NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2019 AND 2018
NOTE
1 –Organization and Going Concern
Celexus,
Inc. (the Company)(formerly Telupay International, Inc.; formerly i-Level Media Group Incorporated; formerly Jackson Ventures,
Inc.) was incorporated in the State of Nevada on August 23, 2005 as Jackson Ventures Ltd. and its initial operations included
the acquisition and exploration of mineral resources. In March, 2007 the Company changed its name to i-Level Media Group Incorporated
(“i-Level”) and changed its business to that of developing and operating a digital media network service. This business
ceased operations on December 1, 2008 and its business was wound-up.
On
September 24, 2013, the Company effected the acquisition of Telupay, PLC by way of a reverse merger. As a result of the Merger,
the Company changed its name to Telupay International Inc., effectuated a 1.5-for-1 forward stock split and Telupay became a wholly-owned
subsidiary. Telupay was engaged in the mobile banking and payment processing business primarily in the Philippines, Peru, Indonesia,
Myanmar and the United Kingdom. Telupay PLC was the primary operating subsidiary of the Company accounting for most of our assets
and liabilities. Telupay PLC never reached profitability and was spun out of the Company shortly after December 31, 2014 to the
former directors and officers of the Company whereby the business, including the assets and liabilities of Telupay PLC were transferred
for no consideration. As a result, the Company had no operations.
On
January 18, 2017, Barton Hollow, LLC, a limited liability company, was appointed custodian for the Company by the District Court
of Clark County, Nevada. The Company was reinstated by the Nevada Secretary of State on November 9, 2017 and on September 9, 2018
changed its name to Celexus, Inc. The Company currently is looking to acquire an operating business or develop a business.
In February 2019, the Company signed
an exchange agreement (“Agreement”) with HempWave, Inc., a company in common control of Lisa Averbuch our CFO and Director.
We have targeted HempWave, Inc., as it is currently operating in the hemp industry and is farming high quality hemp in Arizona
and as such we believe that it would be a great addition to our Company and would allow us to further achieve our business objectives.
We expect the proposed HempWave acquisition to be a key part of establishing the company as a leader in the hemp industry. The
acquisition agreement that was executed in February 2019, is expected to be fully consummated by May 31, 2020 or sooner, providing
all due diligence and market analysis confirms that moving forward will be beneficial to the company and its shareholders.
The Agreement entails that the Company
will acquire 100% of the outstanding shares of HempWave (formerly Bio Distribution, Inc.) in exchange for $13,000,000 worth of
common stock of the Company based on a fair market appraisal valuation and $1. The Company desires this exchange to qualify as
a reorganization under the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. There is a 90 day
due diligence period in the Agreement during which time either party may terminate the Agreement without further liability.
Termination
This Agreement may be
terminated and abandoned at any time prior to the Effective Time of the Exchange:
(a) by
mutual written consent of CELE and the Company;
(b) by either
CELE or the Company if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Exchange and such order, decree, ruling or other action shall have become final
and non-appealable;
(c) by
either CELE or the Company if the Exchange shall not have been consummated on or before July 31, 2018 (other than as a result of
the failure of the party seeking to terminate this Agreement to perform its obligations under this Agreement required to be performed
at or prior to the Effective Time.);
(d) by CELE,
if a material adverse change shall have occurred relative to the Company (and not curable within thirty (30) days);
(e) by
the Company if a material adverse change shall have occurred relative to CELE (and not curable within thirty (30) days);
(f) by
CELE, if the Company willfully fails to perform in any material respect any of its material obligations under this Agreement; or
(g) by the
Company, if CELE willfully fails to perform in any material respect any of its obligations under this Agreement.
Extension; Waiver
Subject to Section 6.01(c),
at any time prior to the Effective Time, the Parties may (a) extend the time for the performance of any of the obligations or other
acts of the other Parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement, or (c) waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights.
The foregoing descriptions
of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of
such agreements, which is filed as Exhibit 10.1 on our Annual Report on Form 10-K, respectively, each of which are incorporated
herein by reference.
Going
Concern
The
Company’s financial statements are prepared using generally accepted accounting principles in the United States of America
applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course
of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs to allow
it to continue as a going concern. As of March 31, 2019, the Company had an accumulated deficit of $8,932,710. The ability of
the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until
it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In
view of these conditions, the ability of the Company to continue as a going concern is in doubt and dependent upon achieving a
profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Historically,
the Company has relied upon internally generated funds and funds from the sale of shares of stock, issuance of promissory notes
and loans from its shareholders and private investors to finance its operations and growth. Management is planning to raise necessary
additional funds for working capital through loans and/or additional sales of its common stock. However, there is no assurance
that the Company will be successful in raising additional capital or that such additional funds will be available on acceptable
terms, if at all. Should the Company be unable to raise this amount of capital its operating plans will be limited to the amount
of capital that it can access. These financial statements do not give effect to any adjustments which will be necessary should
the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities
in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.
NOTE 2 – Summary of Significant
Accounting Policies
Use of Estimates
The preparation of the Company’s consolidated
financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities
and expenses. These estimates and assumptions are affected by management’s application of accounting policies. On an on-going
basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.
Cash
Cash includes amounts held in bank accounts.
The Company has amounts deposited with financial institutions in excess of federally insured limits.
Fair Value Measurements
The Company measures fair value as the price
that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market
participants at the reporting date. The Company utilizes a three-tier hierarchy which prioritizes the inputs used in the valuation
methodologies in measuring fair value:
Level 1. Valuations based on quoted prices in active
markets for identical assets or liabilities that an entity has the ability to access. The Company has no assets or liabilities
measured and recorded on a recurring or nonrecurring basis with Level 1 inputs.
Level 2. Valuations based on quoted prices for similar
assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. The Company
has no assets or liabilities measured and recorded on a recurring or nonrecurring basis with Level 2 inputs.
Level 3. Valuations based on inputs that are supported
by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has no assets
or liabilities measured and recorded on a recurring or nonrecurring basis with Level 3 inputs.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents,
accounts payable and interest payable approximate their fair value because of the short-term nature of these instruments and their
liquidity. It is not practical to determine the fair value of the Company’s debentures payable due to the complex terms.
Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial
instruments.
Stock Based Compensation
When applicable, the Company will account for
stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based
payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated
statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments
to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments
to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated
statement of operations based on the value of the vested portion of the award over the requisite service period as measured at
its then-current fair value as of each financial reporting date.
The Company calculates the fair value of option
grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized
during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires
forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised,
if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures”
is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered
stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense
for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well
as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee
awards is generally recognized on a straight-line basis over the period in which the Company expects to receive the benefit, which
is generally the vesting period.
Loss
per Share
The computation of basic earnings per share
(“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares
of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of
basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially
dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume
conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore,
when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the
EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method
only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants
(they are in the money). See “NOTE 5 - Net Loss Per Share” for further discussion.
Income Taxes
The Company accounts for income taxes using
the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax
assets to amounts expected to be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain
income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded
as a component of interest expense or other expense, respectively.
Business segments
ASC 280, “Segment Reporting”
requires use of the “management approach” model for segment reporting. The management approach model is based
on the way a company’s management organizes segments within the company for making operating decisions and assessing performance.
The Company determined it has one operating segment.
Recent Accounting Pronouncements
In July 2017, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share
(Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in
Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features)
with down round features. When determining whether certain financial instruments should be classified as liabilities or equity
instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to
an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As
a result, a free-standing equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as
a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial
instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the
effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available
to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are
now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with
Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize
the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a
scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this
Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The
Company does not expect this accounting update to have a material effect on its Consolidated Financial Statements.
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock
Compensation (Topic 718) Scope of Modification Accounting. The amendments in this Update provide guidance about which changes
to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The
amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning
after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities
for reporting periods for which financial statements have not yet been issued. The Company does not expect this accounting update
to have a material effect on its Consolidated Financial Statements.
In March 2016, the FASB issued ASU No. 2016-09,
“Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting (Topic 718)”, which is intended
to simplify several aspects of the accounting for share-based payment award transactions. The guidance is effective for our current
fiscal year. The adoption of ASU 2016-09 did not have a material impact on the Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)”, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC 842, Leases. The new guidance requires
the recognition of lease assets and liabilities for operating leases with terms of more than 12 months. Presentation of leases
within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the
current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption
permitted. The Company does not expect this accounting update to have a material effect on its Consolidated Financial Statements.
The Company reviews new accounting standards
as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal
year may be applicable, the Company has not identified any standards that the Company believes merit further discussion. The Company
believes that none of the new standards will have a significant impact on the financial statements.
NOTE 3 – Debt – Related
Party
On January 18, 2017, the Company entered into
a Revolving Demand Note (the “Revolving Demand Note”) with Securities Compliance Group, Ltd. (the “Creditor”).
Pursuant the Revolving Demand Note, the Company borrowed $25,000 at an annual interest rate of 9.5% with a default rate of 22%.
The Revolving Demand Note may be converted into common stock at an exercise price of par, or $0.001 per share at the discretion
of the Creditor. The Revolving Demand Note does not have a maturity date.
The debt discount attributable to the fair
value of the beneficial conversion feature amounted to $17,500 and was accreted on the date of issuance due to no maturity date
of the Revolving Demand Note.
During the years ended March 31, 2019 and 2018,
the Company recognized $2538 and $2,791 of interest expense related to the Convertible Debenture.
Prior to the Company filing the Form 10 General
Form for Registration of Securities on February 5, 2019, this revolving demand note was acquired by European Trade Partners, LLC
as part of the change in majority ownership. European Trade Partners, LLC is a related party under the control of Lisa Averbuch,
the Company’s major shareholder, member of the board of directors and president.
European Trade Partners, LLC has advanced the
corporation an additional amount of $58,500 as of March 31, 2019. The advances bear no interest and are payable on demand.
Also see Note 7 –
Related Party Transactions.
NOTE 4 – Common Stock
At March 31, 2019, the Company had 1,500,000,000
authorized shares of common stock with a par value of $0.001 per share and 6,288,457 shares of common stock outstanding.
During the year ended March 31, 2017, On January
18, 2017, in connection with the custodianship, the Company issued 4,444,445 shares to Barton Hollow, LLC to satisfy and caused
to be retired, the obligations of the Company. As a result, the Company recognized stock compensation expense of $160,000 based
on the closing stock price on January 18, 2017 of $0.036 per share.
NOTE 5 - Net Loss Per Share
During the years ended March
31, 2018 and 2017, the Company recorded a net loss. Basic net loss per share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. The Company has not included the effects of convertible debt on
net loss per share because to do so would be antidilutive.
Following is the computation of basic
and diluted net loss per share for the years ended March 31, 2019 and 2018:
|
|
Years Ended March 31,
|
|
|
2019
|
|
2018
|
Basic and Diluted EPS Computation
|
|
|
|
|
Numerator:
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(21,234
|
)
|
|
$
|
9,669
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
565,864,527
|
|
|
|
565,864,527
|
|
Basic and diluted EPS
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
The shares listed below were not included in the computation of diluted losses
|
|
|
|
|
|
|
|
|
per share because to do so would have been antidilutive for the periods presented:
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
5,802,270
|
|
|
|
3,011,097
|
|
NOTE 6 – Income Taxes
On December 22, 2017, the Tax Cuts and Jobs
Act (“The Act”) was enacted into law. The Act applies to corporations generally beginning with taxable years starting
after December 31, 2017 and reduces the corporate tax rate from a graduated set of rates with a maximum 35% tax rate to a flat
21% tax rate. Additionally, the Act introduces other changes that impact corporations, including a net operating loss (“NOL”)
deduction annual limitation, an interest expense deduction annual limitation, elimination of the alternative minimum tax, and immediate
expensing of the full cost of qualified property. The Act also introduces an international tax reform that moves the U.S. toward
a territorial system, in which income earned in other countries will generally not be subject to U.S. taxation. However, the accumulated
foreign earnings of certain foreign corporations will be subject to a one-time transition tax, which can be elected to be paid
over an eight-year tax transition period, using specified percentages, or in one lump sum. NOL and foreign tax credit (“FTC”)
carryforwards can be used to offset the transition tax liability. The Company does not expect that this change will have an impact
on the Company as it has not earned taxable income in the past and it has significant NOL carryforwards.
Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the Company’s deferred tax assets at March 31, 2018 and 2017 are
as follows:
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
5,812,118
|
|
|
$
|
5,790,884
|
|
Statutory tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Total deferred tax assets
|
|
|
1,220,545
|
|
|
|
1,216,086
|
|
Less: valuation allowance
|
|
|
(1,220,545
|
)
|
|
|
(1,216,086
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The
net change in the valuation allowance for deferred tax assets was an increase of $4,459 and decrease of $2,036 for the years ended
March 31, 2019 and 2018, respectively. In assessing the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Due to the uncertainty of realizing the deferred tax asset, management has recorded a valuation
allowance against the entire deferred tax asset.
For federal income tax purposes, the Company
has net U.S. operating loss carry forwards at March 31, 2019 available to offset future federal taxable income, if any, of $5,812,118.
Accordingly, there is no tax expense for the years ended March 31, 2019 and 2018.
The utilization of the tax net operating loss
carry forwards may be limited due to ownership changes that have occurred as a result of sales of common stock.
The effects of state income taxes were insignificant
for the years ended March 31, 2019 and 2018.
A reconciliation between the amount of income
tax benefit determined by applying the applicable U.S. statutory income tax rate of 21% to pre-tax loss for the years ended March
31, 2019 and 2018 is as follows:
|
|
2019
|
|
2018
|
Federal Statutory Rate
|
|
$
|
4,459
|
|
|
$
|
(2,036
|
)
|
Nondeductible expenses
|
|
|
—
|
|
|
|
—
|
|
Change in allowance on deferred tax assets
|
|
|
4,459
|
|
|
|
(2,036
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company does not have any uncertain tax
positions at March 31, 2018 and 2017 that would affect its effective tax rate. The Company does not anticipate a significant change
in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position,
the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss
carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense.
NOTE 7 - Related Party Transactions
During the year ended
March 31, 2019 and 2018, our former President made payments on behalf of the Company totaling $0 and $7,830, respectively.
During the year ended
March 31, 2019 and 2018, European Trade Partners, LLC, a related entity, has made advances to the corporation in the amount of
$58,500 and $0 respectively.
Also see Note 3 –
Debt – Related Party.
NOTE 8 – Subsequent Events
Management has reviewed material events subsequent
of the period ended March 31, 2019 and through the date of filing of financial statements in accordance with FASB ASC 855 “Subsequent
Events”.
On December 10, 2018 it was Resolved by the
board of directors of the corporation that the name change of the corporation be changed to Celexus and that the outstanding shares
of stock of the corporation be reverse split on a 1 for 90 basis without change to authorized shares. The name change and 1-90
reverse split will take effect at the open of business April 9, 2019.
On May 13, 2019 Celexus has entered into a definitive agreement
by which it will acquire HempWave f/k/a Bio Distributions upon the completion of an appraisal satisfactory to management of both
companies.
As of May 20, 2019, Lisa Averbuch has resigned as President of Celexus,
Inc. Ms. Averbuch will continue to serve as Director of the Company and maintains the authority to vote shares of the Company’s
majority shareholder, Global Services Unlimited Group, Inc.
Following the resignation of Ms. Averbuch, the Board of Directors
has appointed David Soto to serve as President of the Company.