UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM Form 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2022 |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___ |
For the quarterly period endedNovember 30, 2017
☐ 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:000-53994
LZG INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
LZG INTERNATIONAL, INC. | |
(Exact name of registrant as specified in its charter) |
Florida | 90-1907109 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
135 WEST 41st STREET, SUITE 5-104 NEW YORK, NY | 10036 | |
(Address of principal executive offices) | (Zip |
Registrant’s telephone number, including area code:(801) 323-2395 (917) 310-3978
Securities registered pursuant to Section 12(b) of the Act: None
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 ☒ No ☐
Indicate by check mark whether the registrant has 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 (§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 ☒ No ☐ The registrant does not have a Web site.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitionsdefinition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b‑2 of the Exchange Act).
Yes ☒☐ No ☐☒
The number of shares outstanding of the registrant’s common stock as of January 8, 201813, 2023, was 250,556.153,397,456.
TABLE OF CONTENTS
PAGE | ||||
3 | ||||
3 | ||||
4 | ||||
Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited) | 5 | |||
6 | ||||
7 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |||
19 | ||||
19 | ||||
21 | ||||
21 | ||||
21 | ||||
21 | ||||
21 | ||||
21 | ||||
22 | ||||
23 |
PART I – FINANCIAL INFORMATION
ITEMItem 1. FINANCIAL STATEMENTSFinancial Statements
NOTE: This Form 10-Q is incomplete, as the Company did not obtain a review of the interim financial statements by an independent accountant using professional review standards and procedures, although such a review is required by this Form 10-Q.
The delay is due to the inability of the Company and the auditor to complete the work in the prescribed time. The Company anticipates that the review of the financial statements will be completed within the next week and the Company will file an amended Form 10-Q/A subsequent to the completed review.
LZG International, Inc and Subsidiary | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
|
|
|
|
| ||||
ASSETS | ||||||||
|
| As of |
| |||||
|
| November 30, |
|
| May 31, |
| ||
|
| 2022 |
|
| 2022 |
| ||
|
| UNAUDITED |
|
| AUDITED |
| ||
|
|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
Cash |
| $ | 531,464 |
|
| $ | 81,567 |
|
Accounts Receivable, Trade |
|
| 4,254,597 |
|
|
| 24,471 |
|
Accounts Receivable, Trade, Related Party |
|
| - |
|
|
| 130,341 |
|
Other Receivables, Related Party |
|
| - |
|
|
| 9,794,813 |
|
Other Current Assets |
|
| 14,060,426 |
|
|
|
|
|
Total Current Assets |
|
| 18,846,487 |
|
|
| 10,031,192 |
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS |
|
|
|
|
|
|
|
|
Buildings and Other Fixed Assets |
|
| 286,535 |
|
|
| - |
|
Accumulated Depreciation |
|
| (176,270 | ) |
|
| - |
|
Net Fixed Assets |
|
| 110,265 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Right of Use Operating Asset |
|
| 117,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Intangible Assets |
|
| 13,854,969 |
|
|
| 11,643,000 |
|
Accumulated Amortization |
|
| (2,631,284 | ) |
|
| (178,250 | ) |
Other Long Term Assets |
|
| 125,382 |
|
|
| - |
|
Goodwill |
|
| 24,946,433 |
|
|
|
|
|
Total Other Assets |
|
| 36,295,500 |
|
|
| 11,464,750 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 55,369,563 |
|
| $ | 21,495,942 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts Payable |
| $ | 2,839,679 |
|
| $ | 2,036 |
|
Other Payable - Related Party |
|
| 4,495,854 |
|
|
| - |
|
Note Payable - Related Party |
|
| 3,000,000 |
|
|
| 3,000,000 |
|
Notes Payable |
|
| 7,221,279 |
|
|
| - |
|
Accrued Expenses |
|
| 146,839 |
|
|
| 50,000 |
|
Deferred Revenue |
|
| 13,891,437 |
|
|
| 85,866 |
|
Accrued Interest - Related Party |
|
|
|
|
|
| 11,836 |
|
Accrued Interest |
|
| 433,170 |
|
|
| - |
|
Other Current Liabilities |
|
| 4,027,190 |
|
|
| - |
|
Deferred Tax Liability |
|
|
|
|
|
| - |
|
Total Current Liabilities |
|
| 36,055,448 |
|
|
| 3,149,738 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
Notes Payable - Long Term |
|
| 3,032,474 |
|
|
| - |
|
Operating Lease - Long Term |
|
| 76,945 |
|
|
|
|
|
Total Long Term Liabilities |
|
| 3,109,419 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 39,164,867 |
|
|
| 3,149,738 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Common Stock, $0.001 par value; 250,000,000 shares authorized 145,609,472 and 144,899,472 shares issued and outstanding at 11/30/22 and 05/31/22 |
|
| 145,610 |
|
|
| 144,899 |
|
|
|
|
|
|
|
|
|
|
Additional Paid in Capital |
|
| 27,686,117 |
|
|
| 22,474,358 |
|
Accumulated Deficit |
|
| (11,707,645 | ) |
|
| (4,273,053 | ) |
Accumulated Other Comprehensive Loss |
|
| 80,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity |
|
| 16,204,696 |
|
|
| 18,346,204 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 55,369,563 |
|
| $ | 21,495,942 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements |
3 |
Table of Contents |
LZG International, Inc and Subsidiary | ||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||
(Unaudited) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| THREE MONTHS ENDED |
|
| THREE MONTHS ENDED |
|
| SIX MONTHS ENDED |
|
| SIX MONTHS ENDED |
| ||||
|
| 11/30/22 |
|
| 11/30/21 |
|
| 11/30/22 |
|
| 11/30/21 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
REVENUES |
| $ | 6,939,614 |
|
| $ | 43,447 |
|
| $ | 9,372,426 |
|
| $ | 43,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES |
|
| (1,435,544 | ) |
|
| (8,208 | ) |
|
| (1,749,949 | ) |
|
| (8,208 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| 5,504,070 |
|
|
| 35,239 |
|
|
| 7,622,477 |
|
|
| 35,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development Costs |
|
| (5,411,150 | ) |
|
|
|
|
|
| (5,316,243 | ) |
|
|
|
|
Sales and Marketing |
|
| (1,271,680 | ) |
|
|
|
|
|
| (4,520,501 | ) |
|
|
|
|
General and Administrative |
|
| (722,501 | ) |
|
| (22,965 | ) |
|
| (2,213,691 | ) |
|
| (32,690 | ) |
Total Operating Expenses |
|
| (7,405,331 | ) |
|
| (22,965 | ) |
|
| (12,050,435 | ) |
|
| (32,690 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Loss |
|
| (1,901,261 | ) |
|
| 12,274 |
|
|
| (4,427,958 | ) |
|
| 2,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
|
| 99,359 |
|
|
|
|
|
|
| 172,995 |
|
|
|
|
|
Currency Exchange Loss |
|
| 31,432 |
|
|
|
|
|
|
| (107,584 | ) |
|
|
|
|
Total Other Income (Expense) |
|
| 130,791 |
|
|
| - |
|
|
| 65,411 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE NONOPERATING EXPENSES |
|
| (1,770,470 | ) |
|
| 12,274 |
|
|
| (4,362,547 | ) |
|
| 2,549 |
|
NONOPERATING INCOME/(EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
| (186,667 | ) |
|
| (1,571 | ) |
|
| (301,334 | ) |
|
| (2,968 | ) |
Interest Expense - related party |
|
| (60,000 | ) |
|
| (2,854 | ) |
|
| (120,000 | ) |
|
| (5,708 | ) |
Amortization and Depreciation |
|
| (595,918 | ) |
|
|
|
|
|
| (1,179,843 | ) |
|
|
|
|
Stock Compensation Expense |
|
| (1,087,477 | ) |
|
|
|
|
|
| (1,449,969 | ) |
|
|
|
|
Total Nonoperating Expense |
|
| (1,930,062 | ) |
|
| (4,425 | ) |
|
| (3,051,146 | ) |
|
| (8,676 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
| (3,700,532 | ) |
|
| 7,849 |
|
|
| (7,413,693 | ) |
|
| (6,127 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES |
|
| (20,899 | ) |
|
| - |
|
|
| (20,899 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | (3,721,431 | ) |
| $ | 7,849 |
|
| $ | (7,434,592 | ) |
| $ | (6,127 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share |
| $ | (0.02 | ) |
| $ | 0.00 |
|
| $ | (0.05 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
| 152,966,276 |
|
|
| 4,426,380 |
|
|
| 150,068,465 |
|
|
| 2,327,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements |
4 |
Table of Contents |
LZG International, Inc and Subsidiary | ||||||||||||||||||||||||
Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficit) | ||||||||||||||||||||||||
For the six months ended November 30, 2022 and 2021 | ||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| ||||||||||
|
|
|
|
|
| Additional |
|
|
|
| Other |
|
| Stockholders' |
| |||||||||
|
| Common Stock |
|
| Paid in |
|
| Accumulated |
|
| Comprehensive |
|
| Equity |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Loss |
|
| (Deficit) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance - May 31, 2021 |
|
| 250,556 |
|
| $ | 251 |
|
| $ | 3,063,134 |
|
| $ | (3,353,260 | ) |
| $ | - |
|
| $ | (289,875 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (13,976 | ) |
|
| - |
|
|
| (13,976 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - August 31, 2021 |
|
| 250,556 |
|
| $ | 251 |
|
| $ | 3,063,134 |
|
| $ | (3,367,236 | ) |
| $ | - |
|
| $ | (303,851 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 7,849 |
|
|
|
|
|
|
| 7,849 |
|
Issuance of common shares for acquisition of software |
|
| 10,000,000 |
|
| $ | 10,000 |
|
| $ | 338,000 |
|
|
|
|
|
|
|
|
|
|
| 348,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - November 30, 2021 |
|
| 10,250,556 |
|
| $ | 10,251 |
|
| $ | 3,401,134 |
|
| $ | (3,359,387 | ) |
| $ | - |
|
| $ | 51,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - May 31, 2022 |
|
| 144,899,472 |
|
| $ | 144,899 |
|
| $ | 22,474,358 |
|
| $ | (4,273,053 | ) |
| $ | - |
|
| $ | 18,346,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,713,161 | ) |
|
| - |
|
| $ | (3,713,161 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,906,906 | ) |
| $ | (1,906,906 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock assigned for services (non-vested) |
|
|
|
|
|
|
|
|
| $ | 362,492 |
|
|
| - |
|
|
| - |
|
| $ | 362,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - August 31, 2022 |
|
| 144,899,472 |
|
| $ | 144,899 |
|
| $ | 22,836,850 |
|
| $ | (7,986,214 | ) |
| $ | (1,906,906 | ) |
| $ | 13,088,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,721,431 | ) |
|
|
|
|
| $ | (3,721,431 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares for business acquisition |
|
| 710,000 |
|
|
| 711 |
|
|
| 3,761,790 |
|
|
|
|
|
|
|
|
|
| $ | 3,762,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,987,520 |
|
| $ | 1,987,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock assigned for services (non-vested) |
|
|
|
|
|
|
|
|
| $ | 1,087,477 |
|
|
|
|
|
|
|
|
|
| $ | 1,087,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - November 30, 2022 |
|
| 145,609,472 |
|
| $ | 145,610 |
|
| $ | 27,686,117 |
|
| $ | (11,707,645 | ) |
| $ | 80,614 |
|
| $ | 16,204,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements |
5 |
Table of Contents |
LZG International, Inc and Subsidiary | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
For the six months ended | ||||||||
UNAUDITED | ||||||||
|
|
|
| |||||
|
| 11/30/22 |
|
| 11/30/21 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net Loss |
| $ | (7,434,592 | ) |
| $ | (6,127 | ) |
Adjustment to reconcile net (loss) to cash used in operating activities: |
|
|
|
|
|
|
|
|
Amortization and depreciation |
|
| 1,179,843 |
|
|
| 8,208 |
|
Stock issued for services performed |
|
| 1,449,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts Receivable, Trade |
|
| (364,907 | ) |
|
|
|
|
Other Receivables |
|
| 317,633 |
|
|
|
|
|
Other Receivables, Related Party |
|
| 14,418,972 |
|
|
|
|
|
Other Current Assets |
|
| (6,583,802 | ) |
|
|
|
|
Other Long Term Assets |
|
| (86,750 | ) |
|
|
|
|
Accounts Payable - related party |
|
| - |
|
|
| 3,000 |
|
Accounts Payable |
|
| 156,457 |
|
|
| 1,350 |
|
Operating Lease Assets |
|
| (117,311 | ) |
|
|
|
|
Operating Lease Liabilities |
|
| 99,686 |
|
|
|
|
|
Other Current Liabilities |
|
| 1,408,893 |
|
|
|
|
|
Deferred Tax |
|
| 36,412 |
|
|
|
|
|
Accrued Expenses |
|
| (6,332 | ) |
|
|
|
|
Deferred Revenue |
|
| 5,208,575 |
|
|
|
|
|
Accred Interest |
|
| 301,334 |
|
|
| 2,968 |
|
Accred Interest - related party |
|
| 120,000 |
|
|
| 5,708 |
|
Net Cash provided by (used in) Operating Activities |
|
| 10,104,080 |
|
|
| 15,107 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Net Proceeds from Notes Payable |
|
| 12,000,000 |
|
|
| 25,000 |
|
Repayments of Debt |
|
| (3,103,856 | ) |
|
|
|
|
Proceeds from Issuance of Common Stock |
|
| 3,762,500 |
|
|
|
|
|
Net cash provided by Financing Activities |
|
| 12,658,644 |
|
|
| 25,000 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from in Investing Activities: |
|
|
|
|
|
|
|
|
Fixed Asset Acquisitions |
|
| (14,595 | ) |
|
|
|
|
Acquisition of PrimeSource, net of cash acquired |
|
| (17,648,979 | ) |
|
|
|
|
Acquisition of Predictive Black, net of cash acquired |
|
| (2,765,987 | ) |
|
|
|
|
Acquisition of SoTech, net of cash acquired |
|
| (1,963,880 | ) |
|
|
|
|
Net Cash used in Investing Activities |
|
| (22,393,441 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Unrealized Currency Loss |
|
| 80,614 |
|
|
|
|
|
Increase in Cash |
|
| 449,897 |
|
|
| 40,107 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period |
|
| 81,567 |
|
|
| 4,735 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
| $ | 531,464 |
|
| $ | 44,842 |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for acquisition of software |
|
|
|
|
|
| 348,000 |
|
|
|
|
|
|
|
|
|
|
Issuance of 170,000 shares of common stock for SO Tech stock acquisition |
|
| 1,062,300 |
|
|
|
|
|
Issuance of 540,000 shares of common stock for Predictive Black stock acquisition |
|
| 2,700,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 1, 2022, the Company assigned 7,837,672 of restricted common shares in exchange for in-kind consulting services. The shares were valued at $17,399,632 or $2.22/share. Expenses are recognized over the vesting period. For the six months ended 11/30/22, $1,449,969 was recognized as expense. | ||||||||
| ||||||||
The accompanying notes are an integral part of these condensed financial statements |
6 |
Table of Contents |
LZG INTERNATIONAL, INC.
For the Three and Six Months Ended
November 30, 2017
(Unaudited)
LZG International Inc.
Condensed Balance Sheets
(Unaudited)
NOVEMBER 30, 2017 | MAY 31, 2017 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash | $ | 89 | $ | 1,013 | |||
Total Current Assets | 89 | 1,013 | |||||
TOTAL ASSETS | $ | 89 | $ | 1,013 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
CURRENT LIABILITIES | |||||||
Accounts Payable - vendors | $ | 1,125 | $ | — | |||
Accounts Payable - related party | 95,600 | 92,500 | |||||
Loans Payable | 47,600 | 45,100 | |||||
Accrued Interest | 13,833 | 11,952 | |||||
Total Current Liabilities | 158,158 | 149,552 | |||||
LONG-TERM LIABILITIES | |||||||
Loan Payable - related party | 23,500 | 23,500 | |||||
Accrued Interest - related party | 14,637 | 13,697 | |||||
Total Long-term Liabilities | 38,137 | 37,197 | |||||
TOTAL LIABILITIES | 196,295 | 186,749 | |||||
STOCKHOLDERS' DEFICIT | |||||||
Preferred stock, $.001 par value, 20,000,000 shares authorized, none issued and outstanding | — | — | |||||
Common Stock, $.001 par value, 100,000,000 shares authorized, 250,556 shares issued and outstanding | 251 | 251 | |||||
Additional Paid in Capital | 3,063,134 | 3,063,134 | |||||
Accumulated Deficit | (3,259,591 | ) | (3,249,121 | ) | |||
Total Stockholders' Deficit | (196,206 | ) | (185,736 | ) | |||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 89 | $ | 1,013 |
The accompanying notes are an integral part of these financial statements.
LZG International, Inc.
Condensed Statements of Operations
(Unaudited)
THREE MONTHS ENDED NOV 30, 2017 | THREE MONTHS ENDED NOV 30, 2016 | SIX MONTHS ENDED NOV 30, 2017 | SIX MONTHS ENDED NOV 30, 2016 | |||||||||||||
REVENUES | $ | — | $ | — | $ | — | $ | — | ||||||||
EXPENSES | ||||||||||||||||
General and administrative | 2,625 | 2,925 | 7,649 | 7,599 | ||||||||||||
TOTAL EXPENSES | 2,625 | 2,925 | 7,649 | 7,599 | ||||||||||||
Net Operating Loss Before Other Expense | (2,625 | ) | (2,925 | ) | (7,649 | ) | (7,599 | ) | ||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest expense | (952 | ) | (882 | ) | (1,881 | ) | (1,702 | ) | ||||||||
Interest expense – related party | (470 | ) | (470 | ) | (940 | ) | (940 | ) | ||||||||
TOTAL OTHER EXPENSE | (1,422 | ) | (1,352 | ) | (2,821 | ) | (2,642 | ) | ||||||||
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (4,047 | ) | (4,277 | ) | (10,470 | ) | (10,241 | ) | ||||||||
INCOME TAXES | — | — | — | — | ||||||||||||
LOSS FROM CONTINUING OPERATIONS | (4,047 | ) | (4,277 | ) | (10,470 | ) | (10,241 | ) | ||||||||
DISCONTINUED OPERATIONS | ||||||||||||||||
Loss from discontinued operations | — | — | — | — | ||||||||||||
NET LOSS | $ | (4,047 | ) | $ | (4,277 | ) | $ | (10,470 | ) | $ | (10,241 | ) | ||||
Net Loss Per Share | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.04 | ) | ||||
Weighted average shares outstanding | 250,556 | 250,556 | 250,556 | 250,556 |
The accompanying notes are an integral part of these financial statements.
LZG International, Inc.
Condensed Statements of Cash Flows
(Unaudited)
SIX MONTHS ENDED NOV 30, 2017 | SIX MONTHS ENDED NOV 30, 2016 | |||||||
Cash Flows from Operating Activities | ||||||||
Net Loss | $ | (10,470 | ) | $ | (10,241 | ) | ||
Adjustment to reconcile net (loss) to cash provided (used) by operating activities: | ||||||||
Changes in assets and liabilities: | ||||||||
Accounts payable - related party | 3,100 | 3,200 | ||||||
Accounts payable - other | 1,125 | — | ||||||
Accrued interest | 1,881 | 1,702 | ||||||
Accrued interest - related party | 940 | 940 | ||||||
Net Cash Provided (Used) by Operating Activities | (3,424 | ) | (4,399 | ) | ||||
Cash Flows From Investing Activities | — | — | ||||||
Cash Flows from Financing Activities: | ||||||||
Loans, other | 2,500 | 5,500 | ||||||
Net Cash Provided by Financing Activities | 2,500 | 5,500 | ||||||
Increase (Decrease) in Cash | (924 | ) | 1,101 | |||||
Cash and Cash Equivalents, Beginning of Period | 1,013 | 1,562 | ||||||
Cash and Cash Equivalents, End of Period | $ | 89 | $ | 2,663 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash Paid For: | ||||||||
Interest | $ | — | $ | — | ||||
Income Taxes | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements.
LZG International, Inc.Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 20172022
(Unaudited)
(UNAUDITED)
NOTE 1 –- BASIS OF FINANCIAL STATEMENT PRESENTATION AND ACCOUNTING POLICIES
TheIn the opinion of management, the accompanying unaudited condensed financial statementsinterim Condensed Consolidated Financial Statements of LZG International and its subsidiary reflect all adjustments, including normal recurring accruals, necessary for a fair presentation. All significant intercompany balances and transactions have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.eliminated in consolidation. Certain information and footnote disclosuresdisclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted accounting principlesin the United States of America have been condensed or omitted in accordance with suchpursuant to instructions, rules and regulations.regulations prescribed by the Securities and Exchange Commission (“SEC”). The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although managementCompany believes that the disclosures and information presentedprovided herein are adequate to make the information presented not misleading it is suggested thatwhen these interim condensed financial statements beunaudited Condensed Consolidated Financial Statements are read in conjunction with the audited Financial Statements contained in the Company’s audited financial statements and notes thereto included in itsForm 10-K for the year ended May 31, 2017 Annual Report on Form 10-K. Operating31,2022. The results of operations for the six monthsmonths’ ended November 30, 20172022 are not necessarily indicative of the results to be expected for year endingthe full year. The Consolidated Financial Statements as of May 31, 2018.2022 are derived from audited financial statements included in the Company’s Form 10-K for the year ended May 31, 2022.
Organization
LZG International, Inc. (“the Company”) is a Florida company that was incorporated on May 22, 2000. To date, the Company has not paid any dividends and does not anticipate dividends to be paid in the foreseeable future.
On June 17, 2022, the Company entered into a Master Stock Purchase Agreement with two individuals, Yevgeniy Chsherbinin and Victor Nazarov through its wholly owned subsidiary, FB Prime Source Acquisition, LLC to acquire Prime Source, a Kazakhstani corporation and Prime Source’s affiliates consisting of Prime Source Innovation, Prime Source – Analytical Systems, Digitalism, and InFin-IT Solution (together with Prime Source, the “Prime Source Companies”). The agreed upon purchase price of $18,000,000 is payable on a payment schedule.
On September 22, 2022, the Company, through its wholly owned subsidiary, FatBrain Acquisition Company Limited, entered into a Stock Purchase Agreement to acquire all outstanding shares of SO Technology Ltd, a United Kingdom limited company (“SO Tech”). The agreed upon purchase price of $2,762,500 is comprised of a cash distribution of $1,700,000 (payable on a payment schedule) and 170,000 shares of common stock valued at $1,062,500 or $6.25/share.
On November 14, 2022, the Company, through its wholly owned subsidiary, FatBrain Acquisition Company Limited, entered into a Stock Purchase Agreement to acquire all outstanding shares of Predictive Black Ltd, a United Kingdom limited company (“Predictive Black”). The agreed upon purchase price of $3,300,000 is comprised of a cash distribution of $600,000 (payable on a payment schedule) and 540,000 shares of common stock valued at $2,700,000 or $5.00/share.
Fiscal Year
The Company’s fiscal year ends on May 31.
7 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
Revenue Recognition
Substantially all the Company’s revenue is derived from contracts with customers for subscription services over a period of time. Contracts with customers are considered to be short-term when the time between signed agreements and satisfaction of the performance obligations is equal to or less than one year, and virtually all of the Company’s contracts are short-term. The Company recognizes revenue when services are provided to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. The Company typically satisfies its performance obligations in contracts with customers upon delivery of the services. The Company does not have any contract assets since the Company has an unconditional right to consideration when the Company has satisfied its performance obligation and payment from customers is not contingent on a future event. Generally, payment is due from customers immediately at the invoice date, and the contracts do not have significant financing components nor variable consideration. There are no returns and there are no allowances. All the Company’s contracts have a performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as a price per unit. All estimates are based on the Company’s historical experience, complete satisfaction of the performance obligation, and the Company’s best judgment at the time the estimate is made.
Cost of Revenues
Cost of Revenues primarily include expenses incurred by the Company to host and deliver products through the marketplace and payroll expenses directly to the production of market ready products. Related platform and payment processing fees are recorded in the period incurred. Payroll costs are recognized in the period they were incurred.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Accounts Receivable
Accounts receivables are recorded at the amount due from customers and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities on the Statement of Cash Flows. The Company does not have any off-balance-sheet credit exposure related to its customers. The Company evaluates the collectability of its accounts receivables based on collection risks and historical experience. Estimated losses, if any, are recorded to the allowance for doubtful accounts and as a general expense. There were no anticipated losses in the current reporting period or for the prior year ended May 31, 2022 and therefore, no allowance for doubtful accounts is deemed necessary.
Leases
The Company maintains a corporate office in a leased facility which is accounted for as an operating lease. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets.
The Company amortizes leasehold improvements over the shorter of the life of the lease or the projected life of the improvements.
Fair Value Measurement
The fair value hierarchy categorizes the inputs used to measure fair value into three levels, which are described as follows:
· | Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities | |
· | Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly | |
· | Level 3: Inputs for the asset or liability that are not based on observable market data |
8 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
It is not practicable to estimate the fair value of related party loans because there is no established market for these loans and it is inappropriate to estimate future cash flows, which are largely dependent on the Company establishing or acquiring operations at some future point. No financial instruments are held for trading purposes.
Goodwill and Intangible Assets
The Company relies on guidance under ASC 350, Intangibles – Goodwill and Other, to account for intangible assets. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows.
In accordance with U.S. GAAP for goodwill and other indefinite-lived intangibles, the Company tests these assets for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and indefinite-lived intangible assets acquired in business combinations.
The estimated useful lives for each intangible asset class are as follows:
Estimated Useful Lives | |
AI Technology (Angelina FX) | 5 years |
Intellagents IT Platform and ecosystem | 5 years |
FatBrain IT | 5 years |
IP Technology, Prime Source | 5 years |
Impairment Assessment
The Company evaluates intangible assets and long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value. For the year period ended November 30, 2022, the Company recorded no impairments to intangible assets or long-lived assets.
Sales and Marketing
Sales and marketing expenses are expensed and incurred and primarily consist of costs associated with acquiring new clients or selling new products. Expenses include salaries, commissions, online advertising costs as well as outsourced marketing strategy.
General and Administrative
General and administrative expenses consist of costs primarily related to finance operations, human resources, executive management, legal, corporate technology, corporate development, amortization, and certain other administrative costs that are not directly attributed to a product or service.
9 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs include external costs of outside vendors engaged to design, test and program IT Technologies. Other research and development activities include salaries and related payroll expenses related to the Company’s research and development activities.
Costs for certain development activities are estimated based on an evaluation of the progress to completion of specific tasks using data such vendor representation. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred.
Use of Estimates
In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date
of the financial statements, and revenues and expenses during the reporting period. Actual results may differ from these estimates.
Basic and Fully Diluted Income (Loss) Per Share
In accordance with ASC 260, Earnings Per Share (“ASC 260”) the computations of basic loss per share of common stock are based on the weighted average number of common shares outstanding during the periods presented in the financial statements.
The computations of basic and fully diluted loss per share of common stock are based on the weighted average number of common shares outstanding during the periods presented in the financial statements, plus the common stock equivalents, which would arise from the exercise of stock options and warrants outstanding during the period, or the exercise of convertible debentures. As of November 30, 2022, all common stock activity has been included and there were no items considered to be anti-dilutive.
Software Costs
The Company follows ASC 985-20, Costs of Computer Software to be Sold, Leased, or Marketed, whereby costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed to be sold to external users, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been expensed as research and development. Purchased software that has reached technological feasibility and that has no alternative use, other than existing licenses or contracts for which it is being utilized, is capitalized at cost and amortized ratably over the term of the underlying contract.
Stock-based Compensation
The Company accounts for stock-based compensation to employees and non-employees in conformity with the provisions of ASC 718, Stock Based Compensation. The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards are recognized on a straight-line basis over the requisite service period.
Common shares issued to third parties for services provided are valued based on the estimated fair value of the Company’s common shares. All stock-based compensation costs are recorded in expenses in the condensed consolidated statements of operations.
10 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. Cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company may at times have balances in financial institutions that are more than the federally insured limit of $250,000.
Major Customers
For the six months ended November 30, 2022, the Company did not have any customers with greater than 10% of consolidated sales.
NOTE 2 – BUSINESS ACQUISITION
On June 17, 2022, the Company entered into a Master Stock Purchase Agreement with two individuals, Yevgeniy Chsherbinin and Victor Nazarov through its wholly owned subsidiary, FB PrimeSource Acquisition, LLC to acquire Prime Source, a Kazakhstani corporation and Prime Source’s affiliates consisting of Prime Source Innovation, Prime Source – Analytical Systems, Digitalism, and InFin-IT Solution (together with Prime Source, the “Prime Source Companies”).
On September 22, 2022, the Company, through its wholly owned subsidiary, FatBrain Acquisition Company Limited, entered into a Stock Purchase Agreement to acquire all outstanding shares of SO Technology Ltd, a United Kingdom limited company (“SO Tech”).
On November 14, 2022, the Company, through its wholly owned subsidiary, FatBrain Acquisition Company Limited, entered into a Stock Purchase Agreement to acquire all outstanding shares of Predictive Black Ltd, a United Kingdom limited company (“PB Ltd”).
The Company accounted for these acquisitions as business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. The results of operations of the acquired businesses since the date of acquisition are included in the consolidated financial statements of the Company for the six months ended November 30, 2022. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition, as determined by management. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from the acquisitions described below can be attributed to a number of business factors including, but not limited to, cost synergies expected to be realized, the intellectual property acquired, and a trained technical workforce.
In conjunction with acquisition, the Company uses various valuation techniques to determine fair value of the assets acquired, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Inputs to these valuation approaches require significant judgment including: (i) forecasted sales, growth rates and customer attrition rates, (ii) forecasted operating margins, (iii) royalty rates and discount rates used to present value future cash flows, (iv) the amount of synergies expected from the acquisition, (v) the economic useful life of assets and (vi) the evaluation of historical tax positions. In certain acquisitions, historical data is limited, therefore, we base our estimates and assumptions on budgets, business plans, economic projections, anticipated future cash flows and marketplace data. We have engaged outside consultants to assist us with the valuation of our acquisition. As of November 30, 2022, the results of the valuations are not yet available.
11 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
The purchase price and purchase price allocation cost as of the acquisition completion date follows:
|
| Prime Source Companies |
|
| So Tech |
|
| BP LTD |
| |||
Purchase Price: |
|
|
|
|
|
|
|
|
| |||
Cash, net of cash acquired |
| $ | 5,723,388 |
|
| $ | 901,380 |
|
| $ | 80,000 |
|
Note Payable |
|
| 12,000,000 |
|
|
| 700,000 |
|
|
| 520,000 |
|
170,000 shares of common stock, values at $6.25/sh |
|
| - |
|
|
| 1,062,500 |
|
|
| - |
|
540,000 shares of common stock, values at $5.00/sh |
|
| - |
|
|
| - |
|
|
| 2,700,000 |
|
Total Purchase Price, net of cash acquired |
| $ | 17,723,388 |
|
| $ | 2,663,880 |
|
| $ | 3,300,000 |
|
|
| Prime Source Companies |
|
| So Tech |
|
| BP LTD |
| |||
Assets Acquired: |
|
|
|
|
|
|
|
|
| |||
Cash |
| $ | - |
|
|
|
|
| $ | 14,013 |
| |
Accounts Receivable, Trade, net of allowance |
| $ | 3,653,805 |
|
| $ | 208,476 |
|
| $ | 2,938 |
|
Other Receivables |
|
| 8,023 |
|
|
| 26,254 |
|
|
| 283,356 |
|
Customer Supplies |
|
| 361,455 |
|
|
|
|
|
|
| - |
|
Other Current Assets |
|
| 7,118,181 |
|
|
|
|
|
|
| 1 |
|
Fixed Assets |
|
| 94,453 |
|
|
| 993 |
|
|
| 224 |
|
Intangible Assets |
|
| 1,009,336 |
|
|
|
|
|
|
| - |
|
Other Long-Term Assets |
|
| 39,471 |
|
|
|
|
|
|
| - |
|
Total Assets Acquired |
|
| 12,284,724 |
|
|
| 235,723 |
|
|
| 300,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable |
|
| 2,631,847 |
|
|
| - |
|
|
| 90,977 |
|
Accrued Expenses |
|
| 49,456 |
|
|
| 53,716 |
|
|
| - |
|
Deferred Revenue |
|
| 8,596,996 |
|
|
|
|
|
|
| - |
|
Other Current Liabilities |
|
| 2,418,468 |
|
|
| 72,647 |
|
|
|
|
|
Creditor Loans |
|
| - |
|
|
| 43,184 |
|
|
| 212,981 |
|
Total Liabilities Assumed |
|
| 13,696,767 |
|
|
| 115,831 |
|
|
| 303,958 |
|
Net Assets Acquired |
|
| (1,375,631 | ) |
|
| 119,893 |
|
|
| (3,426 | ) |
Excess Purchase Price “Goodwill” |
| $ | 19,099,019 |
|
| $ | 2,543,987 |
|
| $ | 3,303,426 |
|
12 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
The excess purchase price has been recorded as goodwill ($19,099,019 for the Prime Source Companies, $2,543,987 for SoTech, and $3,303,426 for PB LTD). In accordance with US GAAP for goodwill and other indefinite-lived intangibles, the Company tests Goodwill for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and indefinite-lived intangible assets acquired in business combinations. The goodwill is amortizable for tax purposes.
Identifiable intangible assets acquired by the business combinations are amortized over the estimated useful lives of the assets as determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows. The estimated useful life of the identifiable intangible assets is five years.
NOTE 3 – REVENUES
Deferred revenue is recorded when cash payments are received or due in advance of the Company’s performance, including amounts which are refundable. The Company typically sells software and services with a term from one month up to 1 year. Payments may be made by customers in advance, at the time of sale. As such, the company may receive up to 1 year of revenue in advance.
The transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which may include unearned revenue and unbilled amounts that will be recognized as revenue in future periods. The transaction price allocated to the remaining performance obligations is influenced by several factors, including the timing of renewals, the timing of delivery of software licenses, average contract terms, and foreign currency exchange rates. Unbilled portions of the remaining performance obligations are subject to future economic risks including bankruptcies, regulatory changes, and other market factors.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
(a) Commitments
Effective 10/01/2022, the Company began leasing office space under a lease commitment that expires on September 30, 2024. Future minimum lease payments for the twelve months ended November 30, are as follows:
2023 |
| $ | 63,551 |
|
2024 |
|
| 43,969 |
|
Total Future Lease Payments |
| $ | 107,520 |
|
The following table summarized the components of the gross operating lease costs incurred for the six months ended November 30, 2022:
For the Six Months Ended November 30, 2022 |
| |||
Operating Lease Cost: |
|
|
| |
Current Lease Cost |
| $ | 73,342 |
|
Long Term Lease Cost |
|
| 43,969 |
|
Total Operating Lease Cost |
| $ | 117,311 |
|
13 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
(b) Contingencies
In the normal course of business, from time to time, the Company could be involved in legal actions relating to the ownership and operations of the Company. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the financial position, results of operations, or liquidity of the Company.
NOTE 5 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has limited assets, has incurred losses since inception has negative cash flows from operations, and has no revenue-generating activities. Itsactivities that do not exceed operational expenses. Historically, its activities have been limited for the past several years and it ishave been dependent upon financing to continue operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s plan to further develop and market its technology and acquire or merge with other operatingrevenue generating companies.
NOTE 36 – RELATED PARTY TRANSACTIONS
As of November 30, 2022, the financial statements included a related party payable in the amount of $4,495,854. As of May 31, 2022 the had a related party receivable in the amount of $9,925,155. The stockholders of the related party also own stock in the Company.
On May 11, 2022, the Company assumed a promissory note from a related party in connection with an asset acquisition. The $3,000,000 note bears interest at 8% per annum and is payable on Demand, no later than January 5, 2023. There have been no payments of principle or interest for the loan as of November 30, 2022. Accrued interest at November 30, 2022 is $131,836.
To assist with the orderly transition of management and operations, the Company entered into a Management Services Agreement with FatBrain LLC, a related party, effective 10/23/21. The Company has retained FatBrain LLC to provide consulting and logistical support when needed to support operating the business for a period of up to two years.
NOTE 7 – NOTES PAYABLE
DuringOn June 17, 2022 in connection with the Prime Source Acquisition, the Company issued two promissory notes of $6,000,000 to each of the former owners of Prime Source. Each loan bears interest of 8% and is payable on prescribed dates per a payment schedule. The final payment is due December, 31, 2023. As of November 30, 2022, the remaining balance due is $9,000,000 of which $3,000,000 is considered long term. Accrued interest on November 30, 2022 is $301,133.
Description |
| Current Portion (Due 2023) |
|
| Long Term Portion (Due 2024) |
| ||
Promissory Note - Victor Nazarov |
| $ | 2,500,000 |
|
| $ | 1,500,000 |
|
Promissory Note - Yevgeniy Chsherbinin |
|
| 3,500,000 |
|
|
| 1,500,000 |
|
Total Note Payable |
| $ | 6,000,000 |
|
| $ | 3,000,000 |
|
In connection with its acquisition of SoTech on September 22, 2022, the Company assumed a bank financed loan that originated on May 5, 2020. The original amount of the loan was GBP 50,000 and at the time of acquisition, the balance outstanding was GBP 36,597 ($43,184). The loan bears annual interest at a rate of 2.5%. For the first 12 months of the loan, no principal payments are due and interest is paid by the government. Thereafter, principle and interest payments are the responsibility of the borrower. The loan is payable monthly over a six-year term with no penalty for pre-payment. As of November 30, 2022, the outstanding balance due is GBP 36,597 ($43,721), of which GBP 11,651 ($13,918) is current and GBP 24,946 ($29,802) is long term.
14 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
NOTE 8 – LONG TERM INCENTIVE PLAN (LTIP)
On August 1, 2022, the Board of Directors approved the establishment of a Long-Term Incentive Plan (the “Plan”) with 13,838,657 shares of common stock available for issuance. The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, and Restricted Stock Units. The Plan is intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make or are expected to make significant contributions to the Company’s success and to allow Participants to share in the success of the Company. From time to time, the Company may issue Incentive Awards pursuant to the Plan. Each of the awards will be evidenced by and issued under a written agreement.
If an incentive award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to the company in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction. For the six months ended November 30, 2017,2022, 7,837,672 shares have been assigned and will vest annually over a four-year period starting August 1, 2023. There are 6,000,985 shares available for future grants under the Company borrowed $2,500 fromplan.
A summary of the Company’s stock activity and related information follows:
|
| # of Restricted Shares |
|
| Weighted Average Grant Date FMV |
| ||
Balance, May 31, 2022 |
|
| - |
|
|
| - |
|
Restricted shares, assigned |
|
| 7,837,672 |
|
| $ | 2.22 |
|
Restricted shares forfeited |
|
| - |
|
|
| - |
|
Balance, November 30, 2022 |
|
| 7,837,672 |
|
| $ | 2.22 |
|
Vested and Exercisable |
|
| - |
|
|
| - |
|
The restricted stocks vests over a third party. This loan is due on demandfour-year period which coincides with the requisite service period. Share-based expenses total $17,399,632 and bears interest atare amortized over the ratevesting period. The expense recognized for the six months ended November 30, 2022, was $1,449,969. The remaining expenses ($15,949,663) will be amortized ratably over the remainder of 8%.the vesting period as follows:
Year ending May 31: |
| Amount |
| |
2023 |
| $ | 2,174,954 |
|
2024 |
|
| 4,349,908 |
|
2025 |
|
| 4,349,908 |
|
2026 |
|
| 4,349,908 |
|
2027 |
|
| 724,985 |
|
Total |
| $ | 17,037,140 |
|
15 |
Table of Contents |
LZG International Inc and Subsidiary
Notes to the Condensed Consolidated Financial Statements
November 30, 2022
(UNAUDITED)
NOTE 49 – INCOME TAXES
As of November 30, 2022, the Company has available unused net operating loss carryforwards from its US based entities of approximately $8,200,000 ($1,210,000 at May 31, 2022) which may be applied against future taxable income, and which expire in various years from 2023 through 2040. Due to a substantial change in the Company’s ownership during October 2021, there may be annual limitations on the amount of previous net operating loss carryforwards that can be utilized.
The amount of and ultimate realization of the benefits from the net operating loss carryforwards for US income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the net operating loss carryforwards, the Company has established a US valuation allowance equal to the tax effect of the net operating loss carryforwards and, therefore, no deferred tax asset has been recognized in the accompanying financial statements. The net US deferred tax assets are approximately $1,800,000 and $254,900 as of November 30, 2022 and May 31, 2022, respectively, with an offsetting valuation allowance of the same amount resulting in a change in the valuation allowance of approximately $1,545,100 and $127,890 for the six months ended November 30, 2022 and for the fiscal year ended May 31, 2022, respectively, (exclusive of effects of Federal tax rate changes).
Deferred tax assets and the valuation account are as follows:
|
| November 30, 2022 |
|
| May 31, 2022 |
| ||
Deferred Tax Asset: |
|
|
|
|
|
| ||
NOL Carryforward (at 21%) |
| $ | 1,800,000 |
|
| $ | 254,900 |
|
Valuation Allowance |
|
| (1,800,000 | ) |
|
| (254,900 | ) |
Deferred Tax Assets |
| $ | - |
|
| $ | - |
|
A reconciliation of amounts obtained by applying the Federal tax rate of 21% to pretax income to income tax benefit is as follows:
|
| November 30, 2022 |
|
| May 31, 2022 |
| ||
Federal Tax Benefit (at 21%) |
| $ | 1,560,000 |
|
| $ | 194,000 |
|
Valuation Allowance |
|
| (1,560,000 | ) |
|
| (194,000 | ) |
Deferred Tax Assets |
| $ | - |
|
| $ | - |
|
The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.
The Company includes interest and penalties arising from the underpayment of income taxes, if any, in the statements of operations in the provision for income taxes. As of May 31, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions.
The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended May 31, 2018 through May 31, 2022
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through January 17, 2023 which is the date the financial statements were available to be issued and has determined that there arewere no suchsubsequent events or transactions, other than the matters described below, that would have a material impact onrequired recognition or disclosure in the financial statements.
In 2022, the Board of Directors approved the establishment of an Employee Stock Option Plan for its employees. Stock Option awards (incentive and nonqualified) may be issued under the terms of the plan. The Company has reserved 13,838,657 shares of common stock for issuance under the Plan. No written agreement has yet been signed.
16 | |
Table of Contents |
In this report references to “LZG International,” “the Company,” “we,” “us,” and“us” or “our” refer to LZG International, Inc., a Florida corporation
FORWARD LOOKINGFORWARD-LOOKING STATEMENTS
The U.S.U. S. Securities and Exchange Commission (“SEC”) encourages reporting companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions. This report contains these types of statements. Words such as “may,” “intend,” “expect,” “believe,” “anticipate,” “estimate,” “project,” or “continue” or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
ITEMItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
Executive Overview
LZG International, Inc. was a “blank check” company until acquired by the current management team on October 23, 2021 (“AI Recap”). Incorporated in the State of Florida on May 22, 2000, as LazyGrocer.Com, Inc., the company offered an online grocery solution, limited its operations in November 2001 and changed its name to LZG International, Inc., on August 28, 2009.
As part of the AI Recap, we capitalized the company with software and related IT Assets, including the Outcomes™ engine and the connected AI Solutions, that use artificial intelligence (“AI”) to help businesses automate and optimize enterprise decision cycles (“AI Solutions”).
Since 2015, our Outcomes™ engine and platform have enabled scores of innovations across dozens of F500 business cases, billions of transactions, and hundreds of millions of behavioral profiles.
In 2019, for example, our AI solution for Bank of America outperformed by over 60% the combined effectiveness and efficiency of BOA’s $100M state of the art system and 800 of its investigative experts to fight financial crimes.
In November 2021, we launched a foreign exchange (“FX”) AI solution to tackle discriminatory pricing, especially with the start-up, small and mid-sized enterprises (“SMEs”) in the $6.6 trillion-dollar daily FX market. The solution uses our Peer Intelligence technology to auto-match individual client’s purchase cycles with their currency and supply chain risk to optimize FX and minimize constraints, across thousands of peers, in hundreds of sectors.
On February 23, 2022, we acquired the software assets of Intellagents, LLC, to accelerate our insurance focus.
On June 17, 2022, we acquired all of the capital stock of Prime Source, a Kazakhstani corporation (“Prime Source”) and Prime Source’s affiliates consisting of Prime Source Innovation, Prime Source – Analytical Systems, Digitalism, and InFin-IT Solution. We acquired Prime Source to expand our international operations and further focus our efforts in software development and IT consulting.
During the period covered by this report, the Company, through its wholly owned UK subsidiary, Fatbrain Acquisition Company Limited (“Fatbrain Acquisition”) acquired all of the outstanding capital stock of SO Technology Ltd (“SO Tech”), a multiple award-winning digital agency in the UK, as described in the current report on Form 8-K filed on September 27, 2022, and all of the outstanding capital stock of Predictive Black Ltd (“PB Ltd”), an innovative financial forecasting SaaS in UK, as described in the current report on Form 8-K filed on November 17, 2022. SO Tech and PB Ltd will continue to be held by Fatbrain Acquisition, and are being integrated into the world-wide business of the Company.
We have streamlined our focus on delivering AI Solutions to the economic stars of tomorrow (SMEs), driving the majority of the global jobs and GDP growth. We are built on the five “P”-pillars comprising Purpose, Promise, Product, Predictability and People. Our distinctive competency works like WAZE to advance Peer Intelligence™ for SMEs, reflecting the dynamic wisdom of many across geo and industry sectors informed by relevant open-source and proprietary data signals. Our AI Solutions are supported by the Outcomes™ software platform and a 600-person team focused to help SMEs be more effective and efficient with top 5 problems ranked across 10M+ subscribers of Intuit’s QuickBooks.
17 |
Table of Contents |
So Tech Agreement
Stock Purchase Agreement (“SO Tech Stock Purchase Agreement”), dated as of September 22, 2022, with Dent Global Limited (“Dent”), and individuals Richard Burch, Stephen Gray, and Mark Purdy (together “SO Tech Sellers”), to acquire all outstanding shares of SO Technology Ltd, a United Kingdom limited company (“SO Tech”) (see the SO Stock Purchase Agreement, filed as Exhibit 10.4 to this report). The parties closed this transaction on September 22, 2022 (“Closing Date”).
SO Tech is a UK-based design and technology company creating web and mobile applications for mid-market enterprises, helping to accelerate growth and expand operation. The So Tech Sellers agreed to sell and assign all of their ownership interests and rights in SO Tech to FatBrain Acquisition, in exchange for a combination of stock and cash totaling two million seven hundred sixty-two thousand five hundred dollars ($2,762,500.00), subject to a payment schedule, with all payments due on or before the first anniversary of the closing.
Except for the Stock Purchase Agreement and the transactions contemplated thereby, neither the SO Tech Sellers, nor SO Tech, nor any of its officers or directors serving before the Stock Purchase Agreement had any material relationship with LZG or LZG’s affiliates prior to this transaction.
Predictive Black Agreement
LZG International and its wholly owned subsidiary, FatBrain Acquisition, entered into a Share Purchase Agreement (the “PB Ltd Share Purchase Agreement”), dated as of November 14, 2022, with the shareholders of Predictive Black Ltd (together “PB Ltd Sellers”), to acquire all outstanding shares of Predictive Black Ltd, a United Kingdom limited company (“PB Ltd”) (see the PB Ltd Share Purchase Agreement, filed as Exhibit 10.5 to this report). The parties closed this transaction on November 14, 2022 (“Closing Date”).
PB Ltd is a data analytics company that uses machine learning and artificial intelligence to constantly improve and give increasingly refined predictive forecasts. The PB Ltd Sellers agreed to sell and assign all of their ownership interests and rights in PB Ltd to FatBrain Acquisition, in exchange for a combination of LZGI stock and cash, the payment of a portion of which will be deferred for several months.
Except for the Share Purchase Agreement and the transactions contemplated thereby, neither Sellers, nor PB Ltd, nor any of its officers or directors serving before the Share Purchase Agreement had any material relationship with LZG or LZG’s affiliates prior to this transaction.
Material Changes in Financial Condition
Since we are in the initial phases of marketing the FatBrain technology, we may not recordedrecord significant revenues from operations since inception and may lack revenuesfunding to cover our operating costs. These conditions raise substantial doubt about our ability to continue as a going concern. We are currently devoting our efforts to obtain capital from management, significant stockholders and/or third parties to cover minimal expenses; however, there is no assurance that additional funding will be available. Our ability to continue as a going concern during the long term is dependent upon our ability to find a suitable company and acquire or enter into a merger with such company.
The type of business opportunity with which we acquire or merge will affect our profitability for long term. We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur through a public offering.
Our management has not had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
Our management anticipates that we will likely be able to effect only one business combination, due primarily to our limited financing and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
We anticipate that the selection of a business combination will be complex and extremely risky. Because of 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 have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.
Liquidity and Capital Resources
At November 30, 2017,2022, we had cash of $89$531,464 and total liabilities of $196,295$39,164,867 compared to cash of $1,013$81,567 and total liabilities of $186,749$3,149,738 at May 31, 2017.2022. We have not yet established an ongoing sourcesources of revenue sufficient to cover our operating costs.costs at this time. During the six monthsix-month period ended November 30, 20172022 (“2023 six-month period”) we borrowed $2,500generated $9,372,426 of revenue but still relied upon advances from a third partyrelated parties to fund our operations and relied upon a stockholder for administrative and professional services totaling $3,100. During the year ended May 31, 2017 we borrowed $6,500 from a third partyoperations. The current conditions continue to fund our operations and relied upon a stockholder, for administrative and professional services totaling $6,400.
These conditions raise substantial doubt about our ability to continue as a going concern. We are currently devoting our efforts to obtaining capital from management, significant stockholders and/or third parties to cover minimal operations; however, there is no assurance thatexpenses. We are also seeking to acquire additional funding will be available.companies with established revenue sources. Our ability to continue as a going concern during the long term is dependent upon our ability to find a suitable business opportunityproduce and acquire or enter into a merger with such a company.market the FatBrain technology.
The typeFinalizing long-term, constant revenue generating technology contracts with our existing and other customers remains our greatest challenge because our on-going business is dependent on the types of business opportunity that we acquire or merge with will affectrevenues and cash flows generated by such contracts. Cash flow and cash requirement risks are closely tied to and are dependent upon our profitability for the long term. We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seekingability to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its securities, while avoiding, among other things, the time delays,attract significant expense, and loss of voting control which may occur through a public offering.long-term technology contracts
During the next 12 months we anticipate incurring costs related to theproducing and marketing our FatBrain technology and filing of Exchange Act reports, and possibly investigating, analyzing and consummating an acquisition.reports. We believe we will be able to meet these costs through funds provided by management, significant stockholders and third parties.parties until our revenues increase.
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Table of Contents |
Material Changes in Results of Operations
We did not record revenues in 2017 or 2016. General and administrative expenses represented consulting, administrative, professional services and out of pocket costs. General and administrative expenses increased to $7,649 for the six month period ended November 30, 2017 (“2018 six month period”) compared to $7,599 for the six month period ended November 30, 2016 (“2017 six month period”). General and administrative expenses decreased to $2,625 for the three month period ended November 30, 2017 (“2018 second quarter”) compared to $2,925 for the three month period ended November 30, 2016 (“2017 second quarter”).
Total other expense increased to $2,821 for the 2018 six month period compared to $2,642 for the 2017 six month period and increased to $1,422 for the 2018 second quarter compared to $1,352 for the 2017 second quarter. The increase is a result of accrued interest on loans.
Net loss increased to $10,470 for the 2018 six month period compared to $10,241 for the 2017 six month period and decreased to $4,047 for the 2018 second quarter compared to $4,277 for the 2017 second quarter. Management expects net losses to continue until we acquire or merge with a business opportunity.
Commitments and Obligations
We have relied upon loans and advances to fund our operational expenses. During the years ended May 31, 2009 and 2010, our Director and President, Greg L. Popp, loaned an aggregate of $23,500 to the Company. On April 20, 2010, these loans were combined into one promissory note which carries interest at 8%, is not collateralized and matured in June 2012. In June 2016, Mr. Popp extended the due date of the promissory note from June 30, 2016 to June 30, 2018. These loans accrued interest of $940 for the six month period ended November 30, 2017.
During the 2018 six month2023 six-month period, we borrowed $2,500recorded revenues of $9,372,426 and net loss of ($7,434,592). For the six-month period ended 11/30/21, we recorded revenues of $43,447 and a net loss of $2,327,059.
Commitments or Obligations
On May 11, 2022, the Company assumed a promissory note from a thirdrelated party for operating expenses. At November 30, 2017 we owe the third party $47,600 and accrued interest on this loan of $13,833. These loans are payable upon demand, are not collateralized and bearin connection with an asset acquisition. The $3,000,000 note bears interest at 8% per annum.annum and is payable on Demand, no later than January 5, 2023. There have been no payments of principle or interest for the loan as of November 30, 2022. Accrued interest at November 30, 2022 is $131,836.
DuringOn June 17, 2022 in connection with the 2018 six month period First Equity Holdings, Corp. (“First Equity”), a 20% stockholder, provided consulting, administrative and professional services and providedPrime Source Acquisition, the Company issued two promissory notes of $6,000,000 to or paid on behalfeach of the Company, out-of-pocket costs. First Equity billed the Company $3,100 for its servicesformer owners of Prime Source. Each loan bears interest of 8% and advances for the 2018 six month period.is payable on prescribed dates per a payment schedule. The final payment is due December, 31, 2023. As of November 30, 2017 First Equity’s account payable totals $95,600.
Off-Balance Sheet Arrangements2022, the remaining balance due is $9,000,000 of which $3,000,000 is considered long term. Accrued interest on November 30, 2022 is $301,133.
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.Emerging Growth Company
Critical Accounting Policies
We qualify as an “emergingemerging growth company”company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). A company qualifies as an emerging growth company if it has total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year and, as of December 8, 2011, had not sold common equity securities under a registration statement. Under the recently enacted JOBS Act. As a result,Act we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, among other things, we will not be required to:requirements
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last dayare a smaller reporting company as defined by Rule 12b-2 of the first fiscal year in which our total annual gross revenues exceed $1 billion; (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur ifand are not required to provide the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.information otherwise required under this item.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 4. Controls and Procedures.
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure.
Our President, who serves as our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and he determined that our disclosure controls and procedures were ineffective due tobecause we had a control deficiency. During the period we did not have additional personnel to allow segregation of duties to ensure the completeness or accuracy of our information. Due to the size and operations of our Company we are unable to remediate this deficiency until we acquire or merge with another company with more personnel.
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Changes to Internal Control over Financial Reporting
Management is responsible to establish and maintain adequate internal control over financial reporting. Our principal executive officer is responsible to design or supervise a process that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The policies and procedures include:
· | maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of assets, | |
· | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors, and | |
· | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements. |
For the six-months ended November 30, 2022, management has relied on the Committee of Sponsoring Organizations of the Treadway Commission (COSO - 2013), “Internal Control - Integrated Framework,” to evaluate the effectiveness of our internal control over financial reporting. Based upon that framework, management determined that in the preparation of the financial statements we did not have additional personnel to allow segregation of duties to ensure the completeness or accuracy of our information. Accordingly, our President has concluded that our internal control over financial reporting is ineffective because lack of an adequate control environment constitutes a deficiency. Due to the size and operations of the Company we are unable to remediate this deficiency until we acquire or merge with another company.
Changes to Internal Control over Financial Reportingcompany with more personnel.
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). Management conducted an evaluation of our internal control over financial reporting and determined that there were no changes made into our internal controlcontrols over financial reporting during the quarter ended November 30, 20172022, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1A. RISK FACTORS
AN INVESTMENT IN THE COMPANY IS HIGHLY SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK.
We have extremely limited assets and no source of revenue.
We have limited assets and have had no revenues since inception. We will not receive revenues until we complete an acquisition, reorganization or merger. We can provide no assurance that any selected or acquired business will produce any material revenues for the Company or our stockholders, or that any such business will operate on a profitable basis.Item 1.Legal Proceedings
We will,know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in all likelihood, sustain operating expenses without corresponding revenues, at least until we completeany material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a business combination with a privatematerial interest adverse to our company. This may result in our incurring a net operating loss that will increase unless we consummate a business combination with a profitable business. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination, or that any such business will be profitable at
Item 1a. Risk Factors
A smaller reporting company is not required to provide the timeinformation required by this Item.
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
The Company issued 170,000 shares of its acquisition by the Company, or ever become profitable.
There is currently no trading market for our common stock to Dent Global Limited, Richard Burch, Stephen Gray, and liquidity of shares of our common stock is limited.
Shares of our common stock are not registered underMark Purdy along with cash in exchange for all the securities laws of any state or other jurisdictionissued and are not quoted on any OTC market. Accordingly, there is no public trading market for the common stock. Further, no public trading market is expected to develop in the short term. Therefore, outstanding shares of ourSO Tech. The Company also issued 540,000 shares of its common stock cannot be offered, sold, pledged or otherwise transferred unless subsequently registered pursuant to or exempt from registration under the Securities Actowners of 1933, as amended (the “Securities Act”) and any other applicable federal or state securities laws or regulations. Stockholders may relyPB Ltd in exchange for all the issued share capital of PB Ltd. We relied on thean exemption from the registration requirements provided by Rule 144Section 4(a)(2) of the Securities Act (“Rule 144”), subject to certain restrictions; namely, common stock may not be sold until one year after:for both issuances.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Compliance with the criteria for securing exemptions under federal securities laws and the securities lawsItem 6. Exhibits.
Exhibit No. | Description | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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____________ * Filed herewith ** Furnished herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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.
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