UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

SECTOR 10, Inc.

(Exact name of small business issuer as specified in its charter)

10900 NE 4th Street, Suite 2300

,Bellevue, WA  Suite 2300

Bellevue, WA98004

(Address of principal executive offices, including zip code)

Issuer’s telephone number, including area code (425) 331-9620

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

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

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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

As of SeptemberJune 30, 2022,2023, the aggregate market value of the voting and non-voting common equity held by non-affiliates, computed based on the average bid and asked price of the common stock, was $4,023.$660.

As of October 24, 2022August 9, 2023 the issuer had 305,778 shares of common stock outstanding. An additional 6,480,000 common shares have been accrued as of March 31, 2023 and are unissued as of August 9, 2023.  There was a total of 6,785,778 common shares issued and accrued but not yet issued as of August 9, 2023.

TABLE OF CONTENTS

Sector 10, Inc.

Item 1. FINANCIAL STATEMENTS

NOTE: THE FINANCIAL STATEMENTS, RELATED NOTES AND THE OTHER INFORMATION INCLUDED IN THIS REPORT HAVE NOT BEEN REVIEWED BY THE COMPANY’S OUTSIDE ACCOUNTANT PRIOR TO THE FILING OF THIS REPORT.

Sector 10, Inc.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Sector 10, Inc.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Six Months Ended SeptemberJune 30, 2023 and 2022 and 2021 and

for the Period From Inception,     

September 16, 2002 to SeptemberJune 30, 20222023

Debt Maturity Schedule

As of December 31, 2021,June 30, 2023, the annual maturities for notes payable are scheduled as follows:

All interest is due under the terms of the various agreements.  However future interest payments will not be made until the restructuring plan has been implemented and a satisfactory revised payment arrangement is completed by all parties.

Note 4 – EQUITY

During the Quarter ended: June 30, 20222023

No equity transactions occurred in the period ended June 30, 2022

During2023.   The Company has 6,480,000 shares accrued and unissued as of the Quarter ended: September 30, 2022

No equity transactions occurred inclose of the period ended September 30, 2022fiscal period.

Note 5 – GOING CONCERN

The Company generated minimal revenues prior to the current fiscal year.  No revenues were generated for the sixthree month period ended SeptemberJune 30, 2022.2023. This level of revenuesrevenue is not sufficient for the Company to meet its future obligations. This factor raises substantial doubt about the Company’s ability to continue as a going concern.

Note 6 - INCOME TAX

Income taxes are accounted for using the asset and liability method. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s financial statements for the sixthree month period ended SeptemberJune 30, 20222023 and 20212022 do not include any provision for income taxes.   No income tax accrual has been recorded based on the expectation that the Company will be in a net loss position for the overall applicable fiscal year. Accordingly, deferred tax assets have been entirely offset by valuation allowances. The difference between the amounts of income tax benefit that would result from applying domestic federal statutory income tax rates to the net loss and the net deferred tax assets is related to certain nondeductible expenses, state income taxes, and the change in the valuation allowance.

The Financial Accounting Standards Board ("FASB") has issued ASC 740 for Accounting for Income Taxes that clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740.

The Company had no unrecognized tax benefit which would affect the effective tax rate if recognized.

The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of SeptemberJune 30, 20222023 the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in the states of Delaware, Utah and any other jurisdiction where required. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.2019.

Note 7 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events per the requirements of ASC Topic 855 and has determined that the following events should be disclosed.  

1)The Company has marketing rights over the MRU and SRU products. The Company is reviewingcurrently evaluating various options to determine thefor use of this equipment and other products in future restructuring of the Company operations.  No restructuring plan hasplans have been finalized as of the filing date of this report. 

2)The Company will be seeking proposals from new auditors to provide an audit for the current fiscal year-ended March 31, 2024 including reviews and/or audits of any applicable prior year(s). 

Item 2. Management’s Discussion And Analysis Or Plan Of Operation

This report contains forward-looking statements within the meaning of Section 29a of the Securities Act of 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from historical or anticipated results. You should not place undue reliance on such forward-looking statements, and, when considering such forward-looking statements, you should keep in mind the risk factors noted in this report, including the section of this report entitled “Risks Related to Our Business and Operations.” You should also keep in mind that all forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. The following discussion and analysis should be read in conjunction with the Company’s financial statements and notes thereto, which are included elsewhere in this report.

Overview

The Company maintains rights to the MRU and SRU products.  The Company is currently evaluating various options for use of this equipment in future operations.  No plans have been finalized as of the date of this report.

Going Concern Qualification

Our notes to the financial statements disclose that the Company has generated no revenue or cash flow, has incurred net losses for the fiscal year and has a working capital deficiency. The Company operations are not likely to produce positive cash flow until at least the end of the fiscal year ended March 31, 2023. These factors raise substantial doubt about our ability to continue as a going concern. Our going concern uncertainty may affect our ability to raise additional capital, and may also affect our relationships with suppliers and customers. Investors should carefully examine our financial statements and read the notes to the financial statements.

Results of Operations

Six Months Ended September 30, 2022 as Compared to the Six Months Ended September 30, 2021

Revenues -

The Company had no revenues for the six months ended September 30, 2022.

The Company had no revenues for the six months ended September 30, 2021.

Other Income-

The Company had no other income for the six months ended September 30, 2022.

Other income for the six months ended September 30, 2021 was $576,426 resulting from the extinguishment of debt from a previous litigation settlement which was composed of the forgiveness and related release of the following:

Professional Services & Consulting fees – $324,529;  Notes payable – $106,615 and Accrued interest on Notes Payable - $145,282.

Operating Expenses -

The Company had no operating expenses for the six months ended September 30, 2022.

The Company had no operating expenses for the six months ended September 30, 2021.

General and Administrative Expenses -

General and administrative expenses were $4,653 for the six months ended September 30, 2022 which was made up primarily of Filing Fees - $3,303 and State fees – $1,350.

General and administrative expenses were $19,682 for the six months ended September 30, 2021 which was made up primarily of Insurance - $8,979, State fees – $7,395 and Filling fees and other expense - $3,308.

Depreciation Expense –

Depreciation expense for the six months ended September 30, 2022 was $0.

Depreciation expense for the six months ended September 30, 2021 was $0.

Interest Expense –

Interest expense for the six month period ended September 30, 2022 was $6,560.

Interest expense for the six month period ended September 30, 2021 was $10,558.  

Three Months Ended SeptemberJune 30, 20222023 as Compared to the Three Months Ended SeptemberJune 30, 20212022

Revenues -

The Company had no revenues for the three months ended SeptemberJune 30, 2022.2023

The Company had no revenues for the three months ended SeptemberJune 30, 2021.2022.

Other Income -Income-

The companyCompany had no other income for the three months ended SeptemberJune 30, 2022.2023.

OtherThe Company had no other income for the three months ended SeptemberJune 30, 2021 was $576,426 resulting from the extinguishment of debt from a previous litigation settlement which was composed of the forgiveness and related release of the following: Professional Services & Consulting fees – $324,529; Notes payable – $106,615 and Accrued interest on Notes Payable - $145,282.2022.

Operating ExpensesCost of Sales -

The Company had no cost of sales or other operating expenses for the three monthsfiscal year ended SeptemberJune 30, 2022.2023.

The Company had no cost of sales or other operating expenses for the three monthsfiscal year ended SeptemberJune 30, 2021.2022.

All expenses for the Company were treated as general and administrative expenses.

General and Administrative Expenses -

General and administrative expenses were $3,008$512 for the three months ended SeptemberJune 30, 2022 which was2023.  These expenses are made up primarily of Filing Fees - $1,658filing and State fees – $1,350.other reporting fees.

General and administrative expenses were $8,498$1,645 for the three months ended SeptemberJune 30, 2021 which was2022.  These expenses are made up primarily of Insurance - $4,228, State fees – $2,600 and Filling feesfiling and other expense - $1,670.reporting fees.

Depreciation Expense –

Depreciation expense for the three monthsmonth period ended SeptemberJune 30, 20222023 was $0.

Depreciation expense for the three monthsmonth period ended SeptemberJune 30, 20212022 was $0.

Interest Expense –

Interest expense for the three month period ended SeptemberJune 30, 20222023 was $3,280.$3,280 for interest accrued on notes payable.

Interest expense for the three month period ended SeptemberJune 30, 20212022 was $3,280.$3,280 for interest accrued on notes payable.

Liquidity and Capital Resources

`

As of SeptemberJune 30, 2022,2023, Sector 10 had cash of $0. This amount is not sufficient to meet the Company’s working capital requirements for the balance of the fiscal year ending March 31, 20232024 or for any future period.

Total Assets -

The Company had no assets as of SeptemberJune 30, 2022.2023.

Working capital -

As of this filing date, the Company is currently in the process of reviewing its strategic options for restructuring its operations in order to raise capital and continue in its efforts to manufacture and distribute its products.  No plans have been finalized as of the date of this report.  Potential funding for operations is not expected until sometime in the fiscal year ended March 31, 20232024 or beyond.

Our auditors are of the opinion that our continuation as a going concern is in doubt. Our continuation as a going concern is dependent upon continued financial support from our shareholders and other related parties.  THE FINANCIAL STATEMENTS, RELATED NOTES AND THE OTHER INFORMATION INCLUDED IN THIS REPORT HAVE NOT BEEN REVIEWED BY THE COMPANY’S OUTSIDE ACCOUNTANT PRIOR TO THE FILING OF THIS REPORT.

Total Liabilities -

Current liabilities as of SeptemberJune 30, 20222023 were $9,862,677.$9,850,353.  The balance was composed of accounts payable and accrued liabilities of $9,698,677 and$9,686,353, note payable to outside investors of $164,000.    

Long term liabilities as of SeptemberJune 30, 20222023 were $0.

Total liabilities as of SeptemberJune 30, 20222023 were $9,862,677.$9,850,353.  

Cash flows -

Operating Activities -

Cash used in operations for the sixthree months ended SeptemberJune 30, 20222023 was $0. Operating activities were affected by net income – ($11,213) and change in accounts payable and accrued liabilities – $11,213.

Cash used in operations for the sixthree months ended SeptemberJune 30, 20212022 was $0. Operating activities were affected by net income – $546,186 and change in accounts payable and accrued liabilities – ($546,186).

Investing Activities –

Cash used from investing activities for the sixthree months ended for SeptemberJune 30, 20222023 was $0.

Cash used from investing activities for the sixthree months ended for SeptemberJune 30, 20212022 was $0.

Financing Activities –-

Cash provided from financing activities for the sixthree months ended SeptemberJune 30, 20222023 was $0.

Cash provided from financing activities for the sixthree months ended SeptemberJune 30, 20212022 was $0.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Risks Related to the Company’s Business and Operations

Investing in the Common Stock involves a high degree of risk. You should carefully consider the risks described below, and all of the other information set forth in this report before deciding to invest in shares of the Company’s common stock. In addition to historical information, the information in this report contains forward-looking statements about the Company’s future business and performance. The Company’s actual operating results and financial performance may be different from what the Company’s management expects as of the date of this report. The risks described in this report represent the risks that the Company’s management has identified and determined to be material to the Company. Additional risks and uncertainties not currently known to the Company’s management, or that the Company’s management currently deems to be immaterial, may also materially harm the Company’s business operations and financial condition.

Going Concern Qualification

Our notes to the financial statements disclose that the Company has generated no revenue or cash flow, has incurred net losses for the fiscal year and has a working capital deficiency. Due to the current restructuring discussions, the Company operations are not likely to produce positive cash flow until at least the end of the fiscal year ended March 31, 2023.2024. These factors raise substantial doubt about our ability to continue as a going concern. Our going concern uncertainty may affect our ability to raise additional capital, and may also affect our relationships with suppliers and customers. Investors should carefully examine our financial statements and read the notes to the financial statements.

Other risk factors to be considered include the following:

·The Company has not generated revenues and has not executed any significant contracts for the sale of the Company’s products. 

·The Company uses outside sources to fulfill contract obligations and has limited control over the provider’s ability to meet the Company obligations. 

·The directors, executive officers and principal shareholders of the Company have effective control of the Company, preventing non-affiliate shareholders from significantly influencing the Company’s direction and future. 

·The Company relies on outsourced manufacturers for the production of all Sector 10 products.  

·The market for the Company’s stock is thin and subject to manipulation. 

·The market price for the Common Stock is volatile and may change dramatically at any time. 

·Our business may be affected by increased compensation and benefits costs. 

·The Company has not paid dividends and does not anticipate paying dividends in the future. 

·The Common Stock is a “low-priced stock” or “penny stock” and subject to regulation that limits or restricts the potential market for the stock. 

·Compliance with existing and new regulations of corporate governance and public disclosure may result in additional expenses. 

Item 4.  Controls and Procedures

(a)Based on the evaluation of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by paragraph (b) of Rules 13a-15 or 15d-15, the Company’s principal executive officer and principal financial officer concluded that as of SeptemberJune 30, 2022,2023, the Company’s disclosure controls and procedures were effective. 

(b)There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

There is no pending litigation.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None 

Item 3. Defaults Upon Senior Securities

None 

Item 4.  Submission of Matters to a Vote of Security Holders

None 

Item 5.  Other Information

Applicable shareholders with anti-dilution rights have notified the Company of their intention to exercise their anti-dilution rights.  No ani-dilution rights were exercised in the quarter ended September 30, 2022.None 

Item 6. Exhibits