a company controlled by its former CEO, Kevin Yates, as compensation. The shares were valued at $0.002 per share, the market price of the common stock on the date of issuance for a total value of $200,000. This expense is included in general and administrative expenses and was recognized on the date the stock was issued. See Note 8 – Related party transactions.

 

During the fiscal first quarter, the Company issued 4,799,504 shares of its common stock upon the conversion of $18,597 of principal of its outstanding convertible notes, at an average price of $0.0039 per share.

 

During the fiscal second quarter, the Company issued 11,492,635 shares of its common stock upon the conversion of $13,454 of principal of its outstanding convertible notes, at an average price of $0.0012 per share.

 

During the fiscal third quarter, the Company issued 423,247,653 shares of its common stock upon the conversion of $86,740 of principal of its outstanding convertible notes, at an average price of $0.0002 per share.

 

During the fiscal fourth quarter, the Company issued 880,261,864 shares of its common stock upon the conversion of $51,047 of principal of its outstanding convertible notes, at an average price of $0.000058 per share. 

 

Issuances of Common Stock During 2016

 

During fiscal 2016 we issued shares of our common stock as follows:

 

On October 14, 2015, Ms. Roberton was issued 332,667 shares of common stock valued at $49,900, or $0.15 per share as a performance bonus pursuant to her employment agreement.

 

On October 9, 2015, we issued 3,333,333 shares of our common stock, twenty-six shares of Series F preferred stock, with a stated value of $5,000 and a par value of $0.001 per share, and three shares of Series H Preferred Stock, with a stated value of $1,000 and a par value of $0.001 per share, to the Company’s current Chairman of the Board in consideration for his forgiveness of $633,000 in accrued compensation. Subsequently, in October 2015, these Series F and Series H preferred shares were exchanged for 532,000 shares of Series A preferred stock.  Holders of Series A preferred shares are restricted from converting their shares to common stock for two years (the “Lock-Up Period”). After the Lock-Up Period, they may convert up to one percent of their Series A preferred shares into common shares on a one for one basis each month for four years (the “Leak-Out Period”). However, the conversion price automatically reduces by 86% to $0.035 per share if our common stock is below $0.10 per share. At the end of the Leak-Out Period, up to all of the remaining Series A preferred shares may be converted to common stock at the shareholders’ discretion.

 

Director Independence

 

Our sole director is not considered “independent” within the meaning of meaning of Rule 5605 of the NASDAQ Marketplace Rules.

 

16
   

 

Item 14. Principal Accountant Fees and Services

 

On May 9, 2017 (the “Engagement Date”), the Company formally engaged Assurance Dimensions, Inc. as our independent registered public accounting firm. The engagement was due to the merger of our existing certifying account, D’Arelli Pruzansky, P.A. and Assurance Dimensions, Inc. The decision to engage Assurance Dimensions, Inc. as our independent registered public accounting firm was approved by our Board of Directors on May 9, 2017.

 

The former certifying accountant, D’Arelli Pruzansky, P.A., has provided the Company with a letter addressed to the United States Securities and Exchange Commission stating it agrees with the statements of the Form 8-K which was filed on May 11, 2017. A copy of the letter is filed concurrently herewith as Exhibit 16.1.

 

During the two most recent fiscal years and through the Engagement Date, neither the Company, nor an one on its behalf, consulted with Assurance Dimensions, Inc. in regard to the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or any other matters or reportable events as defined in Item 304(a)(2)(i) and (ii) of Regulation S-K.

 

The following table summarizes the fees of Assurance Dimensions, Inc., our independent registered public accounting firm billed for each of the last two fiscal years for audit services and other services:

 

Fee Category   2017     2016  
Audit Fees Paid to D’Arelli Pruzansky, P.A. (1)   $

10,000

    $ 30,000  
Audit Related Fees Paid to Assurance Dimensions, Inc. (1)    

20,000

      -  
                 
Tax Fees (2)     -       -  
All Other Fees     -       -  
                 
Total Fees   $ 30,000     $ 30,000  

 

(1) Consists of fees for professional services rendered in connection with the financial statements included in our Annual Report on Form 10-K and quarterly reports on Form 10-Q.

 

(2) Consists of fees relating to any tax compliance and tax planning.

 

We do not have an Audit Committee. Our Board of Directors pre-approves all auditing services and permissible non-audit services provided to us by our independent registered public accounting firm. All fees listed above were pre-approved in accordance with this policy.

 

17
   

 

PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

a. Index to Financial Statements and Financial Statement Schedules

 

  Page
Report of Independent Registered Public Accounting Firm F-2
Balance Sheets as of June 30, 2017 and 2016 F-3
Statements of Operations for each of the two years in the period ended June 30, 2017 F-4
Statements of Changes in Stockholders’ Deficit for each of the two years in the period ended June 30, 2017 F-5
Statements of Cash Flows for each of the two years in the period ended June 30, 2017 F-6
Notes to Financial Statements F-7 - F-17

 

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, or are inapplicable, and therefore have been omitted.

 

b. Exhibits

 

Exhibit No.   Description of Exhibit
     
2.1   Merger Agreement Between Jaguar Investments, Inc., Freight Rate, Inc., and Jag2 Corporation (1)
     
2.2   Agreement and Plan of Merger Between Fittipaldi Logistics, Inc. and State Petroleum Distributors, Inc. (30)
     
3.1   Articles of Incorporation (2)
     
3.2   Certificate of Amendment to Articles of Incorporation (3)
     
3.3   Certificate of Amendment to the Articles of Incorporation (4)
     
3.4   Certificate of Voting Powers, Designations, Preferences and Rights to Series B Convertible Preferred Stock (10)
     
3.5   Certificate of Voting Powers, Designations, Preferences and Rights to Series C Convertible Preferred Stock (10)
     
3.6   Certificate of Voting Powers, Designations, Preferences and Rights to Series Y Preferred Stock (5)
     
3.7   Certificate of Correction of Certificate of Voting Powers, Designations, Preferences and Right to Series Y Preferred Stock (5)
     
3.8   Certificate of Amendment to Articles of Incorporation Increasing Authorized Shares of Common Stock to 250,000,000 filed on August 13, 2004 (9)
     
3.9   Certificate of Voting Powers, Designations, Preferences and Rights to Preferred Stock of Series X Convertible Preferred Stock (5)
     
3.10   Bylaws (2)
     
3.11   Amended Bylaws dated March 31, 2003 (5)
     
3.12   Certificate to Set Forth Designations, Preferences and Rights to Series D Convertible Preferred Stock (23)
     
3.13   Certificate to Set Forth Designations, Preferences and Rights to Series E Convertible Preferred Stock (29)
     
3.14   Certificate to Set Forth Designations, Preferences and Rights to Series F Convertible Preferred Stock (29)
     
3.15   Certificate to Set Forth Designations, Preferences and Rights to Series G Convertible Preferred Stock (29)
     
3.16   Certificate to Set Forth Designations, Preferences and Rights to Series H Convertible Preferred Stock (29)
     
3.17   Certificate to Set Forth Designations, Preferences and Rights to Series I Convertible Preferred Stock (29)
     
3.18   Certificate to Set Forth Designations, Preferences and Rights to Series J Convertible Preferred Stock (35)
     
4.1   Form of Common Stock Purchase Warrant to Newbridge Securities Corporation for Business Advisory Agreement (10)
     
4.2   Form of 14.25% secured convertible debenture (35)
     
4.3   $100,000 principal amount promissory note pursuant to settlement agreement with Stokes Logistics Consulting, LLC (35)

 

18
   

 

4.4   $100,000 principal amount 8% secured convertible promissory note (35)
     
4.5   Letter of agreement dated February 8, 2008 evidencing $25,000 principal promissory note to Canberra Financial Services II, Inc. (35)
     
4.6   $14,000 principal 12.5% promissory note for services (35)
     
4.7   Form of unsecured promissory note (35)
     
4.8   Form of non-plan option agreement (10)
     
4.9   Form of common stock purchase warrant (10)
     
4.10   Form of Common Stock Purchase Warrant re: 14.25% secured convertible debentures (10)
     
4.11   Form of Common Stock Purchase Warrant issued to Newbridge Securities Corporation as Placement Agent for 14.25% secured convertible debentures (10)
     
4.12   Form of Series C 10% unsecured convertible debenture (20)
     
4.13   Form of Warrant for Series C 10% unsecured convertible debenture offering (35)
     
4.14   Form of Series D 8% unsecured convertible debenture (35)
     
4.15   Form of 10% convertible debenture (35)
     
4.16   Form of Warrant for Series D 8% unsecured convertible debenture (22)
     
4.17   Articles of Merger between Power2Ship, Inc. and Fittipaldi Logistics, Inc. (25)
     
4.18   Form of Term Sheet for Purchase of Outstanding Debentures (Version 2) (28)
     
4.19   Form of Term Sheet for Purchase of Outstanding Debentures (Version 1) (28)
     
4.20   Form of Non-Plan Stock Option Agreement for Employees (29)
     
4.21   Form of Non-Plan Stock Options Agreement for Executives (29)
     
4.22   Articles of Merger between Fittipaldi Logistics, Inc. and NuState Energy Holdings, Inc. (31)
     
4.23   $10,000 principal amount 12% convertible promissory note (35)
     
4.24   $5,000 principal amount 12% convertible promissory note (35)
     
4.25   $25,000 principal amount 12% convertible promissory note (35)
     
4.26   $25,000 principal amount 12% convertible promissory note (35)
     
4.27   $20,000 principal amount 12% convertible promissory note (35)
     
4.28   $20,000 principal amount 12% convertible promissory note (35)
     
4.29   $5,000 principal amount 12% convertible promissory note (35)
     
4.30   $20,000 principal amount 12% convertible promissory note (35)
     
4.31   $25,000 principal amount 12% convertible promissory note (35)
     
4.32   $25,000 principal amount 18% convertible promissory note (35)
     
4.33   $12,000 principal amount 12% convertible promissory note (35)
     
4.34   $10,000 principal amount 12% convertible promissory note (35)
     
4.35   $20,000 principal amount 12% convertible promissory note (35)
     
4.36   $18,000 principal 12.5% promissory note for services (35)
     
4.37   $30,000 principal amount 12% convertible promissory note (35)

 

19
   

 

4.38   $15,000 principal amount 12% convertible promissory note (35)
     
4.39   $10,000 principal amount 12% convertible promissory note (35)
     
4.40   $25,000 principal amount 18% convertible promissory note (35)
     
4.41   $25,000 principal amount 18% convertible promissory note (35)
     
4.42   $15,000 principal amount 12% convertible promissory note (35)
     
4.43   $25,000 principal amount 12% convertible promissory note (35)
     
4.44   $10,000 principal amount 12% convertible promissory note (35)
     
4.45   $25,000 principal amount 12% convertible promissory note (35)
     
4.46   $10,000 principal amount 12% convertible promissory note (35)
     
10.1   Securities Purchase Agreement (6)
     
10.2   Investor Registration Rights Agreement (6)
     
10.3   2001 Employee Stock Compensation Plan (3)
     
10.4   Employment Agreement with Richard Hersh (8)
     
10.5   Form of Intellectual Property Assignment Agreement between Power2Ship, Inc. and each of Richard Hersh, Michael J. Darden and John Urbanowicz (10)
     
10.6   Security Agreements for 14.25% secured convertible debentures (10)
     
10.7   Registration Rights Agreement for 14.25% secured convertible debentures (10)
     
10.8   Asset Purchase Agreement with GFC, Inc. (14)
     
10.9   Mutual Agreement with Commodity Express Transportation, Inc. (15)
     
10.10   Asset Purchase Agreement with GFC, Inc. (16)
     
10.11   Form of Unsecured Promissory Note (13)
     
10.12   Separation and Severance Agreement with Richard Hersh (23)
     
10.13   Consulting Agreement with Richard Hersh (23)
     
10.14   Consulting Agreement with David S. Brooks and S. Kevin Yates (as amended) (23)
     
10.15   Software Transaction Agreement Between NuState Energy Holdings, Inc., Rentar Environmental Solutions, Inc. and the organizers of a new company to be formed (33)
     
10.16   Capital Contribution Agreement Between Rentar Logic, Inc., Rentar Environmental Solutions, Inc. and NuState Energy Holdings, Inc. (33)
     
10.17   Rentar Logic, Inc. Shareholders Agreement (33)
     
10.18   Voting Trust Agreement Between Rentar Logic, Inc., Rentar Environmental Solutions, Inc. and NuState Energy Holdings, Inc. (33)
     
10.19   NuState/Rentar Agreement April 2010 (35)
     
10.20   Employment Agreement with Kevin Yates (35)
     
10.21   Consulting Agreement with Will Williams (35)
     
10.22   Consulting Agreement with Mobile Software Team, LLC (35)
     
10.23   Consulting Agreement with C3i Sports, LLC (35)
     
14.1   Code of Ethics (11)
     
21.1   Subsidiaries of Registrant (20)
     
31.1   Section 302 Certificate of Chief Executive Officer.*
     
31.2   Section 302 Certificate of Principal Financial Officer.*
     
101.   The following materials from the Company’s Annual Report on Form 10-K for the year ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) related notes to these financial statements.**

 

20
   

 

* Filed herewith.
   
** Furnished herewith.
   
(1) Incorporated by reference to Current Report on Form 8-K filed on March 26, 2003.
   
(2) Incorporated by reference to registration statement on Form 10-SB, as amended.
   
(3) Incorporated by reference to definitive Schedule 14C Information Statement filed on February 2, 2001.
   
(4) Incorporated by reference to definitive Schedule 14C Information Statement filed on April 22, 2003.
   
(5) Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
   
(6) Incorporated by reference to Current Report on Form 8-K filed on July 8, 2004.
   
(7) Incorporated by reference to Current Report on Form 8-K filed on January 3, 2002.
   
(8) Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended March 31, 2003.
   
(9) Incorporated by reference to Preliminary Information Statement on Schedule 14C filed on July 8, 2004.
   
(10) Incorporated by reference to registration statement on Form SB-2, SEC File No. 333-118792, filed on September 3, 2004.
   
(11) Incorporated by reference to Amendment No. 1 to registration statement the Form SB-2, SEC File No. 333-118792, filed on October 20, 2004.
   
(12) Incorporated by reference to Amendment No. 3 to the registration statement on Form SB-2, SEC File No. 333-118792, filed on December 15, 2004.
   
(13) Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended December 31, 2004 filed on February 14, 2005.
   
(14) Incorporated by reference to Current Report on Form 8-K/A filed on February 25, 2005.
   
(15) Incorporated by reference to Current Report on Form 8-K filed on March 25, 2005.
   
(16) Incorporated by reference to Current Report on Form 8-K filed on March 28, 2005.
   
(17) Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended March 31, 2005.
   
(18) Incorporated by reference to Current Report on Form 8-K filed on June 3, 2005.
   
(19) Incorporated by reference to Current Report on Form 8-K filed on July 28, 2005.
   
(20) Incorporated by reference to registration statement on Form SB-2, SEC File No. 333-131832 filed on February 14, 2006.
   
(21) Incorporated by reference to Current Report on Form 8-K filed on February 17, 2006.
   
(22) Incorporated by reference to Amendment No. 1 to registration statement the Form SB-2, SEC File No. 333-131832 filed on May 5, 2006.
   
(23) Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended June 30, 2006 filed on October 13, 2006.
   
(24) Incorporated by reference to Current Report on Form 8-K filed on October 17, 2006.
   
(25) Incorporated by reference to Current Report on Form 8-K filed on October 24, 2006.
   
(26) Incorporated by reference to Current Report on Form 8-K filed on January 26, 2007.

 

21
   

 

(27) Incorporated by reference to Current Report on Form 8-K filed on April 30, 2007.
   
(28) Incorporated by reference to Current Report on Form 8-K filed on July 25, 2007.
   
(29) Incorporated by reference to Annual Report on Form 10-KSB filed on October 15, 2007.
   
(30) Incorporated by reference to Current Report on Form 8-K filed on November 15, 2007.
   
(31) Incorporated by reference to Current Report on Form 8-K filed on December 31, 2007.
   
(32) Incorporated by reference to Current Report on Form 8-K filed on March 25, 2008.
   
(33) Incorporated by reference to Current Report on Form 8-K filed on June 13, 2008.
   
(34) Incorporated by reference to Current Report on Form 8-K filed on October 16, 2008.
   
(35) Incorporated by reference to Registration Statement on Form 10-12G/A filed on June 14, 2013.

 

22
   

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

NUSTATE ENERGY HOLDINGS, INC.

 

By: /S/ Kevin Yates  
  Kevin Yates  
  Chief Executive Officer  

 

Date: September 28, 2017

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE   TITLE   DATE
           
By: /S/ Kevin Yates   Chief Executive Officer and Chief Financial Officer (principal accounting officer)   September 28, 2017

 

23
   

 

TABLE OF CONTENTS

 

Report of Independent Registered Public Accounting Firm

F-2
   
Financial Statements:  
   
Balance Sheets F-3
   
Statements of Operations F-4
   
Statements of Changes in Stockholders’ Deficit F-5
   
Statements of Cash Flows F-6
   
Notes to Financial Statements F-7 - F-17

 

 F-1 
  

 

 

REPORT OF Independent Registered Public Accounting Firm

 

To the Board of Directors and

Stockholders of NuState Energy Holdings, Inc.

 

We have audited the accompanying financial statements of NuState Energy Holdings, Inc. (a Florida corporation), which comprise the balance sheet as of June 30, 2017 and the related statements of operations, changes in stockholders’ deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NuState Energy Holdings, Inc. as of June 30, 2017 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had a loss from operations of approximately $1,760,100 and cash used in operations of approximately $279,000 for the year ended of June 30, 2017. The Company had a working capital deficit of approximately $4,929,000 and an accumulated deficit of approximately $43,301,000 at June 30, 2017. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

 

The financial statements as of June 30, 2016, were audited by D’Arelli Pruzansky, P.A., who sold its audit practice to Assurance Dimensions, Inc. as of May 3, 2017, and whose report dated October 13, 2016, expressed an unmodified opinion on those statements.

 

Coconut Creek,   /s/ Assurance Dimensions
September 28, 2017   Certified Public Accountants

 

 


 F-2 
  

 

NUSTATE ENERGY HOLDINGS, INC.

BALANCE SHEETS

 

    June 30,  
    2017     2016  
ASSETS                
Current assets:                
Cash   $ 2,313     $ 1,806  
                 
Total current assets     2,313       1,806  
                 
Total assets   $ 2,313     $ 1,806  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 565,468     $ 550,308  
Accrued compensation     280,125       190,325  
Accrued interest     1,493,014       1,235,330  
Convertible notes payable to ASC Recap LLC     147,965       147,965  
Convertible notes payable, net of discount of $27,083 and $108,750, respectively     2,174,831       1,500,599  
Notes payable     270,241       240,240  
Derivative liabilities     -       636,096  
Total current liabilities     4,931,643       4,500,863  
                 
Stockholders’ deficit:                
Preferred stock                
Series A ($0.001 par value; 20,000,000 shares authorized, 13,992,340 and 0 shares issued and outstanding as of June 30, 2017 and 2016, respectively)     13,992       13,992  
Series B ($0.001 par value 30,000,000 shares authorized, 1,327,640 and 149,600 and shares issued and outstanding as of June 30, 2017 and 2016, respectively)     1,328       1,328  
Common stock, $0.0001 par value, 10,000,000,000 shares authorized: 1,497,455,835 shares and 5,654,179 shares issued and outstanding at June 30, 2017 and 2016, respectively (See Note 7)     149,746       565  
Additional paid in capital     38,206,460       37,025,805  
Accumulated deficit     (43,300,856 )     (41,540,747 )
Total stockholders’ deficit    

(4,929,330

)     (4,499,057 )
                 
Total liabilities and stockholders’ deficit   $ 2,313     $ 1,806  

 

See accompanying notes to financial statements.

 

 F-3 
  

 

NUSTATE ENERGY HOLDINGS, INC.

STATEMENTS OF OPERATIONS

 

    FOR THE YEAR ENDED  
    June 30, 2017     June 30, 2016  
             
Net revenues   $ -     $ -  
                 
Operating expenses:                
Selling, general and administrative     2,056,854       719,868  
Total operating expenses     2,056,854       719,868  
                 
Loss from operations     (2,056,854 )     (719,868 )
                 
Other income (expense)                
Gain on change in fair value of derivative liabilities     636,096       189,712  
Derivative liability expense     -       (265,000
Interest expense     (339,351 )     (456,546 )
Gain on troubled debt restructuring     -       1,897,927
Loss on debt settlement     -       (12,135 )
Total other income (expense)     296,745       1,353,958
                 
Net income (loss)   $ (1,760,109   $ 634,090  
                 
WEIGHTED AVERAGE COMMON SHARES                
Basic     354,260,584       4,087,739  
Diluted     354,260,584       54,340,344  
                 
NET (LOSS) INCOME PER COMMON SHARE –BASIC:   $ (0.01)     $ 0.15  
                 
NET (LOSS) INCOME PER COMMON SHARE –DILUTED:   $ (0.01)     $ 0.01  

 

See accompanying notes to financial statements.

 

 F-4 
  

 

NUSTATE ENERGY HOLDINGS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED JUNE 30, 2017 AND 2016

 

   Preferred
Stock -
   Preferred
Stock -
   Preferred
Stock -
   Preferred
Stock
   Preferred
Stock -
   Preferred
Stock -
   Preferred
Stock -
   Preferred
Stock -
   Preferred
Stock -
   Common             
   Series A   Series B   Series C   Series D   Series F   Series H   Series I   Series J   Series Y   Stock   Additional       Total 
   $0.001 Par Value   $0.001 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.0001 Par Value   Paid-in   Accumulated   Stockholders' 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
 Balance at June 30,2015             149,600   $150    332   $3    19   $0    128   $1    70   $1    30,000   $300    2   $0    87,000   $870    1,451,303   $145   $36,281,972   $(42,174,837)  $(5,891,396)
                                                                                                                    
Shares issued as compensation                                                                                             332,667    33    49,867         49,900 
                                                                                                                    
Shares issued in exchange for accrued comp                                           106    0    15    0                                  3,361,459    336    638,264         638,600 
                                                                                                                    
Shares exchanged for Series A   11,181,340    11,181    (149,600)   (150)   (332)   (3)   (19)   (0)   (234)   (1)   (85)   (1)   (30,000)   (300)   (2)   0                        (4,408)        6,318 
                                                                                                                    
Shares issued in exchange for cash   40,000    40    200,000    200                                                                                    84,760         85,000 
                                                                                                                    
Shares issued in exchange for Series Y   87,000    87         0                                                                (87,000)   (870)             783         0 
                                                                                                                    
Shares issued for notes payable   2,684,000    2,684    1,127,640    1,128                                                                          508,750    51    (25,431)        (21,569)
                                                                                                                    
Adjust for change in par value                                                                                                                 0 
                                                                                                                    
  Net income for the year ended June 30, 2016