UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
(Mark
One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934. |
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT |
For
the transition period from APRIL 1, 2018 to DECEMBER 31,
2018
Commission
File Number 000-53276
SIMLATUS
CORPORATION
(Exact
name of registrant as specified in its charter)
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Nevada |
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20-2675800 |
(State
or other jurisdiction of
Incorporation) |
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(IRS
Employer
Identification Number) |
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175
Joerschke Drive, Ste. A
Grass
Valley, CA 95945
(Address
of principal executive offices)
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(530)
205-3437
(Registrant’s
Telephone Number)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes
o
No
x
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
o
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
x
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
x
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer |
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Accelerated
filer |
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| Non-accelerated
filer |
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(Do
not check if a smaller reporting company) |
Smaller
reporting company |
x
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Emerging
growth company |
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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. o
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
o
No
x
On
June 29, 2018, the last business day of the registrants most
recently completed third quarter, the aggregate market value of the
Common Stock held by non-affiliates of the registrant was $29,
based upon the closing price on that date of the Common Stock of
the registrant of $0.0001. For purposes of this response, the
registrant has assumed that its directors, executive officers and
beneficial owners of 5% or more of its Common Stock are deemed
affiliates of the registrant.
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock as of the latest practicable
date.
As of
May 3, 2019, there were 134,429,596 shares of the registrant’s
$0.00001 par value common stock issued and outstanding
.
Documents
incorporated by reference: None
TABLE OF CONTENTS
Explanatory
Note
On
November 13, 2018, Satel Group Inc. (“Satel ” or “Company”), a
Nevada Corporation, merged with Simlatus Corporation. Satel was
incorporated in the State of Nevada on August 15, 2016. The Company
was originally formed as Satel, LLC on February 26, 2003 as a
California limited liability company. Satel, LLC converted to a
California Corporation, Satel, Inc., by Articles of Incorporation
with a Statement of Conversion signed by Richard Hylen as managing
member of Satel LLC, dated December 20, 2013 and filed with the
California Secretary of State on December 23, 2013. On September
25, 2016 Satel Group, Inc. purchased all of the assets of Satel,
Inc., and therefore this Company was organized and continues to
operate with the same management while engaged in providing their
existing High Speed Internet and DirecTV™ services to upscale,
high-rise commercial buildings including large office complexes,
apartments and condominiums in the City of San Francisco and
throughout the Bay Area. Under the Asset Purchase Agreement with
Simlatus Corporation, the Company changed its fiscal year end from
March 31 to a calendar year end; accordingly, the Company is filing
this Transition Report for the period from April 1, 2018 to the
year ended December 31, 2018.
FORWARD-LOOKING
STATEMENTS
This
annual report contains forward-looking statements. These statements
relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by
terminology such as “may”, “should”, “expects”, “plans”,
“anticipates”, “believes”, “estimates”, “predicts”, “potential” or
“continue” or the negative of these terms or other comparable
terminology. These statements are only predictions and involve
known and unknown risks, uncertainties and other factors, including
the risks in the section entitled “Risk Factors”, that may cause
our or our industry’s actual results, levels of activity,
performance or achievements to be materially different from any
future results, levels of activity, performance or achievements
expressed or implied by these forward-looking
statements.
Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required
by applicable law, including the securities laws of the United
States, we do not intend to update any of the forward-looking
statements to conform these statements to actual
results.
Our
financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted
Accounting Principles.
In
this annual report, unless otherwise specified, all dollar amounts
are expressed in United States dollars and all references to
“common shares” refer to the common shares in our capital
stock.
As
used in this annual report, the terms “Simlatus”, “we”, “us”, “our”
and “our company” refer to Simlatus Corporation, unless otherwise
indicated.
PART I
ITEM 1. BUSINESS
General
Overview
The
company operates with multiple revenue streams from the
Cannabis/Hemp CBD Industry, Major Broadcast Studio Industry and the
Internet Provider Industry. The company acquired Proscere
Bioscience in the first quarter of 2019, as a subsequent event.
Proscere Bioscience manufactures a commercial, industry standard
combination cold- water/alcohol CBD extraction system for medical
grade CBD utilization in conjunction with their aeroponic,
commercial grade, climate controlled grow containers for government
food-safety programs and commercial and medical grade
CBD.
Satel
Group merged with Simlatus Corporation (“SIML” or “Company”) on
November 13, 2018 and is the premier provider of DirecTV to
high-rise apartments, condominiums and large commercial office
buildings in the San Francisco metropolitan area and is now
expanding both their DirecTV and Internet services across the Bay
Area. Simlatus continues to manufacture its own proprietary systems
for major broadcast studios, such as Warner Bros., Fox News, CBS
and DirecTV. Its video technology supports the major system used
for underwater oil exploration in the world.
Simlatus
has been selling audio-video system technology for approximately 20
years, manufactures its own product line of commercial audio and
video systems that offers advanced applications utilized in the
commercial and government broadcast industry and other industries
where such applications are required. The Company products are sold
through a global network of established broadcast audio/video
equipment distributors, many of whom have been selling Simlatus
products for many years.
Simlatus
Corporation was initially incorporated in the State of Nevada under
the name Sunberta Resources Inc. on November 15, 2006, as a mining
and exploration of mineral claims business. On November 18, 2009,
the Company changed its name to Grid Petroleum Corp. and continued
with the mining and exploration of mineral claims in Alberta,
Canada, Vancouver Island, British Columbia, England and the United
States.
On
March 9, 2016, Grid Petroleum Corp. entered into an Asset Purchase
Agreement (the “Asset Purchase Agreement”) with RJM and Associates,
LLC, a California limited liability company (“RJM”) whereby RJM‟s
owners became the directors of the Company and were to be issued
$6,250,000 worth of the Company’s stock; $5,000,000 of Restricted
Common Stock 90 days from the date of this agreement and $1,250,000
of Preferred Series-A Shares of the Company’s Preferred Stock. On
the same date the entire management team of RJM became the entire
management team of Grid Petroleum Corp.
The
Company’s transaction with RJM has been treated as a reverse
recapitalization of the Company, with the Company (the legal
acquirer of RJM) considered the accounting acquiree, and RJM, whose
management took control of the Company (the legal acquiree of the
Company) considered the accounting acquirer. The Company did not
recognize goodwill or any intangible assets in connection with the
transaction. All costs related to the transaction are being charged
to operations as incurred. The $6,250,000 worth of shares of
Company stock, to be issued in conjunction with the transaction,
was presented as a liability until such time that the shares were
issued, and the liability reduced. The historical financial
statements include the operations of the accounting acquirer for
all periods presented.
On
March 25, 2016, the Company approved a name change to Simlatus
Corporation, stock symbol SIML, which was executed on April 4,
2016. The new name change better describes the Company’s new
business and revenues from selling commercial broadcast equipment
on a global basis. Simlatus Corporation develops, manufactures,
markets and owns proprietary advanced broadcast equipment and
software. These systems have been sold worldwide over the past 20
years to some of the most recognized, major broadcast companies in
the Television Industry.
The
Company currently sells approximately 55 different commercial
audio/video products and is preparing to market its newest
audio/video product referred to as SyncPal™. In addition to the
Company’s traditional line of audio/video products, it has
commenced the research & development of its Immersive Broadcast
System, referred to as the Simlatus-IBS™. The Simlatus-IBS™ will
include commercial augmented reality and virtual reality
applications for studio engineers. These applications, both
hardware and software, will allow the customer to control and
manage the studio audio/video systems from anywhere in the world.
These products are being developed to serve a market segment that
is presently being strongly embraced by consumers and is
forecasted, by some of the most widely recognized tech companies in
the world, as becoming a multi-billion-dollar market in the very
near future. The Market Analysis and IP Portfolio will include new
patents specifically developed for these products and owned by the
Company.
Satel
Group Inc., a Nevada Corporation, merged with Simlatus Corporation
on November 13, 2018. Satel Group, Inc., (the “Company” or “Satel”)
was incorporated in the State of Nevada on August 15, 2016. The
Company was originally formed as Satel, LLC on February 26, 2003 as
a California limited liability company. Satel, LLC converted to a
California Corporation, Satel, Inc., by Articles of Incorporation
with a Statement of Conversion signed by Richard Hylen as managing
member of Satel LLC, dated December 20, 2013 and filed with the
California Secretary of State on December 23, 2013. On September
25, 2016 Satel Group, Inc. purchased all of the assets of Satel,
Inc., and therefore this Company was organized and continues to
operate with the same management while engaged in providing their
existing High Speed Internet and DirecTV™ services to upscale,
high-rise commercial buildings including large office complexes,
apartments and condominiums in the City of San Francisco and
throughout the Bay Area.
MERGER
TRANSACTION
On
November 13, 2018, the Company and Satel Group Inc., a Nevada
corporation, entered into an Agreement and Plan of Merger (the
“Merger Agreement”) and completed a merger, whereby Satel Group
merged with and into Simlatus, with Satel Group remaining as the
surviving entity (the “Merger”). Upon the consummation of the
Merger, the shares of the common stock of Satel Group extinguished
and the stockholders of the Company were issued an aggregate of
1,086,592 of the Preferred Series A stock at a price of $1.79 per
share and convertible pursuant the conversion rights as specified
in the Articles of Incorporation for SIML. As a result of the
Merger, the Company acquired the business of Satel Group and will
continue the Simlatus business.
The
Company’s transaction with Satel Group has been treated as a
reverse recapitalization of the Company, with the Company (the
legal acquirer of Satel) considered the accounting acquiree, and
Satel, whose management took control of the Company (the legal
acquiree of the Company) considered the accounting acquirer. The
Company did not recognize goodwill or any intangible assets in
connection with the transaction. All costs related to the
transaction are being charged to operations as incurred. The
historical financial statements include the operations of the
accounting acquirer for all periods presented.
Satel’s
business model includes long term contractual relationships with
building owners and management companies and our licensing
agreement with DirecTV™ and with other Service Operators to provide
DirecTV entertainment services and dedicated high-speed Internet at
competitive pricing compared to the local, legacy Cable TV and
Telephone Companies. In addition to competitive pricing, the
Company provides meaningful benefits to building owners/managers
including all of the necessary equipment and labor to install a
building’s internal wiring systems and Internet network. This
equipment and labor is provided at no additional cost by Satel.
Additional benefits include no up-front or reoccurring costs for
the building owner to have the network and its equipment
maintained. The company at times, may utilize the already existing
network within a building, including coaxial cable, Ethernet, or
telephone infrastructure to deploy Satel’s services as a part of
the contract, when no additional wiring or addition cost of
re-wiring is required.
The
Company has been providing satellite delivered television
entertainment services since 2003 and is recognized as the largest
DirecTV system operator to high-rise apartments, condominiums and
commercial office buildings in the City of San Francisco. San
Francisco is recognized to be among the credible candidates to
become the economic capital of the 21st century. It is the main
urban center of a region, home to many of the leading corporations
of the digital age and has become an unparalleled hub of
innovation, invention and entrepreneurship.
In
earlier decades, when suburban living was in vogue and the Bay
area’s center of economic gravity was shifting southward toward the
Silicon Valley and San Jose, San Francisco’s slow growth seemed
natural enough. But now, more and more of the smart, ambitious,
tech savvy young people who power the region’s economy would rather
live in the City than in the tract homes and garden apartments of
the Silicon Valley. Satel has been targeting this younger, vibrant,
tech savvy customer demographic, both individually and
commercially.
Now,
many of Silicon Valley’s work force would rather commute south from
San Francisco to the office campuses of Apple, Facebook,
Alphabet/Google and other tech giants instead of living on the
Peninsular. And, newer tech companies (or tech-enabled companies)
have increasingly been locating in San Francisco proper to recruit
and embrace the talent they need. The result is a City that feels
like it’s again on the verge of the kind of economic leap forward
that most places on the earth can only dream of happening.
Economists have learned much in recent years about the advantages
of agglomeration. Put lots of highly skilled, highly productive,
highly innovative people together in the same place and the
economic gains are huge. The Bay area has been such a place for
some time now. What’s new is San Francisco’s opportunity to regain
its role as the region’s economic epicenter, in turn driving even
more economic growth in the area and -- by extension -- the U.S.
Indeed, San Francisco is growing for it has added about 50,000
people since 2010, and 8,900 new high-rise housing units were under
construction as of last fall. Big new apartment and condominium
complexes are transforming the once sparsely populated areas south
of downtown. These complexes are part of the enhanced target market
for Satel and are being wired by the Company.
Competition
and Marketing
Simlatus
has performed an in-depth investigation and analysis of our
competition as one of the most important components of our
comprehensive market analysis. This allows us to assess our
competitor’s strengths and weaknesses and implement effective
strategies in pricing and products being offered to improve our
competitive advantage. The Company has identified our competition
to determine and weigh our attributes, assess our strengths and
weaknesses, and implement strategies to strengthen our competitive
position within our market segments. A key factor contributing to
market growth is the adoption of HDTV entertainment distribution
via the Internet. The Company has begun to focus new product
development in digital and analog/digital conversion solutions to
better satisfy changing market demand. Immersive technologies with
augmented reality and virtual reality await the near future for the
Broadcasting Industry. Simlatus has access to top professionals in
Immersive Technology and is now designing their new Immersive
Broadcast Studio (IBS).
The
global broadcast studio switcher market is expected to reach $2B by
2020, as compared to the global broadcast switcher market in 2013
of $1.28B. The CAGR growth of 6.7% will occur from 2014 to 2020,
whereas augmented reality devices which combine virtual objects
with the real world through high-tech goggles and glasses, are
forecast to become a $120 billion business by 2020. New media
channels and automation will substantially drive market growth over
the next 5 years, and Simlatus has initiated its B2B and B4B
platform with its domestic and international distribution team to
capture our share of this market.
We
have determined that a business marketing a product similar to, or
as a substitute for, our own product in the same geographic area is
a direct competitor. Firms offering dissimilar or substitute
products in relation to our products or services are considered
indirect competitors. Indirect competition would exist between the
manufacturing of commercial broadcast equipment selling to the same
customers. To achieve and maintain a competitive advantage in
reaching and selling to our target market, our management has
gained a thorough knowledge of our competition. An in-depth
competitive analysis has provided the company with understanding of
how our existing and potential customers rate the competition, a
positive identification of our competitor’s strengths and
weaknesses, and a mechanism to develop effective competitive
strategies in our target market.
Our
competitors are a part of a concentrated market where only a
handful of competitors exist. We have identified approximately 22
competitors in the Broadcast studio industry. Our top 3 competitors
are Ensemble Designs, Inc., Thomson Video Networks, Inc., and
Ericcson A.B. The Company currently manufacturers a product for
Ensemble Designs, Inc., one of our competitors.
Our
Company is able to compete based upon the price point and quality
that we provide to our end-user. We have 25 distributors providing
global sales of all of our 55 products. Simlatus offers a wide
range of broadcast products including switchers, controllers,
protection switches, HD and Analog Routers, Audio Distribution and
our SoundPal family of audio/video signaling products. Our newest
product being SyncPal.
Our
competitors are profitable, and the industry is expanding into
augmented/virtual audio-video products. The attributes that the
majority of customers request is pricing and support. Simlatus and
all of our competition provide warranty and repair services for all
products. Our customers include Fox News, DirecTV, Warner Bros. and
a variety of government-based buyers for military and government
broadcast facilities.
We
provide an informative website for all of our products, company
information and distribution. We provide various testimonial
statements from major customers. Further, we advertise in trade
journals and through our distribution websites. Each of our
products includes a complete manual and specifications data
sheet.
Our
sales staff has more access to competitive information than anyone
else in our organization. Customers often show our sales people
sales literature, contracts, price quotes, and other information
from competitors. It is our responsibility to engage with potential
customers to discuss problems they have with a competitor’s
product. Customers will also reveal our competition’s product
benefits, strengths, and customer service programs. We instruct our
sales force to ask for copies of any competitive literature if and
when that’s possible. All sales staff maintains a record of all
competitive information they discover and devote a regular portion
of each sales meeting to a discussion of the competition. Our
employees working in other areas of the company also become exposed
to competitive information and share that with our sales
team.
In
regard to our Trade Associations, Simlatus compiles and has access
to published industry statistics and reports regarding industry
news and leaders through trade association magazines and
newsletters. Most trade associations also sponsor trade shows and
other professional meetings. This is an opportunity for our company
to experience first-hand what our competition is producing. It also
provides the opportunity to discover new players who may soon
become our competition.
We
interview our customers, suppliers, and industry experts about our
competition’s product and service periodically. Once we’ve gathered
all of the competitive data, we analyze the data to determine
product information, market share, marketing strategies, and to
identify our competition’s strengths and weaknesses. We rely on our
sales staff and customer feedback what product features and
benefits are most important to our customers and potential
customers. A products or services competitive position is largely
determined by how well it is differentiated from our competition
and by its price.
Our
products have been sold for approximately 20 years and our sales
strategy provides the company an advantage with our existing
dealers & customers, existing product line, existing broadcast
users, our manufacturing processes, experienced personnel,
professional management, and quality product reputation. Simlatus
is positioned with current sales of their commercial broadcasting
support systems and is now structuring the R&D
virtual/augmented reality products to develop a strategic
technology roadmap which will enable the company to expand into
high-growth digital television and over-the-top (OTT) markets.
These products are being developed for Simlatus‟ existing consumers
and newer markets. Further, Simlatus understands market trends,
including worldwide movement towards high speed, IP software
solutions. Simlatus will continue to focus on driving adoption of
upgraded technology and the company’s R&D focus will be on
programs to out-pace competition.
In
regard to Satel Group Inc., the global Internet audience continues
to grow steadily, with the worldwide base of broadband Internet
users (including fixed and wireless) in the 3.2 billion range as
2016 began. This vast base of high speed Internet users encourages
businesses to innovate in order to offer an ever-evolving array of
online services. Sectors that are growing very rapidly online
include the sale of entertainment products, event tickets, travel,
apparel and consumer electronics.
The
most powerful trends on the Internet include access via wireless
devices, the migration of entertainment to the web and cloud-based
software-as-a-service. Today, consumers are more focused than ever
on finding the best prices, as consumer attitudes and shopping
habits changed dramatically as a result of the 2007-09 recession.
Consequently, e-commerce firms that offer high value at low prices
are well-positioned to prosper.
Telecommunication,
or telecom, companies provide fixed and mobile voice, text, and
data transmission to consumers, small businesses, enterprises, and
government entities. Traditionally, telecom companies drove revenue
mainly by providing voice calling, text messaging, and Internet
connectivity through wire line or landline connections by offered
its services to both consumers and businesses. Now, the business is
driven wireless along with wired internet, data, and business
solutions. In wire line, telecom companies sell voice and data
services to customers via traditional landline phones and VoIP
(Voice over Internet Protocol). For the Internet, they give
solutions ranging from basic connectivity over the usual DSL
(digital subscriber line) to high-speed connections. In home
entertainment, they provide television services through IPTV
(Internet Protocol television). They also sell advanced services in
video conferencing, high bandwidth dedicated lines, and secured
communication systems to their larger customers.
Although
telecom companies provide voice and data services to consumers and
businesses, the nature of these services differs significantly
between the two customer segments. While residential customers
mainly use wireless services, businesses use wire line to get
high-capacity broadband and advanced communications services. Also,
telecom companies rent their facilities or networks—providing
wholesale data and communication access—to other carriers of
communication services.
Key
companies in the US include AT&T (T), Verizon (VZ), and Sprint
(S) which are the large integrated, publicly trade telecom
companies that provide wireless and wire line services, while
T-Mobile (TMUS) is a listed national wireless operator. Wire line
players—like CenturyLink (CTL), Frontier Communications (FTR), and
Windstream Holdings (WIN)—are some of the other key regional
telecom companies in the US. A wire line network includes
interlinked connection and redistribution systems that supports
information—like voice and data—to travel electronically.
Traditional, local and long distance telephone systems that
supported voice calls, messaging, and fax were the primary wire
line services that transmitted services over a network of copper
wires and switches. The wires and switches connected calls between
users mostly using a copper infrastructure connecting traditional
landlines and pay phones. Now, with the backbone of the network
being fiber optics, they support a broadband network capable of
delivering VoIP (Voice over Internet Protocol), Internet, TV
services, and managed private communications. Broadband
infrastructure is recognized as a critical resource for economic
development. Most countries, across the globe have strategic plans
in place—like the National Broadband Plan—to expand and develop
their Broadband network to support a broad range of enhanced
communications and entertainment services.
Since
inception in 2003, Satel operations have primarily consisted of
providing DirecTV services to high-rise apartments, condominiums
and to business in commercial buildings by investing in the
equipment and employing the trained personnel required to maintain
those services in the City of San Francisco. In 2014, Satel began
expanding their services to provide Internet services in the same
high-rise buildings in which they already provide DirecTV. Our
business model now incorporates three-phases that detail the steps
we intend to take to expand our services by launching and marketing
an expanded mix of products.
Phase
1: Upgrading as necessary and or installing an enhanced coaxial and
wireless internet network in buildings already under contract with
Satel to provide existing customers access, through proprietary
systems either manufactured or distributed by Simlatus local, off
air television programming at a minimum monthly charge, while
supporting faster internet speeds at less cost to the customer to
attract new residential and commercial customers.
Phase
2: Enhancing our website to include point of sale transactions,
allow subscribers to manage their accounts and purchase additional
services online.
Phase
3: Continue to obtain long term contracts to provide services in
both existing and new high rise complexes throughout the Bay Area
to grow our customer base and support the increase in customer
usage volume with the enhanced wireless internet network and
website.
Currently
the company provides services to approximately 18,108 high rise
condominium and apartment dwellings located in 170 buildings that
have been wired by Satel to receive satellite delivered television
entertainment through the company’s licensing agreement with
DirecTV. There are approximately 1,354 subscribers to the DirecTV
service with the average monthly fee charged by DirecTV for each
account being approximately $114. Satel receives monthly, 18% of
the recurring monthly fee from DirecTV in accordance with the terms
of the licensing agreement.
In
addition to the 18% commission fee, Satel receives an installation
fee from DirecTV on each new customer and a monthly service fee of
$9.95 from approximately 70% of the total number of customer
accounts pursuant to the customer contract between Satel and the
customer.
In
summary, from the current 1,354 subscribers, Satel’s recurring
average monthly revenue is based on receiving $30.12 per customer
resulting in monthly revenues of approximately $40,108. Additional
monthly recurring revenue is generated from approximately 5,400
subscribers at the rate of $20.52 per month. Lastly, the company
offers two types of entertainment packages which allow the customer
to choose any of the various program offered by DirecTV
specifically for commercial buildings, resulting in additional
monthly revenues of approximately $11,200.
Satel
has to date been offering limited Internet services to many of the
complexes in which they also provide DirecTV services which result
in additional average monthly revenues of approximately $8,783 per
month.
Satel’s
current revenue from the combination of individual DirecTV
subscribers, DirecTV services from commercial office buildings plus
Internet subscribers and contracted upgrades of commercial
entertainment systems averages to be approximately $70,000 per
month.
One
customer contract includes a monthly service fee while the other
contract requires no fee. Both contracts include the DirecTV MDU
Equipment Lease Agreement which is required by DirecTV for each new
customer, along with options for „No Commitment‟, „One Year
Commitment‟, or „Two Year Commitment‟. The Satel „No Fee‟ customers
are properties we acquired from other companies that were not
paying a monthly fee to Satel. The Satel Fee‟ customers are in
properties we acquired directly with long term contracts that pay a
monthly fee to Satel. The Satel Terms and Conditions‟ provide for a
disclosure of rates and charges, a warranty that covers equipment
use, repair and replacement, and miscellaneous provisions that
provides disclosure regarding jurisdiction laws and rights for the
customer. The DirecTV MDU Equipment Lease Agreement provides
additions customer rights and warranties.
The
company’s internet service is less expensive than AT&T, Google
and Comcast, which currently offer „Gigabit‟ as their top Internet
service, while most customers buy a much slower and less expensive
service under a 100 MB. Satel’s application of HPNA technology
using coaxial cable to deliver Internet, provides download speeds
of 200Mb-500Mb, with unlimited downloads for a cost less than those
fees charged by other carriers for the same speeds. The company
believes that there is a good and marketable monthly Internet
service in the $40-$45 range. Satel can also combine local, off air
channels, whereas the other OTT providers do not.
We
will continue to market our product to new building owners and
management companies using our direct B2B campaign as well as to
contact those architects, engineering firms and other decision
makers involved with new high rise construction in the Bay Area.
Our CEO, Richard Hylen, has established long-term relationships
with owners, builders, management companies, managers and other
service providers to introduce our product and create our initial
sales contact. Our CEO has extensive experience in marketing both
entertainment and Internet services and believes that the marketing
of our products directly to consumers would not have the same
potential for increased sales that it would have without the
ongoing support of established building managers.
Employees
As of
the date of this filing, Simlatus Corporation has 3 employees, 14
contracting engineers, 17 suppliers, 34 distributors, in addition
to the needed legal and accounting support of a public
company.
Satel
Group Inc. has 6 employees, 1 consultant, and 10 suppliers, in
addition to legal and accounting support.
ITEM 1A. RISK
FACTORS
The
Company is a smaller reporting company as defined by Rule 12b-2 of
the Securities Exchange Act of 1934 and is not required to provide
the information under this item.
ITEM 1B. UNRESOLVED STAFF
COMMENTS
None.
ITEM 2. PROPERTIES
Simlatus
has executive offices at 175 Joerschke Drive, Suite A, Grass
Valley, CA 95945. The office is a ground floor space of 2,000 sq.
ft. with a large inventory room FCC Compliant, manufacturing and
assembly of products, 4 executive offices, packaging and shipping
facility, and conference room. Additional space may be required as
the Company expands its operations. Management does not foresee any
significant difficulties in obtaining any required additional
space. The Company currently does not own any real
property.
Satel
Group maintains offices and equipment at 330 Townsend Street, Suite
135, San Francisco, California 94107. The office is ground floor
space of 1,000 sq. ft. with a large equipment repair room, 2
executive offices, Inventory Room and Reception area. Additional
space may be required as the Company expands its operations.
Management does not foresee any significant difficulties in
obtaining any required additional space. The Company currently does
not own any real property.
ITEM 3. LEGAL
PROCEEDINGS
We
know of no material, existing or pending legal proceedings against
our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which
our director, officer or any affiliates, or any registered or
beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
ITEM 4. MINE SAFETY
DISCLOSURE
None.
PART II
ITEM 5. MARKET FOR THE COMPANY’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Common
Stock
Our
common stock is currently quoted on the OTC Markets. Our common
stock has been quoted on the OTC Markets since October 17, 2007
trading under the symbol “SBRT”. On January 15, 2008, our symbol
was changed to “SBTR” and on December 15, 2009, our symbol was
changed to “GRPR” to reflect our Company’s name change. On April
21, 2016, our symbol was changed to “SIML” to reflect our Company’s
name change to Simlatus Corporation. Because we are quoted on the
OTC Markets, our securities may be less liquid, receive less
coverage by security analysts and news media, and generate lower
prices than might otherwise be obtained if they were listed on a
national securities exchange.
The
following table sets forth, for the periods indicated over the last
two years, the high and low closing bid quotations, as reported by
the OTC Markets, and represents prices between dealers, does not
include retail markups, markdowns or commissions, and may not
represent actual transactions:
|
|
|
For the Year Ended December 31 |
|
|
|
|
2018 |
|
|
2017 |
|
|
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
First Quarter |
|
|
0.0001 |
|
|
|
0.0001 |
|
|
|
0.0015 |
|
|
|
0.0002 |
|
|
Second Quarter |
|
|
0.0001 |
|
|
|
0.0001 |
|
|
|
0.0009 |
|
|
|
0.0001 |
|
|
Third Quarter |
|
|
0.0001 |
|
|
|
0.0001 |
|
|
|
0.0002 |
|
|
|
0.0001 |
|
|
Fourth Quarter |
|
|
0.1099 |
|
|
|
0.0080 |
|
|
|
0.0001 |
|
|
|
0.0001 |
|
Record
Holders
As of
December 31, 2018, there were 108,077,937 shares of the
registrant’s $0.00001 par value common stock issued and
outstanding, which were held by 26 shareholders of
record.
Dividends
We
have not paid dividends on our common stock, and do not anticipate
paying dividends on our common stock in the foreseeable
future.
Securities
authorized for issuance under equity compensation
plans
We
have no compensation plans under which our equity securities are
authorized for issuance.
Performance
graph
We
are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
required under this item.
Recent
Sales of Unregistered Securities
During
the nine months ended December 31, 2018 , the holders of
convertible notes converted a total of $10,447 of principal and
interest into 2,791,717 shares of common stock. The issuance
extinguished $115,941 worth of derivative liabilities which was
recorded to additional paid in capital.
Recent
issuances of unregistered securities subsequent to our fiscal year
ended of December 31, 2018
On
January 7, 2019, the holder of a convertible note converted a total
of $580 of interest into 200,000 shares of our common
stock.
On
January 9, 2019, the Company issued 1,675,978 Series A Preferred
shares at $1.79 per share to Proscere Bioscience, pursuant to an
Asset Purchase Agreement dated January 9, 2019.
On
January 16, 2019, the holder of a convertible note converted a
total of $6,000 of principal into 1,500,000 shares of our common
stock.
On
February 11, 2019, the holder of a convertible note converted a
total of $8,353 of principal and interest into 4,640,816 shares of
our common stock.
On
February 14, 2019, the holder of a convertible note converted a
total of $10,000 of principal into 5,714,286 shares of our common
stock.
On
February 19, 2019, the holder of a convertible note converted a
total of $266 of principal into 379,496 shares of our common
stock.
On
February 21, 2019, 2,413 shares of Series A preferred shares were
converted to 5,400,000 common shares.
On
March 12, 2019, the holder of a convertible note converted a total
of $12,339 of principal and interest into 6,169,500 shares of our
common stock.
On
March 14, 2019, the holder of a convertible note converted a total
of $10,000 of principal into 4,968,944 shares of our common
stock.
On
March 21, 2019, the holder of a convertible note converted a total
of $5,400 of interest and fees into 3,000,000 shares of our common
stock.
Issuer
Repurchases of Equity Securities
None.
ITEM 6. SELECTED FINANCIAL
DATA
We
are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This
Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”) and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). These
forward-looking statements are not historical facts but rather are
based on current expectations, estimates and projections. We may
use words such as “anticipate,” “expect,” “intend,” “plan,”
“believe,” “foresee,” “estimate” and variations of these words and
similar expressions to identify forward-looking statements. These
statements are not guarantees of future performance and are subject
to certain risks, uncertainties and other factors, some of which
are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or
forecasted. You should read this report completely and with the
understanding that actual future results may be materially
different from what we expect. The forward-looking statements
included in this report are made as of the date of this report and
should be evaluated with consideration of any changes occurring
after the date of this Report. We will not update forward-looking
statements even though our situation may change in the future and
we assume no obligation to update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Merger
Transaction
On
November 13, 2018, the Company, and Satel Group Inc., a Nevada
corporation, entered into an Agreement and Plan of Merger (the
“Merger Agreement”) and completed a merger, whereby Satel Group
merged with and into Simlatus, with Satel Group remaining as the
surviving entity (the “Merger”). Under U.S. generally accepted
accounting principles, the merger is treated as a “reverse merger”
under the purchase method of accounting, with Satel as the
accounting acquirer. Accordingly, Satel’s historical financial
results of operations replace Simlatus Corp’s historical financial
results of operations for all periods prior to the Merger and, for
all periods following the Merger, the financial results of
operations of the combined company will be included in the
Company’s financial statements. Accordingly, the results of
operations and cash flows for the nine months ended December 31,
2018 may not be comparable to the results of operations for the
nine months ended December 31, 2017.
Results
for the Nine Months Ended December 31, 2018 Compared to the Nine
Months Ended December 31, 2017
Revenues:
The
Company’s revenues were $489,016 for the nine months ended December
31, 2018 compared to $606,254 for the nine months ended December
31, 2017. The company has a strong relationship with DirecTV and
has focused its efforts on expanding services outside of the San
Francisco metropolitan area. The decrease in revenue is partially a
result of an increase with the cost of materials in 2018, as well
as changing from an accrual based accounting to a cash-basis. The
company carried account receivables under an accrual basis prior to
this merger and auditing procedures. Further, Richard Hylen has
been focused on expansion in 2018 and local customer base retention
has declined. Satel has strong relationships with commercial and
residential building owners and management, and as a public company
with the adequate funding, Satel can expand its services and
anticipates increasing revenues over the next 24 months. Satel
recognizes the customer needs, and the importance of competitive
pricing and services. The company believes that it can invest its
capital into faster internet, bundling of various internet based
services, and expanding its customer base into the entire Bay Area
as described in the marketing place as a part of this Form
10-KT.
Cost of Sales:
The
Company’s cost of materials was $1,492 for the nine months ended
December 31, 2018, compared to $0 for the nine months ended
December 31, 2017.
Operating Expenses :
Operating
expenses consisted primarily of consulting fees, professional fees,
salaries and wages, office expenses and fees associated with
preparing reports and SEC filings relating to being a public
company. Operating expenses for the nine months ended December 31,
2018, and December 31, 2017, were $576,543 and $640,331,
respectively. The decrease was primarily attributable to a decrease
in professional fees and G&A expenses.
Other Income (Expense) :
Other
income (expense) for the nine months ended December 31, 2018, and
December 31, 2017, was $7,172,229 and $(15,184), respectively.
Other income (expense) consisted of derivative valuation gains and
interest expense. The gain or loss on derivative valuation is
directly attributable to the change in fair value of the derivative
liability. Interest expense is primarily attributable to interest
and penalties on outstanding notes payable, the initial interest
expense associated with the valuation of derivative instruments at
issuance, and the accretion of the convertible debentures over
their respective terms. The increase in other income primarily
resulted from the fluctuation of the Company’s stock price which
impacted the valuation of the derivative liabilities.
Net Income (Loss):
Net
income for the nine months ended December 31, 2018, was $7,083,210
compared with a net loss of $49,261 for the nine months ended
December 31, 2017. The increase in net income can be explained by
the changes in the gain in the fair value of derivative
liabilities.
Impact
of Inflation
We
believe that the rate of inflation has had a negligible effect on
our operations.
Liquidity
and Capital Resources
| |
|
December 31, |
|
|
December 31, |
|
|
|
|
2018 |
|
|
2017 |
|
|
Current Assets |
|
$ |
35,332 |
|
|
$ |
84,432 |
|
| Current
Liabilities |
|
|
8,476,605 |
|
|
|
113,858 |
|
| Working Capital
(Deficit) |
|
$ |
(8,441,273 |
) |
|
$ |
(29,426 |
) |
The
overall working capital (deficit) increased from $(29,426) at
December 31, 2017 to $(8,441,273) at December 31, 2018 due to the
effect of the merger.
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2018 |
|
|
2017 |
|
| Cash
Flows (used in) provided by Operating Activities |
|
$ |
(4,500 |
) |
|
$ |
9,154 |
|
| Cash Flows
provided by Investing Activities |
|
|
1,576 |
|
|
|
— |
|
| Cash Flows (used
for) provided by Financing Activities |
|
|
(1,500 |
) |
|
|
1,042 |
|
| Net Increase
(decrease) in Cash During Period |
|
$ |
(4,424 |
) |
|
$ |
10,196 |
|
During
the nine months ended December 31, 2018, cash (used in) provided by
operating activities was $(4,500) compared to $9,154 for the nine
months ended December 31, 2017. The increase in the cash used in
operating activities is primarily attributed to the gain on the
valuation of derivative liabilities.
During
the nine months ended December 31, 2018 cash provided by investing
activities was $1,576 compared to $0 for the year ended December
31, 2017, with an increase due to the effect of the
merger.
During
the nine months ended December 31, 2018, cash (used for) provided
by financing activities was $(1,500) compared to $1,042, for the
nine months ended December 31, 2017. The decrease in cash from
financing activity primarily resulted from payments on promissory
notes during the nine months ended December 31, 2018.
As of
December 31, 2018, the Company had a cash balance and current asset
total of $5,982 and $35,332 respectively, compared with $10,681 and
$84,432 of cash and current assets, respectively, as of December
31, 2017. The decrease in assets was due to a decrease in accounts
receivable.
As of
December 31, 2018, the Company had total liabilities of $8,537,605
compared with $464,540 as of December 31, 2017. The increase in
total liabilities was primarily attributed to the merger and
additional notes payable, derivatives, and related party
liabilities.
Going
Concern
The
ability of the Company to continue as a going concern is dependent
on the Company’s ability to raise additional capital and implement
its business plan. Since its inception, the Company has been funded
by related parties through capital investment and borrowing
funds.
As of
December 31, 2018, we have not attained profitable operations and
are dependent upon obtaining financing to pursue any extensive
acquisitions and activities. For these reasons, our auditors stated
in their report on our December 31, 2017 audited financial
statements that they have substantial doubt that we will be able to
continue as a going concern.
Future
Financings
We
will continue to rely on equity sales of our common shares in order
to continue to fund our business operations. Issuances of
additional shares will result in dilution to existing stockholders.
There is no assurance that we will achieve any additional sales of
the equity securities or arrange for debt or other financing to
fund planned acquisitions and exploration activities.
Off-Balance
Sheet Arrangements
We
have no significant 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 that are material to stockholders.
Critical
Accounting Policies
Our
financial statements and accompanying notes have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis. The preparation of
financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods.
We
regularly evaluate the accounting policies and estimates that we
use to prepare our financial statements. A complete summary of
these policies is included in the notes to our financial
statements. In general, management’s estimates are based on
historical experience, on information from third party
professionals, and on various other assumptions that are believed
to be reasonable under the facts and circumstances. Actual results
could differ from those estimates made by management.
Significant
Accounting Policies
Our
discussion and analysis of our results of operations and liquidity
and capital resources are based on our financial statements, which
have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues
and expenses, and disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates and judgments,
including those related to revenue recognition, allowance for
doubtful accounts, warranty liabilities, share-based payments,
income taxes and litigation. We base our estimates on historical
and anticipated results and trends and on various other assumptions
that we believe are reasonable under the circumstances, including
assumptions as to future events. These estimates form the basis for
making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. By
their nature, estimates are subject to an inherent degree of
uncertainty. Actual results that differ from our estimates could
have a significant adverse effect on our operating results and
financial position. We believe that the significant accounting
policies and assumptions as detailed in Note 1 to the financial
statements contained herein may involve a higher degree of judgment
and complexity than others.
Contractual
Obligations
We
are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The
Company does not hold any assets or liabilities requiring
disclosure under this item.
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
SIMLATUS
CORPORATION
FINANCIAL
STATEMENTS
Table
of Contents
|
|
|
Page |
|
|
Report of Independent Registered
Public Accounting Firm |
|
17 |
|
| Consolidated Balance Sheets at December
31, 2018 and December 31, 2017 |
|
18 |
|
| Consolidated Statements of Operations for
the nine months ended December 31, 2018 and 2017 |
|
19 |
|
| Consolidated Statements of Shareholders’
Equity (Deficit) for the three months ended March 31, 2017
(Unaudited), the nine months ended December 31, 2017 (Audited), the
three months ended March 31, 2018 (Unaudited) and the nine months
ended December 31, 2018 (Audited) |
|
20 |
|
| Consolidated Statements of Cash Flows for
the nine months ended December 31, 2018 and 2017 |
|
21 |
|
|
Notes to Financial
Statements |
|
22 |
|
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Simlatus Corporation
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of
Simlatus Corporation (the Company) as of December 31, 2018 and
2017, and the statements of operations, statements of stockholders’
equity (deficit), and cash flows for the nine month transition
periods ended December 31, 2018 and 2017, and the related notes and
schedules (collectively referred to as the financial statements).
In our opinion, the financial statements audited present fairly, in
all material respects, the financial position of the Company as of
December 31, 2018 and 2017, and the transition periods described
above, in conformity with accounting principles generally accepted
in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company suffered losses from
operations which raise substantial doubt about its ability to
continue as a going concern. Managements plans regarding those
matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
/s/
M&K CPAS, PLLC
We
have served as the Company’s auditor since 2018.
Houston,
TX
May
8, 2019
|
SIMLATUS CORP. |
|
BALANCE SHEETS |
| |
|
December 31, |
|
|
December 31, |
|
|
|
|
2018 |
|
|
2017 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
| Current
Assets |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,982 |
|
|
$ |
10,681 |
|
|
Accounts receivable |
|
|
29,350 |
|
|
|
73,751 |
|
| Total current
assets |
|
|
35,332 |
|
|
|
84,432 |
|
| |
|
|
|
|
|
|
|
|
|
Security deposit |
|
|
5,162 |
|
|
|
5,162 |
|
| |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
40,494 |
|
|
$ |
89,594 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
| Current
Liabilities: |
|
|
|
|
|
|
|
|
| Accounts
payable |
|
$ |
307,410 |
|
|
$ |
67,227 |
|
| Accounts
payable - related parties |
|
|
31,269 |
|
|
|
— |
|
| Accrued
wages |
|
|
1,058,808 |
|
|
|
5,065 |
|
| Accrued
expenses |
|
|
41,313 |
|
|
|
41,566 |
|
| Accrued
interest |
|
|
651,619 |
|
|
|
— |
|
|
Derivative liabilities |
|
|
4,888,497 |
|
|
|
— |
|
|
Convertible notes payable in default, net of discount |
|
|
812,437 |
|
|
|
— |
|
|
Convertible notes payable, net of discount |
|
|
235,516 |
|
|
|
— |
|
|
Promissory notes |
|
|
297,669 |
|
|
|
|
|
|
Related party liabilities |
|
|
152,067 |
|
|
|
— |
|
| Total Current
Liabilities |
|
|
8,476,605 |
|
|
|
113,858 |
|
| |
|
|
|
|
|
|
|
|
| Long term notes
payable |
|
|
61,000 |
|
|
|
299,169 |
|
| Long
term notes payable, interest |
|
|
— |
|
|
|
51,513 |
|
| |
|
|
|
|
|
|
|
|
| Total
liabilities |
|
|
8,537,605 |
|
|
|
464,540 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and
contingencies |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| Preferred stock, $0.001 par value
20,000,000 shares authorized |
|
|
|
|
|
|
|
|
|
Series A: 10,000,000 shares authorized |
|
|
5,065 |
|
|
|
— |
|
| 5,064,929
shares issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
| 0 shares
issued and outstanding at December 31, 2017 |
|
|
|
|
|
|
|
|
|
Series B: 10,000,000 shares authorized |
|
|
1 |
|
|
|
— |
|
| 500 shares
issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
| 0 shares
issued and outstanding at December 31, 2017 |
|
|
|
|
|
|
|
|
| Common stock, $0.00001 par value
900,000,000 authorized |
|
|
1,081 |
|
|
|
— |
|
| 108,077,937
shares issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
| 0 shares issued
and outstanding at December 31, 2017 |
|
|
|
|
|
|
|
|
| Capital
stock |
|
|
— |
|
|
|
14,000 |
|
| Additional paid
in capital |
|
|
(15,137,988 |
) |
|
|
13,414 |
|
|
Accumulated earnings (deficit) |
|
|
6,634,730 |
|
|
|
(402,360 |
) |
| Total
shareholders’ deficit |
|
|
(8,497,111 |
) |
|
|
(374,946 |
) |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
|
$ |
40,494 |
|
|
$ |
89,594 |
|
The
accompanying notes are an integral part of these financial
statements
|
SIMLATUS CORP. |
|
STATEMENT OF OPERATIONS |
| |
|
Nine months ended |
|
| |
|
December 31, |
|
|
|
|
2018 |
|
|
2017 |
|
| Sales |
|
$ |
489,016 |
|
|
$ |
606,254 |
|
| Cost of
materials |
|
|
1,492 |
|
|
|
— |
|
|
Gross profit
(loss) |
|
|
487,524 |
|
|
|
606,254 |
|
| |
|
|
|
|
|
|
|
|
| Operating
expenses: |
|
|
|
|
|
|
|
|
|
G&A expenses |
|
|
322,918 |
|
|
|
388,978 |
|
|
Professional fees |
|
|
2,278 |
|
|
|
23,995 |
|
|
Salaries and wages |
|
|
251,347 |
|
|
|
227,358 |
|
|
Total operating
expenses |
|
|
576,543 |
|
|
|
640,331 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(89,019 |
) |
|
|
(34,077 |
) |
| |
|
|
|
|
|
|
|
|
| Other income
(expense): |
|
|
|
|
|
|
|
|
| Gain
(loss) on settlement of debt |
|
|
— |
|
|
|
— |
|
| Gain
(loss) in fair value of derivative liability |
|
|
7,251,108 |
|
|
|
— |
|
|
Interest expense |
|
|
(78,879 |
) |
|
|
(15,184 |
) |
|
Total other income
(expense) |
|
|
7,172,229 |
|
|
|
(15,184 |
) |
| |
|
|
|
|
|
|
|
|
| Net income (loss)
before income taxes |
|
|
7,083,210 |
|
|
|
(49,261 |
) |
|
Income tax expense |
|
|
— |
|
|
|
— |
|
|
Net income (loss) |
|
$ |
7,083,210 |
|
|
$ |
(49,261 |
) |
| |
|
|
|
|
|
|
|
|
| Per share information |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic |
|
|
18,589,285 |
|
|
|
— |
|
| Net
income (loss) per common share, basic |
|
$ |
0.38 |
|
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, diluted |
|
|
1,783,656,841 |
|
|
|
— |
|
| Net
income (loss) per common share, basic |
|
$ |
0.0040 |
|
|
$ |
(0.00 |
) |
The
accompanying notes are an integral part of these financial
statements
|
SIMLATUS CORP. |
|
STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT) |
| FOR
THE THREE MONTHS ENDED MARCH 31, 2017 (Unaudited), |
| FOR
THE NINE MONTHS ENDED DECEMBER 31, 2017 (Audited), |
| FOR
THE THREE MONTHS ENDED MARCH 31, 2018 (Unaudited), AND |
| FOR
THE NINE MONTHS ENDED DECEMBER 31, 2018 (Audited) |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|
|
|
Series A |
|
|
Series B |
|
|
Common Stock |
|
|
Capital |
|
|
Paid-In |
|
|
Earnings |
|
|
Shareholders’ |
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Stock |
|
|
Capital |
|
|
(Deficit) |
|
|
Equity (Deficit) |
|
|
Balances as of December 31, 2016
(Audited) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
14,000 |
|
|
$ |
9,872 |
|
|
$ |
(337,265 |
) |
|
$ |
(313,393 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15,834 |
) |
|
|
(15,834 |
) |
|
Balances as of March 31, 2017
(Unaudited) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
14,000 |
|
|
$ |
9,872 |
|
|
$ |
(353,099 |
) |
|
$ |
(329,227 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,542 |
|
|
|
— |
|
|
|
3,542 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(49,261 |
) |
|
|
(49,261 |
) |
|
Balances as of December 31, 2017
(Audited) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
14,000 |
|
|
$ |
13,414 |
|
|
$ |
(402,360 |
) |
|
$ |
(374,946 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(46,120 |
) |
|
|
(46,120 |
) |
|
Balances as of March 31, 2018
(Unaudited) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
14,000 |
|
|
$ |
13,414 |
|
|
$ |
(448,480 |
) |
|
$ |
(421,066 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt to common
stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,791,717 |
|
|
|
28 |
|
|
|
— |
|
|
|
10,420 |
|
|
|
— |
|
|
|
10,448 |
|
|
Derivative settlements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
115,941 |
|
|
|
— |
|
|
|
115,941 |
|
|
Effect of reverse merger |
|
|
5,064,929 |
|
|
|
5,065 |
|
|
|
500 |
|
|
|
1 |
|
|
|
105,286,220 |
|
|
|
1,053 |
|
|
|
(14,000 |
) |
|
|
(15,280,745 |
) |
|
|
— |
|
|
|
(15,288,626 |
) |
|
Imputed interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,982 |
|
|
|
— |
|
|
|
2,982 |
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,083,210 |
|
|
|
7,083,210 |
|
|
Balances as of December 31, 2018
(Audited) |
|
|
5,064,929 |
|
|
$ |
5,065 |
|
|
|
500 |
|
|
$ |
1 |
|
|
|
108,077,937 |
|
|
$ |
1,081 |
|
|
$ |
— |
|
|
$ |
(15,137,988 |
) |
|
$ |
6,634,730 |
|
|
$ |
(8,497,111 |
) |
The
accompanying notes are an integral part of these financial
statements
|
SIMLATUS CORP. |
|
STATEMENTS OF CASH FLOWS |
|
|
|
Nine months ended |
|
|
|
|
December 31, |
|
|
|
|
2018 |
|
|
2017 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
7,083,210 |
|
|
$ |
(49,261 |
) |
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
|
Amortization of convertible debt discount |
|
|
18,860 |
|
|
|
— |
|
|
Imputed interest |
|
|
2,982 |
|
|
|
— |
|
|
Change in fair value of derivative liability |
|
|
(7,251,108 |
) |
|
|
— |
|
|
Decrease (increase) in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(6,874 |
) |
|
|
(20,585 |
) |
|
Inventory |
|
|
1,746 |
|
|
|
— |
|
|
Prepaid expenses |
|
|
3,806 |
|
|
|
— |
|
|
Other current assets |
|
|
— |
|
|
|
2,667 |
|
|
Accrued interest |
|
|
37,567 |
|
|
|
15,184 |
|
|
Accounts payable |
|
|
43,745 |
|
|
|
46,706 |
|
|
Accrued expenses |
|
|
59,368 |
|
|
|
14,443 |
|
|
Advances from related parties |
|
|
2,198 |
|
|
|
— |
|
|
Net cash (used in) provided by operating activities |
|
|
(4,500 |
) |
|
|
9,154 |
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Effect from reverse merger |
|
|
1,576 |
|
|
|
— |
|
|
Net cash provided by investing activities |
|
|
1,576 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Contributed capital |
|
|
— |
|
|
|
3,542 |
|
|
Payments on promissory notes |
|
|
(1,500 |
) |
|
|
(2,500 |
) |
|
Net cash (used in) provided for financing activities |
|
|
(1,500 |
) |
|
|
1,042 |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
(4,424 |
) |
|
|
10,196 |
|
| |
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
10,406 |
|
|
|
485 |
|
|
Cash, end of period |
|
$ |
5,982 |
|
|
$ |
10,681 |
|
| |
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
| Cash
paid for income taxes |
|
$ |
— |
|
|
$ |
— |
|
| Cash
paid for interest |
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
Schedule of non-cash investing & financing activities: |
|
|
|
|
|
|
|
|
|
Stock issued for debt conversion |
|
$ |
10,448 |
|
|
$ |
— |
|
|
Derivative settlements |
|
$ |
115,941 |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these financial
statements
1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
and Description of Business
Satel
Group merged with Simlatus Corporation (“SIML” or “Company”) on
November 13, 2018 and is the premier provider of DirecTV to
high-rise apartments, condominiums and large commercial office
buildings in the San Francisco metropolitan area and is now
expanding both their DirecTV and Internet services across the Bay
Area. Simlatus continues to manufacture its own proprietary systems
for major broadcast studios, such as Warner Bros., Fox News, CBS
and DirecTV. Its video technology supports the major system used
for underwater oil exploration in the world.
Simlatus
Corporation was initially incorporated in the State of Nevada under
the name Sunberta Resources Inc. on November 15, 2006, as a mining
and exploration of mineral claims business. On November 18, 2009,
the Company changed its name to Grid Petroleum Corp. and continued
with the mining and exploration of mineral claims in Alberta,
Canada, Vancouver Island, British Columbia, England and the United
States.
On
March 9, 2016, Grid Petroleum Corp. entered into an Asset Purchase
Agreement (the “Asset Purchase Agreement”) with RJM and Associates,
LLC, a California limited liability company (“RJM”) whereby RJM‟s
owners became the directors of the Company and were to be issued
$6,250,000 worth of the Company’s stock; $5,000,000 of Restricted
Common Stock 90 days from the date of this agreement and $1,250,000
of Preferred Series-A Shares of the Company’s Preferred Stock. On
the same date the entire management team of RJM became the entire
management team of Grid Petroleum Corp.
The
Company’s transaction with RJM has been treated as a reverse
recapitalization of the Company, with the Company (the legal
acquirer of RJM) considered the accounting acquiree, and RJM, whose
management took control of the Company (the legal acquiree of the
Company) considered the accounting acquirer. The Company did not
recognize goodwill or any intangible assets in connection with the
transaction. All costs related to the transaction are being charged
to operations as incurred. The $6,250,000 worth of shares of
Company stock, to be issued in conjunction with the transaction,
was presented as a liability until such time that the shares were
issued, and the liability reduced. The historical financial
statements include the operations of the accounting acquirer for
all periods presented.
On
March 25, 2016, the Company approved a name change to Simlatus
Corporation, stock symbol SIML, which was executed on April 4,
2016. The new name change better describes the Company’s new
business and revenues from selling commercial broadcast equipment
on a global basis. Simlatus Corporation develops, manufactures,
markets and owns proprietary advanced broadcast equipment and
software. These systems have been sold worldwide over the past 20
years to some of the most recognized, major broadcast companies in
the Television Industry.
Satel
Group Inc., a Nevada Corporation, merged with Simlatus Corporation
on November 13, 2018. Satel Group, Inc., (the “Company” or “Satel”)
was incorporated in the State of Nevada on August 15, 2016. The
Company was originally formed as Satel, LLC on February 26, 2003 as
a California limited liability company. Satel, LLC converted to a
California Corporation, Satel, Inc., by Articles of Incorporation
with a Statement of Conversion signed by Richard Hylen as managing
member of Satel LLC, dated December 20, 2013 and filed with the
California Secretary of State on December 23, 2013. On September
25, 2016 Satel Group, Inc. purchased all of the assets of Satel,
Inc., and therefore this Company was organized and continues to
operate with the same management while engaged in providing their
existing High Speed Internet and DirecTV™ services to upscale,
high-rise commercial buildings including large office complexes,
apartments and condominiums in the City of San Francisco and
throughout the Bay Area.
Financial Statement Presentation
The audited financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
Fiscal
Year End
In
conjunction with the closing of the Asset Purchase Agreement dated
November 13, 2018, the Company changed its fiscal year from March
31 to a calendar year end of December 31 to coincide with the
fiscal year end of Satel Group Inc.
Use
of Estimates
The
preparation of the Company’s financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period.
Management
makes its best estimate of the ultimate outcome for these items
based on historical trends and other information available when the
financial statements are prepared. Actual results could differ from
those estimates.
Cash
Equivalents
The
Company considers all highly liquid investments with maturities of
90 days or less from the date of purchase to be cash
equivalents.
Revenue
Recognition and Related Allowances
The
Company’s revenues are derived primarily by broadcast products. On
January 1, 2018, we adopted Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (Topic 606), which
supersedes the revenue recognition requirements in Accounting
Standards Codification (ASC) Topic 605, Revenue Recognition (Topic
605). Results for reporting periods beginning after January 1, 2018
are presented under Topic 606. The impact of adopting the new
revenue standard was not material to our financial statements and
there was no adjustment to beginning retained earnings on January
1, 2018.
Under
Topic 606, revenue is recognized when control of the promised goods
or services is transferred to our customers, in an amount that
reflects the consideration we expect to be entitled to in exchange
for those goods or services.
We
determine revenue recognition through the following
steps:
|
|
● |
identification
of the contract, or contracts, with a customer; |
|
|
|
|
|
|
● |
identification
of the performance obligations in the contract; |
|
|
|
|
|
|
● |
determination
of the transaction price; |
|
|
|
|
|
|
● |
allocation
of the transaction price to the performance obligations in the
contract; and |
|
|
|
|
|
|
● |
recognition
of revenue when, or as, we satisfy a performance
obligation. |
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are stated at the amount that management expects to
collect from outstanding balances. Bad debts and allowances are
provided based on historical experience and management’s evaluation
of outstanding accounts receivable. Management evaluates past due
or delinquency of accounts receivable based on the open invoices
aged on due date basis. The allowance for doubtful accounts at
December 31, 2018 and December 31, 2017 is $0.
Accounts
Payable and Accrued Expenses
Accounts
payable and accrued expenses are carried at amortized cost and
represent liabilities for goods and services provided to the
Company prior to the end of the fiscal year that are unpaid and
arise when the Company becomes obliged to make future payments in
respect of the purchase of these goods and services.
Loss
Per Share
Basic
loss per share of common stock is computed by dividing the net loss
by the weighted average number of common shares outstanding during
the period after giving retroactive effect to the reverse stock
split affected on November 1, 2017 (see Note 10).
Inventories
Inventories
are stated at the lower of cost, computed using the first-in,
first-out method and net realizable value. Any adjustments to
reduce the cost of inventories to their net realizable value are
recognized in earnings in the current period.
Fair
Value of Financial Instruments
Fair
value is defined as the price that would be received upon sale of
an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and
in the principal or most advantageous market for that asset or
liability. The fair value should be calculated based on assumptions
that market participants would use in pricing the asset or
liability, not on assumptions specific to the entity. In addition,
the fair value of liabilities should include consideration of
non-performance risk including our own credit risk.
In
addition to defining fair value, the standard expands the
disclosure requirements around fair value and establishes a fair
value hierarchy for valuation inputs is expanded. The hierarchy
prioritizes the inputs into three levels based on the extent to
which inputs used in measuring fair value are observable in the
market. Each fair value measurement is reported in one of the three
levels and which is determined by the lowest level input that is
significant to the fair value measurement in its
entirety.
These
levels are:
Level
1 - inputs are based upon unadjusted quoted prices for identical
instruments traded in active markets.
Level
2 - inputs are based upon quoted prices for similar instruments in
active markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation
techniques for which all significant assumptions are observable in
the market or can be corroborated by observable market data for
substantially the full term of the assets or
liabilities.
Level
3 - inputs are generally unobservable and typically reflect
management’s estimates of assumptions that market participants
would use in pricing the asset or liability. The fair values are
therefore determined using model-based techniques that include
option pricing models, discounted cash flow models, and similar
techniques.
The
following table represents the Company’s financial instruments that
are measured at fair value on a recurring basis as of December 31,
2018 for each fair value hierarchy level:
|
December 31, 2018 |
|
Derivative Liabilities |
|
|
Total |
|
| Level I |
|
$ |
— |
|
|
$ |
— |
|
| Level II |
|
$ |
— |
|
|
$ |
— |
|
| Level
III |
|
$ |
4,888,497 |
|
|
$ |
4,888,497 |
|
In
management’s opinion, the fair value of convertible notes payable
and advances payable is approximate to carrying value as the
interest rates and other features of these instruments approximate
those obtainable for similar instruments in the current market.
Unless otherwise noted, it is management’s opinion that the Company
is not exposed to significant interest, exchange or credit risks
arising from these financial instruments. As of December 31, 2018,
the balances reported for cash, accounts receivable, prepaid
expenses, accounts payable, and accrued liabilities, approximate
the fair value because of their short maturities.
Income
Taxes
The
Company records deferred taxes in accordance with FASB ASC No. 740,
Income Taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying
amounts of existing assets and liabilities and loss carry-forwards
and their respective tax bases. 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 are
expected to be recovered or settled. The effect of a change in tax
rules on deferred tax assets and liabilities is recognized in
operations in the year of change. A valuation allowance is recorded
when it is “more likely-than-not” that a deferred tax asset will
not be realized.
As of
the date of this filing, the Company is current in filing their tax
returns. The last return filed by the Company was December 31,
2017, and the Company has not accrued any potential penalties or
interest from that period forward. The Company will need to
file returns for the year ending December 31, 2018, which are still
open for examination.
Recent
Accounting Pronouncements
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from
Contracts with Customers (Topic 606) , which replaces existing
revenue recognition guidance. The updated guidance requires
companies to recognize revenue in a way that depicts the transfer
of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. In addition, the
new standard requires that reporting companies disclose the nature,
amount, timing and uncertainty of revenue and cash flows arising
from contracts with customers. The Company adopted the standard on
January 1, 2018, using a modified retrospective approach, with the
cumulative effect of initially applying the standard recognized in
retained earnings at the date of adoption.
While
the Company does not expect the adoption of this standard to have a
material impact on the Company’s net Revenues in the
Statements of Income, the Company anticipates revenues for certain
wholesale transactions and substantially all digital commerce sales
will be recognized upon shipment rather than upon delivery to the
customer.
Additionally,
provisions for post-invoice sales discounts, returns and
miscellaneous claims will be recognized as accrued liabilities
rather than as reductions to Accounts receivable, net ; and
the estimated cost of inventory associated with the provision for
sales returns will be recorded within Prepaid expenses and other
current assets on the Balance Sheets. The Company continues to
evaluate the impact of this new standard, including on accounting
policies, disclosures, internal control over financial reporting
and its contracts with customers.
In
February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases.
The ASU amends a number of aspects of lease accounting, including
requiring lessees to recognize operating leases with a term greater
than one year on their balance sheet as a right-of-use asset and
corresponding lease liability, measured at the present value of the
lease payments. The amendments in this ASU are effective for fiscal
years beginning after December 15, 2018, including interim
periods within those fiscal years. Early adoption is permitted. The
Company is in the process of assessing the impact on its financial
statements.
In
July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic
260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815). Among other provisions, this
ASU requires that when determining whether certain financial
instruments should be classified as liabilities or equity
instruments, an entity should not consider the down round feature.
The ASU also recharacterizes as a scope exception the indefinite
deferral available to private companies with mandatorily redeemable
financial instrument and certain noncontrolling interests, which
does not have an accounting effect but addresses navigational
concerns within the FASB Accounting Standards Codification. The
provisions of the ASU related to down rounds are effective for
public business entities for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted. The Company is in the process of assessing
the impact on its financial statements.
2.
GOING CONCERN
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As of December 31, 2018,
the Company has accumulated earnings of $6,634,730 since its
inception and working capital deficit of $8,441,273, negative cash
flows from operations, and has limited business operations, which
raises substantial doubt about the Company’s ability to continue as
going concern. The ability of the Company to meet its commitments
as they become payable is dependent on the ability of the Company
to obtain necessary financing or achieving a profitable level of
operations. There is no assurance the Company will be successful in
achieving these goals.
The
Company does not have sufficient cash to fund its desired research
and development objectives for its augmented/virtual reality
product development for the next 12 months. The Company has
arranged financing and intends to utilize the cash received to fund
the research and development project. This financing may be
insufficient to fund expenditures or other cash requirements
required to complete the product design for the augmented/virtual
reality markets. There can be no assurance the Company will be
successful in completing any new product development. The Company
plans to seek additional financing if necessary in private or
public equity offering(s) to secure future funding for operations.
There can be no assurance the Company will be successful in raising
additional funding. If the Company is not able to secure additional
funding, the implementation of the Company’s business plan will be
impaired. There can be no assurance that such additional financing
will be available to the Company on acceptable terms or at
all.
These
financial statements do not give effect to adjustments to the
amounts and classification to assets and liabilities that would be
necessary should the Company be unable to continue as a going
concern.
3.
MERGER TRANSACTION
On
November 13, 2018, the Company, and Satel Group Inc., a Nevada
corporation, entered into an Agreement and Plan of Merger (the
“Merger Agreement”) and completed a merger, whereby Satel Group
merged with and into Simlatus, with Satel Group remaining as the
surviving entity (the “Merger”). Upon the consummation of the
Merger, the shares of the common stock of Satel Group extinguished
and the stockholders of the Company were issued an aggregate of
1,086,592 of the Preferred Series A stock at a price of $1.79 per
share and convertible pursuant the conversion rights as specified
in the Articles of Incorporation for SIML. As a result of the
Merger, the Company acquired the business of Satel Group and will
continue the Simlatus business.
Because
the prior owners of Satel Group, Inc.’s outstanding common stock
owned more than 50% of the combined voting interest in the Company,
on a fully-diluted basis, immediately following the merger, the
Merger is treated as a “reverse merger” under the purchase method
of accounting, with Satel Group, Inc. as the accounting acquirer.
Accordingly, Satel Group, Inc’s historical results of operations
replace Simlatus’ historical results of operations for all periods
prior to the Merger and, for all periods following the Merger, the
results of operations of the combined company will be included in
the Company’s consolidated financial statements.
4.
ACCURED EXPENSES
As of
December 31, 2018 and 2017, accrued expenses were comprised of the
following:
| |
|
December 31, |
|
|
|
|
2018 |
|
|
2017 |
|
| Accrued
expenses |
|
|
|
|
|
|
|
|
|
Credit cards |
|
$ |
18,122 |
|
|
$ |
16,994 |
|
|
Customer deposits |
|
|
18,497 |
|
|
|
18,497 |
|
|
Employee liabilities |
|
|
— |
|
|
|
907 |
|
|
Sales tax payable |
|
|
1,694 |
|
|
|
5,168 |
|
|
Short-term loan |
|
|
3,000 |
|
|
|
— |
|
| Total accrued
expenses |
|
$ |
41,313 |
|
|
$ |
41,566 |
|
| |
|
|
|
|
|
|
|
|
| Accrued
interest |
|
|
|
|
|
|
|
|
|
Interest on notes payable |
|
$ |
585,198 |
|
|
|
— |
|
|
Interest on promissory notes |
|
|
66,421 |
|
|
|
— |
|
| Total accrued
interest |
|
$ |
651,619 |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Accrued
wages |
|
$ |
1,058,808 |
|
|
$ |
5,065 |
|
5.
CONVERTIBLE NOTES PAYABLE
As of
December 31, 2018, notes payable were comprised of the
following:
| |
|
Original |
|
Due |
|
Interest |
|
Conversion |
|
December 31, |
|
|
|
|
Note Date |
|
Date |
|
Rate |
|
Rate |
|
2018 |
|
| Auctus Fund #1 |
|
12/16/2016 |
|
9/16/2017 |
|
24% |
|
Variable |
|
$ |
46,750 |
|
| Auctus Fund #2 |
|
8/9/2017 |
|
5/9/2017 |
|
24% |
|
Variable |
|
|
46,750 |
|
| Blackbridge
Capital #2 |
|
5/3/2016 |
|
5/3/2017 |
|
5% |
|
Variable |
|
|
80,400 |
|
| EMA
Financial |
|
11/9/2016 |
|
11/9/2017 |
|
24% |
|
Variable |
|
|
468,729 |
|
| Emunah Funding
#1 |
|
10/18/2017 |
|
10/18/2018 |
|
0% |
|
Variable |
|
|
110,000 |
|
| Emunah Funding
#2 |
|
10/18/2017 |
|
10/18/2018 |
|
0% |
|
Variable |
|
|
20,000 |
|
| Emunah Funding
#3 |
|
10/18/2017 |
|
10/18/2018 |
|
0% |
|
Variable |
|
|
30,000 |
|
| Emunah Funding
#4 |
|
10/20/2018 |
|
7/20/2018 |
|
8% |
|
Variable |
|
|
10,240 |
|
| Emunah Funding
#5 |
|
5/15/2018 |
|
5/15/2019 |
|
10% |
|
Variable |
|
|
37,778 |
|
| Emunah Funding
#6 |
|
10/31/2018 |
|
10/31/2019 |
|
10% |
|
Variable |
|
|
27,778 |
|
| Fourth Man
#1 |
|
7/3/2018 |
|
7/3/2019 |
|
10% |
|
Variable |
|
|
44,770 |
|
| Fourth Man
#2 |
|
10/26/2018 |
|
7/20/2019 |
|
8% |
|
Variable |
|
|
40,000 |
|
| James
Powell |
|
9/7/2015 |
|
Demand |
|
8% |
|
Variable |
|
|
150,875 |
|
| |
|
|
|
|
|
|
|
|
|
|
1,114,070 |
|
| Less
debt discount |
|
|
|
(66,117 |
) |
|
Notes payable, net of discount* |
|
|
|
$ |
1,047,953 |
|
|
* |
During
the period ended December 31, 2018, the balance of notes payable,
net of discount that are in default is $812,869. |
Auctus
Fund LLC
On
December 16, 2016, the Company issued a convertible note to Auctus
Fund LLC for $46,750, of which $40,000 was received in cash $6,750
was recorded as transaction fees. The note bears interest at 10%
(increases to 24% per annum upon an event of default), matured on
September 16, 2017, and is convertible into the lower of 1) 54%
multiplied by the average of the two lowest trading prices during
the 25 day trading period on the trading day prior to the date of
the note, and 2) 54% multiplied by the average of the two lowest
trading prices during the 25 day trading period on the trading day
prior to the conversion date. The Company recorded a debt discount
from the derivative equal to $46,750 due to this conversion
feature, which has been amortized to the statement of operations.
Pursuant to the default terms of the note, the Company entered a
penalty of $191,562. As of December 31, 2018, the note had a
principal balance of $46,750 and accrued interest of $212,580. This
note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
August 9, 2017, the Company issued a convertible note to Auctus
Fund LLC for $46,750, of which $40,000 was received in cash $6,750
was recorded as transaction fees. The note bears interest at 10%
(increases to 24% per annum upon an event of default), matured on
August 22, 2017, and is convertible into the lower of 1) 54%
multiplied by the average of the two lowest trading prices during
the 25 day trading period on the trading day prior to the date of
the note, and 2) 54% multiplied by the average of the two lowest
trading prices during the 25 day trading period on the trading day
prior to the conversion date. The Company recorded a debt discount
from the derivative equal to $46,750 due to this conversion
feature, which has been amortized to the statement of operations.
Pursuant to the default terms of the note, the Company entered a
penalty of $210,097. As of December 31, 2018, the note had a
principal balance of $46,750 and accrued interest of $219,916. This
note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Blackbridge
Capital
On
May 3, 2016, the Company accepted and agreed to a Debt Purchase
Agreement, whereby Blackbridge Capital acquired $100,000 in
principal of a Direct Capital Group, Inc. convertible note in
exchange for $100,000. The note bears interest at 5% per annum,
matured on May 3, 2017, and is convertible into common stock at 50%
of the lowest market price of the 20 trading days prior to the date
of conversion. The Company recorded a debt discount from the
derivative equal to $100,000 due to this conversion feature, which
has been amortized to the statement of operations. The note has
converted $19,600 of principal into 266,667 shares of common stock.
As of December 31, 2018, the note had a principal balance of
$80,400 and accrued interest of $10,732. This note is currently in
default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
EMA
Financial, LLC
On
November 9, 2016, the Company issued a convertible note to EMA
Financial, LLC for $35,000, of which $30,000 was received in cash
$5,000 was recorded as transaction fees. The note bears interest at
10% (increases to 24% per annum upon an event of default), matured
on November 9, 2017, and is convertible into the lower of 1) the
closing market price on the trading day immediately preceding the
closing date of the note, and 2) 50% of the lowest trading price
during the 25 trading days prior to the conversion date. The
Company recorded a debt discount from the derivative equal to
$35,000 due to this conversion feature, which has been amortized to
the statement of operations. Pursuant to the default terms of the
note, the Company entered a penalty of $446,915 in principal and
$23,143 in interest. The note has converted $13,186 in principal
into 981,600 shares of common stock. As of December 31, 2018, the
note had a principal balance of $468,729 and accrued interest of
$92,145. This note is in default as of December 31,
2018.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Emunah
Funding LLC
On
October 18, 2017, the Company issued a convertible note to Emunah
Funding LLC in consideration of liquidated damages in the amount of
$110,000. The note bears no interest, matured on October 18, 2018,
and is convertible into common stock at 57.5% of the lowest trading
price of the 20 trading day period ending on the latest complete
day prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $110,000 due to this
conversion feature, which has been amortized to the statement of
operations. As of December 31, 2018, the note had a principal
balance of $110,000. This note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 18, 2017, the Company accepted and agreed to a Debt
Purchase Agreement, whereby Emunah Funding LLC acquired $20,000 of
debt from a Tri-Bridge Ventures LLC convertible note in exchange
for $25,000. The note bears no interest, matured on October 18,
2018, and is convertible into common stock at 57.5% of the lowest
trading price of the 20 trading day period ending on the latest
complete day prior to the date of conversion. The Company recorded
a debt discount from the derivative equal to $25,000 due to this
conversion feature, which was amortized to the statement of
operations. The note has converted $5,000 of principal into 72,464
shares of common stock. As of December 31, 2018, the note had a
principal balance of $20,000. This note is currently in
default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 18, 2017, the Company accepted and agreed to a Debt
Purchase Agreement, whereby Emunah Funding LLC acquired $35,817 of
debt from a Tri-Bridge Ventures LLC convertible note in exchange
for $30,000. The note bears no interest, matures on October 18,
2018, and is convertible into common stock at 57.5% of the lowest
trading price of the 20 trading day period ending on the latest
complete day prior to the date of conversion. The Company recorded
a debt discount from the derivative equal to $30,000 due to this
conversion feature, which has been amortized to the statement of
operations. As of December 31, 2018, the note had a principal
balance of $30,000. This note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 20, 2017, the Company issued a convertible note to Emunah
Funding LLC for $33,840, which includes $26,741 to settle
outstanding accounts payable, transaction costs of $4,065, OID
interest of $2,840, and cash consideration of $194. On November 6,
2017, the Company issued an Allonge to the convertible debt in the
amount of $9,720. The Company received $7,960 in cash and recorded
transaction fees of $1,000 and OID interest of $760. On November
30, 2017, the Company issued an Allonge to the convertible debt in
the amount of $6,480. The Company received $5,000 in cash and
recorded transaction fees of $1,000 and OID interest of $480. On
January 11, 2018, the Company issued an Allonge to the convertible
debt in the amount of $5,400. The Company received $5,000 in cash
and recorded OID interest of $480. The note bears interest of 8%
(increases to 24% per annum upon an event of default), matured on
July 20, 2018, and is convertible into common stock at 57.5% of the
lowest trading price of the 20 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $55,440 due
to this conversion feature, which has been amortized to the
statement of operations. On October 26, 2018, the principal amount
of $40,000 was reassigned to Fourth Man, LLC. The note has
converted $5,200 of principal and $4,815 of interest into 2,503,717
shares of common stock. As of December 31, 2018, the note had a
principal balance of $10,240 and accrued interest of $0. This note
is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
May 15, 2018, the Company issued a convertible note to Emunah
Funding LLC for $37,778, which includes $26,000 to settle the
convertible note with Asher Enterprises, $8,000 to settle
outstanding accounts payable, and OID interest of $3,778. The note
bears interest of 10% (increases to 24% per annum upon an event of
default), matures on May 15, 2019, and is convertible into common
stock at 60% of the lowest trading price of the 20 trading day
period ending on the latest complete day prior to the date of
conversion. The Company recorded a debt discount from the
derivative equal to $26,964 due to this conversion feature, and
$19,675 has been amortized to the statement of operations. The debt
discount and OID interest had a balance at December 31, 2018 of
$6,157 and $863, respectively. As of December 31, 2018, the note
had a principal balance of $37,778 and accrued interest of
$2,381.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 31, 2018, the Company issued a convertible note to Emunah
Funding LLC for $27,778, of which $24,000 was received in cash
$3,778 was recorded as transaction fees. The note bears interest of
10% (increases to 24% per annum upon an event of default), matures
on October 31, 2019, and is convertible into common stock at 60% of
the lowest trading price of the 20 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $27,778 due
to this conversion feature, and $7,855 has been amortized to the
statement of operations. The debt discount and transaction fee
interest had a balance at December 31, 2018 of $19,923 and $3,136,
respectively. As of December 31, 2018, the note had a principal
balance of $27,778 and accrued interest of $464.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Fourth
Man LLC
On
July 3, 2018, the Company issued a convertible note to Fourth Man
LLC for $24,200, which includes $20,762 to settle outstanding
accounts payable, OID interest of $2,200, and cash consideration of
$1,238. On July 17, 2018, the Company issued an Allonge to the
convertible debt in the amount of $8,470, which includes $7,700 to
settle outstanding accounts payable and OID interest of $700. On
August 22, 2018, the Company issued an Allonge to the convertible
debt in the amount of $7,700, which includes $7,000 to settle
outstanding accounts payable and OID interest of $700. On October
3, 2018, the Company issued an Allonge to the convertible debt in
the amount of $4,000, which includes $4,000 to settle outstanding
accounts payable and OID interest of $400. The note bears interest
of 10% (increases to 24% per annum upon an event of default),
matures on July 3, 2019, and is convertible into common stock at
60% of the lowest trading price of the 20 trading day period ending
on the latest complete day prior to the date of conversion. The
Company recorded a debt discount from the derivative equal to
$44,770 due to this conversion feature, and $22,624 has been
amortized to the statement of operations. The debt discount and OID
interest had a balance at December 31, 2018 of $21,846 and $1,702,
respectively. As of December 31, 2018, the note had a principal
balance of $44,770 and accrued interest of $1,445.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 26, 2018, the Company accepted and agreed to a Debt
Purchase Agreement, whereby Fourth Man LLC acquired $40,000 of debt
from an Emunah Funding LLC convertible note in exchange for
$40,000. The note bears interest of 24%, matures on July 20, 2019,
and is convertible into common stock at 50% of the lowest trading
price of the 20 trading day period ending on the latest complete
day prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $16,591 due to this
conversion feature, and $4,101 has been amortized to the statement
of operations. As of December 31, 2018, the note had a principal
balance of $40,000 and accrued interest of $545.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
James
Powell
On
September 7, 2015, the Company issued a convertible note with the
Company’s former President, James Powell for non-cash consideration
for accrued fees of $150,875. The note bears interest at 8%, is due
on demand, and is convertible into convertible into common stock at
50% of the lowest trading price for the 15 days prior to the date
of conversion. As of December 31, 2018, the note had a principal
balance of $150,875 and accrued interest of $40,047.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Convertible
Note Conversions
During
the nine months ended December 31, 2018, the Company issued the
following shares of common stock upon the conversions of portions
of the Convertible Notes:
| |
|
Principal |
|
|
Interest |
|
|
Total |
|
|
Conversion |
|
|
Shares |
|
|
|
|
Date |
|
Conversion |
|
|
Conversion |
|
|
Conversion |
|
|
Price |
|
|
Issued |
|
|
Issued to |
| 11/15/2018 |
|
$ |
432 |
|
|
$ |
— |
|
|
$ |
432 |
|
|
$ |
0.0015 |
|
|
|
288,000 |
|
|
EMA |
| 12/31/2018 |
|
|
5,200 |
|
|
|
4,815 |
|
|
|
10,015 |
|
|
|
0.0040 |
|
|
|
2,503,717 |
|
|
Emunah |
| |
|
$ |
5,632 |
|
|
$ |
4,815 |
|
|
$ |
10,447 |
|
|
|
|
|
|
|
2,791,717 |
|
|
|
6.
PROMISSORY NOTE PAYABLE
On
December 1, 2014, Satel Group Inc. entered into a Promissory Note
with Xillient, LLC in the amount of $434,669 pursuant to the Asset
Purchase Agreements dated June 3, 2013 and November 24, 2014, to
acquire certain Direct-TV assets. The note bears interest of 5% per
annum and is due on December 31, 2019. As of December 31, 2018,
Satel has recorded payments of $137,000 and accrued interest of
$66,421. As of December 31, 2018, the principal balance owed is
$297,669 and interest is $66,421.
7.
LONG TERM PROMISSORY NOTE PAYABLE
On
October 1, 2017, Direct Capital Group, Inc. agreed to cancel two
convertible notes in the principal amounts of $25,000 and $36,000,
and $6,304 in accrued interest, in exchange for a Promissory Note
in the amount of $61,000. The note bears no interest and is due on
or before October 1, 2020. As of December 31, 2018, the principal
balance owed is $61,000.
8.
DERIVATIVE LIABILITIES
During
the nine months ended December 31, 2018, the Company valued the
embedded conversion feature of the convertible notes, warrants,
certain accounts payable and certain related party liabilities. The
fair value was calculated at December 31, 2018 based on the
independent report of the valuation specialist.
The
following table represents the Company’s derivative liability
activity for the embedded conversion features for the year ended
December 31, 2018:
| |
|
Notes |
|
|
Warrants |
|
|
Stock Payable |
|
|
Total |
|
| Balance, at merger
date |
|
$ |
7,832,214 |
|
|
$ |
496,260 |
|
|
$ |
3,927,072 |
|
|
$ |
12,255,546 |
|
| Reduction for debt settlement |
|
|
(115,941 |
) |
|
|
— |
|
|
|
— |
|
|
|
(115,941 |
) |
| (Gain) loss on
derivative liability valuation |
|
|
(4,594,756 |
) |
|
|
(400,392 |
) |
|
|
(2,255,960 |
) |
|
|
(7,251,108 |
) |
| Balance, end of period |
|
$ |
3,121,517 |
|
|
$ |
95,868 |
|
|
$ |
1,671,112 |
|
|
$ |
4,888,497 |
|
Convertible
Notes
The
fair value at the valuation date for the convertible notes for the
Company’s derivative liabilities were based upon the following
management assumptions as of December 31, 2018:
| |
|
Valuation date |
| Expected dividends |
|
0% |
| Expected volatility |
|
237.26%-427.64% |
| Expected term |
|
.37 - 1
year |
| Risk free interest |
|
2.48%-2.63% |
Warrants
On
October 20, 2017, the Company executed a Common Stock Purchase
Warrant for 35,227 shares (52,840,909 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on October 20, 2022.
On
November 6, 2017, the Company executed a Common Stock Purchase
Warrant for 10,225 shares (15,338,160 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on November 6, 2022.
On
November 30, 2017, the Company executed a Common Stock Purchase
Warrant for 6,817 shares (10,225,440 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on November 30, 2022.
On
January 11, 2018, the Company executed a Common Stock Purchase
Warrant for 5.681 shares (8,521,200 shares pre-split). The purchase
price of one share of Common Stock under this Warrant shall be
equal to the Exercise Price of $0.0005 per share and expire on
January 11, 2023.
On
May 15, 2018, the Company executed a Common Stock Purchase Warrant
for 26,667 shares (40,000,000 shares pre-split). The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price of $0.0005 per share and expire on May 15,
2023.
On
July 3, 2018, the Company executed a Common Stock Purchase Warrant
for 32,267 shares (48,400,000 shares pre-split). The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price of $0.0005 per share and expire on July 3,
2023.
On
July 17, 2018, the Company executed a Common Stock Purchase Warrant
for 11,293 shares (16,940,000 shares pre-split). The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price of $0.0005 per share and expire on July 17,
2023.
On
August 22, 2018, the Company executed a Common Stock Purchase
Warrant for 10,267 shares (15,400,000 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on August 22, 2023.
On
October 3, 2018, the Company executed a Common Stock Purchase
Warrant for 8,800,000 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.0005 per share and expire on October 3,
2023.
On
October 31, 2018, the Company executed a Common Stock Purchase
Warrant for 3,026,420 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.07 per share and expire on October 31, 2023.
The
Company evaluated all outstanding warrants to determine whether
these instruments may be tainted. All warrants outstanding were
considered tainted. The Company valued the embedded derivatives
within the warrants based on the independent report of the
valuation specialist.
The
fair value at the valuation dates were based upon the following
management assumptions:
| |
|
Valuation date |
| Expected dividends |
|
0% |
| Expected volatility |
|
835.26%-941.55% |
| Expected term |
|
3.81 - 4.84
years |
| Risk free interest |
|
2.46%-2.49% |
Stock
Payable
The
payables to be issued in stock are at 100% of the lowest closing
market price with a 15 day look back. The fair value at the
valuation dates were based upon the following management
assumptions:
| |
|
Valuation date |
|
Expected dividends |
|
0% |
| Expected volatility |
|
427.64% |
| Expected term |
|
1 year |
| Risk free interest |
|
2.63% |
9.
RELATED PARTY TRANSACTIONS
The
Company is periodically advanced noninterest bearing operating
funds from related parties. The advances are due on demand and
unsecured. As of December 31, 2018 and December 31, 2017, the
Company owed related parties $152,067 and $0, respectively. During
the nine months ended December 31, 2018 and December 31, 2017, the
Company recorded imputed interest of $2,982 and $0, respectively,
to the statement of operations with a corresponding increase to
additional paid in capital. As of December 31, 2018 and December
31, 2017, the Company recorded accounts payable due to related
parties of $31,629 and $0, respectively.
10.
PREFERRED STOCK
On
January 25, 2011, the Company filed an amendment to its Nevada
Certificate of Designation to create two classes of Preferred
Stock, Series A and Series B, with a par value of $0.001. Each
class has 10,000,000 shares authorized.
On
July 1, 2015, the Company’s Board of Directors authorized the
creation of shares of Series B Voting Preferred Stock and on July
27, 2015 a Certificate of Designation was filed with the Nevada
Secretary of State. The holder of the shares of the
Series B Voting Preferred Stock has the right to vote those shares
of the Series B Voting Preferred Stock regarding any matter or
action that is required to be submitted to the shareholders of the
Company for approval. The vote of each share of the
Series B Voting Preferred Stock is equal to and counted as 4 times
the votes of all of the shares of the Company’s (i) common stock,
and (ii) other voting preferred stock issued and outstanding on the
date of each and every vote or consent of the shareholders of the
Company regarding each and every matter submitted to the
shareholders of the Company for approval.
On
January 3, 2017, the Company filed an Amendment to Certificate of
Designation with the Nevada Secretary of State defining the rights
and preferences of the Series A Preferred shares. Series A
Preferred stock shall be convertible into common shares at the rate
of the closing market price on the day of the conversion notice
equal to the dollar amount of the value of the Series A shares, and
holders shall have no voting rights on corporate matters, unless
and until they convert their Series A shares into Common Shares, at
which time they will have the same voting rights as all Common
Shareholders have; their consent shall not be required for taking
any corporate action.
On
October 26, 2018, the Company issued 488,827 Series A Preferred
shares at $1.79 per share to Donna Murtaugh, to settle liabilities
of $875,000 owed to her pursuant to the Asset Purchase Agreement
dated March 9, 2016.
On
November 9, 2018, Mike Schatz returned 250 Preferred Series B
Control Shares, valued at par value, pursuant to his new employee
agreement dated November 1, 2018.
On
November 9, 2018, Robert Stillwaugh returned 250 Preferred Series B
Control Shares, valued at par value, pursuant to his new employee
agreement dated November 1, 2018.
On
November 9, 2018, newly appointed President, Richard Hylen was
issued 500 Preferred Series B Control Shares, pursuant to his
employee agreement dated November 1, 2018.
As of
November 13, 2018, 3,489,510 shares of Series A Preferred stock
were transferred into the Company in connection with the reverse
merger.
On
November 13, 2018, the Company granted 1,086,592 Series A Preferred
shares at $1.79 per share to Richard Hylen, valued at $1,945,000,
pursuant the Merger Agreement.
As of
December 31, 2018, 10,000,000 Series A Preferred shares and
10,000,000 Series B Preferred shares were authorized, of which
5,064,929 Series A shares were issued and outstanding and 500
Series B shares were issued and outstanding.
11.
COMMON STOCK
On
June 15, 2016, the Company approved the authorization of a 1 for
1,000 reverse stock split of the Company’s outstanding shares of
common stock, which was effective on July 22, 2016. The financial
statements have been retroactively adjusted to take this into
account for all periods presented.
As of
November 13, 2018, 2,917,799 shares of common stock were
transferred into the Company in connection with the reverse
merger.
On
November 13, 2018, the Company issued 102,368,421 shares of
restricted common stock at $.019 per share, to Richard Hylen as
collateral, pursuant to the Asset Purchase Agreement dated November
13, 2018. The shares are valued at $4,298,450 based on the market
price of the Company’s common stock on the date of the
agreement.
During
the nine months ended December 31, 2018 , the holders of
convertible notes converted a total of $10,447 of principal and
interest into 2,791,717 shares of common stock. The issuance
extinguished $115,941 worth of derivative liabilities which was
recorded to additional paid in capital.
As of
December 31, 2018, 900,000,000 common shares, par value $0.00001,
were authorized, of which 108,077,937 shares were issued and
outstanding.
12.
INCOME TAXES
Deferred
income taxes are determined using the liability method for the
temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred
income taxes are measured based on the tax rates expected to be in
effect when the temporary differences are included in the Company’s
tax return. Deferred tax assets and liabilities are recognized
based on anticipated future tax consequences attributable to
differences between financial statement carrying amounts of assets
and liabilities and their respective tax bases.
The
deferred tax asset and the valuation allowance consist of the
following at December 31, 2018:
| |
|
2018 |
|
| Net operating loss |
|
$ |
208,341 |
|
| Statutory rate |
|
|
21 |
% |
| Expected tax recovery |
|
|
43,752 |
|
| Change in
valuation allowance |
|
|
(43,752 |
) |
| Income tax provision |
|
$ |
— |
|
| |
|
|
|
|
| Components of deferred tax
asset: |
|
|
|
|
| Non capital tax loss
carry-forwards |
|
$ |
43,752 |
|
| Less:
valuation allowance |
|
|
(43,752 |
) |
| Net deferred
tax asset |
|
$ |
— |
|
As of
the date of this filing, the Company is current in filing their tax
returns. The last return filed by the Company was December 31,
2017, and the Company has not accrued any potential penalties or
interest from that period forward. The Company will need to
file returns for the year ending December 31, 2018, which are still
open for examination.
13.
COMMITMENTS AND CONTINGENCIES
On
February 1, 2017, Simlatus Corp. entered into a standard office
lease for approximately 1,700 square feet of office space at 175
Joerschke Drive, Suite A, Grass Valley, CA 95945. The lease has a
term of 1 year, from February 1, 2017 through January 31, 2018,
with a monthly rent of $1,400. On February 1, 2018, the Company
entered into a month-to-month lease with a monthly rent of $1,400.
Rental expenses incurred for this operating lease during the nine
months ended December 31, 2018 were $12,600.
On
January 24, 2017, Satel Group, Inc. entered into a standard office
lease for approximately 1,006 square feet of office space at 330
Townsend Street, Suite 135, San Francisco, CA 94107. The lease had
a term of 2 years, from December 1, 2016 through November 30, 2018,
with a monthly rent of $5,449 for the first year and $5,613 for the
second year. Rental expenses incurred for this operating lease
during the nine months ended December 31, 2018 were
$51,278.
On October 29, 2018, the Board
of Directors dismissed Robert Stillwaugh as an officer and
director, specifically as the Chief Executive Officer, Chairman of
the Board, and Corporate (President) of the Company effective
November 1, 2018. Effective November 1, 2018, Mr. Stillwaugh has a
new revised Employment Agreement which appoints him as President of
Simlatus, a non-director/officer position which includes returning
to Treasury 250 Preferred Series B Control Shares, and an annual
salary of $45,000, which can be accumulated at 6% interest and
converted to restricted common stock at fair market value at the
time of conversion.
On
October 29, 2018, the Board of Directors dismissed Mike Schatz as
an officer and director, specifically as the Chief Operations
Officer, Director, Secretary and Treasurer of the Company effective
November 1, 2018. Effective November 1, 2018, Mr. Schatz has a new
revised Employment Agreement which appoints him as the Vice
President of Simlatus, a non-director/officer position, which
includes returning to Treasury 250 Preferred Series B Control
Shares, and an annual salary of $45,000, which can be accumulated
at 6% interest and converted to restricted common stock at fair
market value at the time of conversion.
On
October 29, 2018, the Board of Directors appointed Richard N. Hylen
as the new Chief Executive Officer, Chairman of the Board, and
President, Secretary, and Treasurer of the Company effective
November 1, 2018. Richard has been provided with an Employment
Agreement that includes the issuance of 500 Preferred Series B
Control Shares, and an annual salary of $120,000, which can be
accumulated at 6% interest and converted to restricted common stock
at fair market value at the time of conversion. As of December 31,
2018, Mr. Hylen has accrued wages of $20,000, received payments of
$4,800, leaving a balance at December 31, 2018 of
$15,200.
14.
SUBSEQUENT EVENTS
On
January 2, 2019, the Company received funding from a convertible
note from Emunah Funding in the amount of $29,150. The note bears
interest at 8% per annum and matures on December 28,
2019.
On
January 9, 2019, the Company entered into an Asset Purchase
Agreement with Proscere Bioscience Inc., a Florida Corporation, and
pursuant with as Asset Purchase Agreement where the Company and
Proscere Bioscience mutually agreed to sell certain assets and to
provide the “Know-How”. The assets pursuant to the Exclusive
Distribution & License Agreement dated 01/09/19 are valued at
$3,000,000. As consideration for the assets and the “Know -How”,
the Buyer shall issue, or cause to be issued, $3,000,000 worth of
Preferred Series A Stock (PAR $.001) three (3) days from the date
of this agreement. The number of shares to be issued is 1,675,978
of the Preferred Series A stock at a price of $1.79 per share and
convertible pursuant the conversion rights as specified in the
Articles of Incorporation for SIML. Proscere Bioscience has
designated the stock to be issued in the name of Optempus
Investments, LLC. Proscere Bioscience Inc. will become a wholly
owned subsidiary of Simlatus Corporation. Proscere Bioscience is in
the business of manufacturing and distribution of agricultural
products, inclusive of cold-water CBD/HEMP extraction technology
and aeroponic grow containers for use in commercial and private
cannabis growing industries, as well as government regulated
food-safety growing facilities, and commercial food distribution
industries.
On
January 9, 2019 , the Board of Directors appointed Baron
Tennelle as a Director of Simlatus and President of Proscere
Bioscience, Inc., a wholly owned subsidiary of Simlatus, effective
January 9, 2019. Mr. Tennelle’s Director Agreement and Employment
Agreement is an exhibit to this document. He will receive an annual
salary of $45,000 paid out quarterly in either cash or stock at the
current fair market value of the stock at time of
conversion.
Baron
Tennelle is 39 years old and attended Mesa College in San Diego,
California where he studied mathematics. He attended Blackstone
Career Institute in San Diego to study law under a Legal Assistant
program regarding real property, torts, personal injury, contracts
and partnerships. His 12 years in business has afforded him the
experience in working in management positions for service oriented
companies, along with sales and marketing. His recent 4 years have
landed him experience as a Data Analyst for Restaurant Revolution
Technologies, and a paralegal for Miller Legal Llp. Mr. Tennelle
will oversee the business direction and maintain core business
objectives and compliance for Proscere Bioscience.
The
Board of Directors also appointed Victoria Boltrick as a Director
of Simlatus and Vice President of Proscere Bioscience, Inc., a
wholly owned subsidiary of Simlatus, effective January 9, 2019. Ms.
Boltrick’s Director Agreement and Employment Agreement is an
exhibit to this document. She will receive an annual salary of
$45,000 paid out quarterly in either cash or stock at the current
fair market value of the stock at time of conversion.
Victoria
Boltrick is 30 years old and attended Grand Valley State University
in Allendale, Michigan where she studied Business Administration
and continued her graduate work at the University of Tennessee in
Knoxville and graduated and received a Business of Science Degree
in Communications and Advertising with a minor in Business. She
brings 10 years’ experience in business and marketing and has
worked with Go-Capital in providing direct marketing platforms and
with The Folsom Corporation where she developed process
improvements to provide security architecture for their receivable
accounting systems. Ms. Boltrick will spearhead the Proscere
Bioscience operations in developing distribution and marketing
channels to place products.
On
January 31, 2019, the Company issued a convertible note to Emunah
Funding, LLC for $33,000. The note bears interest of 8% and matures
on January 31, 2020.
On
February 14, 2019, and i n
conjunction with the Closing of the Asset Purchase Agreement dated
November 13, 2018, the Board of Directors of the Company adopted a
new fiscal year of December 31 in order to coincide with the
existing fiscal year of Satel Group, Inc. to streamline the
financial reporting of the post-combination Companies. The
Company’s Annual Report on Form 10-K for the new fiscal year
for the period ending December 31, 2018 will be due on March 31,
2019.
On
February 19, 2019, the Board of Directors has dismissed Victoria
Boltrick as a Director and Employee because the Chairman, Richard
Hylen, had expressed his desire to replace Victoria Boltrick with a
more experienced individual with the needs of the company. Victoria
Boltrick agreed to being dismissed, as well as has agreed to waive
any/all accrued wages and Director Fees. Simultaneously the Board
of Directors appointed Dusty Vereker as a Director of the company,
and Vice President of Proscere Bioscience. Her employment contract
allows an annual salary of $45,000 to be paid quarterly in either
cash or stock. Her Director Agreement allows for fees associated
with meetings and conferences. Ms. Vereker has accepted the
Director position and employee position respectively. Dusty Vereker
is 42 years old and has been a marketing professional for more than
a decade. She is a seasoned manager with experience in directing
sales for medium to large size corporations, where she earned her
credit to increasing revenue. She brings 8 years’ experience in
sales and 4 years’ experience in human resources. She is a graduate
of Grossmont College, and served as an Administrative Instructor to
the US Naval Sea Cadet Corps. Dusty will assist our team in growing
sales for Proscere Bioscience and implement an Oversight-Committee
for the corporation.
On
February 22, 2019, the Company issued a convertible note to Armada
Investment Fund, LLC for $47,250. The note bears interest of 8% and
matures on November 22, 2019.
On
February 22, 2019, the Company issued a convertible note to BHP
Capital NY Inc. for $47,250. The note bears interest of 8% and
matures on November 22, 2019.
On
February 22, 2019, the Company issued a convertible note to Emunah
Funding LLC for $47,250. The note bears interest of 8% and matures
on November 22, 2019.
On
February 22, 2019, the Company issued a convertible note to Fourth
Man, LLC for $47,250. The note bears interest of 8% and matures on
November 22, 2019.
On
March 19, 2019, the Company entered into a Debt Settlement
Agreement with Xillient, LLC to settle all outstanding debt owed to
Xillient, LLC. The Company has agreed to settle this debt for
$200,000, to be issued in Series A Preferred stock.
On
March 14, 2019 , the company entered into a Settlement
Agreement with Auctus Fund, LLC. Both Parties agreed to settle the
outstanding debt pursuant under the terms of a Securities Purchase
Agreement (the “Debt”), in its entirety. The Agreement was entered
into on March 14, 2019, by and among Simlatus Corp a Nevada
corporation doing business in California (the “Debtor”) and Auctus
Fund, LLC a limited liability company, (the “Creditor”) with
respect to the Securities Purchase Agreement entered into two
convertible notes between the Debtor and the Creditor on or about
December 16, 2016 and August 9, 2017, (the “Purchase Agreement”)
pursuant to which the Debtor issued a Convertible Note each in the
original principal amount of $46,750, respectively (collectively,
the “Notes”) to the Creditor on that same date. Once the following
conditions are timely satisfied, the Notes shall be satisfied in
full: (i) Debtor shall pay $50,000 via wire transfer to the
Creditor on March 15, 2019, (ii) Debtor shall issue 3,000,000
unrestricted shares of the Debtor’s common stock (the “Shares”) to
the Creditor on March 15, 2019, pursuant to a partial conversion of
one of the Notes by the Creditor in accordance with the original
terms of the Notes, and (iii) Debtor shall pay $50,000 via wire
transfer to the Creditor within 60 calendar days after the date of
this Agreement, and (iv) Debtor shall pay $75,000 via wire transfer
to the Creditor within 120 calendar days after the date of this
Agreement. Auctus’ sale of the Shares shall be limited as follows:
beginning on the Execution Date and ending on June 14, 2019, such
sales of the Shares shall be limited to the greater of (i) 20% of
the daily dollar volume of the Company’s common stock during each
respective trading day or (ii) a gross dollar amount of $7,500
during each respective trading day.
On
March 14, 2019, Company issued a convertible note to Power Up
Lending Group Ltd for $73,000. The note bears interest of 10% and
matures on March 14, 2020.
On
March 26, 2019, Company issued a convertible note to BHP Capital NY
Inc. for $28,600. The note bears interest of 8% and matures on
March 26, 2020.
On
March 26, 2019, Company issued a convertible note to Emunah
Funding, LLC for $28,600. The note bears interest of 8% and matures
on March 26, 2020.
On
March 29, 2019, the Company and its subsidiary, Proscere Bioscience
Inc., entered into an Exclusive Distribution Agreement with Brand
House Ventures Inc. allowing the rights to sell the CBD Cold Water
Extraction Systems within all of the United States.
Mike Mulder is the President of Brand House Ventures Inc., and the
company was
formed in 2010 as a sole proprietorship, and in 2014 was formed as
a California S-Corporation. Today Brand House is a Holding Company
for the distribution of a variety of products and
technologies.
On
March 29, 2019, the Company and its subsidiary, Proscere Bioscience
Inc., entered into a Distribution Agreement with United
Opportunities, LLC allowing the rights to sell the CBD/HEMP Cold
Water Extraction Systems within Canada and Europe.
Shawn
Illingworth is the Managing Partner of United Opportunities, LLC,
and the company was formed in 2017 in overseeing the purchases of
multiple cannabis farms in the Humboldt, Adelanto, Needles, Nipton,
Cal City, and Searchlight areas of California and Nevada. The
company currently cultivates medical grade crops on a grand scale
and supply product to all the major manufacturers and extraction
companies in the industry. Future plans are to expand the
company and distribute internationally through attaining
cultivation centers in Canada, Europe and Australia. United
Opportunities is currently opening an office and showroom in Las
Vegas, NV which will round out its current operating platforms in
New York, Florida, and San Diego, California.
On
April 3, 2019, the Company entered into a Settlement Agreement with
EMA Financial, LLC. This Settlement Agreement was entered into on
or about April 3, 2019, by and among Simlatus Corp a Nevada
corporation (the “Company”) and EMA Financial, LLC a Delaware
limited liability company, (the “Investor”) with respect to the
Securities Purchase Agreement entered into between the Company and
the Investor on or about November 9, 2016 (the “Purchase
Agreement”) pursuant to which the Company issued a 10% Convertible
Note in the original principal amount of $35,000 (the “Note”) to
the Investor on that same date. Subject to and upon the terms and
conditions set forth in this Agreement the Investor shall surrender
the Note to the Company and release the Company from any of its
obligations there-under in exchange for Company’s strict compliance
with the following terms: (a) a cash payment by the Company to the
Investor of $50,000 to be paid to the Investor on or before April
4, 2019; (b) Company’s cash payment to Investor of $75,000 to be
paid to the Investor on or before, but in no event later than end
of day July 23, 2019, and (c) the issuance of 3,000,000 shares
pursuant a conversion notice.
The
Company has evaluated subsequent events pursuant to ASC Topic 855
and has determined that there are no additional subsequent events
to disclose.
ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE
There
are no changes in or disagreements with accountants on accounting
and/or financial disclosure.
ITEM 9A. CONTROLS AND
PROCEDURES.
Management’s
Report on Internal Control over Financial Reporting
This
report includes the certifications of our Chief Executive Officer
and Chief Financial Officer required by Rule 13a-14 of the
Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits
31.1 and 31.2. This Item 9A includes information concerning the
controls and control evaluations referred to in those
certifications.
Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934
(the “Exchange Act”), that are designed to ensure that information
required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities
and Exchange Commission’s rules and forms and that such information
is accumulated and communicated to our management, including our
Chief Executive Officer and Principal Financial Officer, as
appropriate to allow timely decisions regarding required
disclosure.
We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Principal Financial Officer of the effectiveness of the
design and operation of our disclosure controls and procedures as
of December 31, 2018. Based on the evaluation of these disclosure
controls and procedures, and in light of the material weaknesses
found in our internal controls over financial reporting, our Chief
Executive Officer concluded that our disclosure controls and
procedures were not effective. Management anticipates that such
disclosure controls and procedures will not be effective until the
material weaknesses are remediated. Our company intends to
remediate the material weaknesses as set out below.
Management’s Annual Report on Internal Control Over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act Rule
13a-15(f). The Company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States of
America.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Under
the supervision and with the participation of management, including
the Chief Executive Officer and C Financial Officer, the Company
conducted an evaluation of the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2018,
using the criteria established in “ Internal Control -
Integrated Framework (2013) ” issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO”).
A
material weakness is a deficiency, or combination of deficiencies,
in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be
prevented or detected on a timely basis. In its assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2018, the Company determined that there were control
deficiencies that constituted material weaknesses, as described
below.
|
1. |
There
is a lack of accounting resources – The Company has
insufficient resources for data entry, reviews, and/or oversight
from a financial expert with the appropriate level of knowledge and
experience to accurately capture transactions in accordance with US
GAAP and SEC rules and regulations. This lack of
resources further results in inadequate segregation of duties.
Additionally, the Company lacks an audit committee as well as a
financial expert. |
|
2. |
The
Company lacks processes and procedures to ensure transactional
evidence is properly retained - The Company needs to
implement processes that ensure they are aware of, and maintain,
evidence necessary to substantiate recorded
transactions. The Company needs to retain formal
executed documents and adequate support, as they are essential to
accurate financial reporting. |
|
3. |
Due
to the Company not having formal Control procedures related to the
approval of related party transactions. |
Accordingly,
the Company concluded that these control deficiencies resulted in a
reasonable possibility that a material misstatement of the annual
or interim financial statements will not be prevented or detected
on a timely basis by the company’s internal controls.
As a
result of the material weaknesses described above, management has
concluded that the Company did not maintain effective internal
control over financial reporting as of December 31, 2018, based on
criteria established in “ Internal Control - Integrated
Framework (2013) ” issued by COSO.
This
annual report does not include an attestation report of the
Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by the Company’s registered public
accounting firm pursuant to rules of the SEC that permit the
Company to provide only management’s report in this annual
report.
Changes in Internal Control over Financial
Reporting
There
has been no change in our internal control over financial reporting
identified in connection with our evaluation we conducted of the
effectiveness of our internal control over financial reporting as
of March 31, 2018, that occurred during our fourth fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER
INFORMATION.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS.
Identification of Directors and Executive
Officers
The
following table sets forth the name and age of our current
directors and executive officer:
|
Name |
|
Age |
|
Position with the Company |
|
Position Held Since |
|
Richard Hylen |
|
72 |
|
Chief
Executive Officer, Chairman of the Board, President, Secretary and
Treasurer |
|
November 1, 2018 |
| Baron
Tennelle |
|
39 |
|
Director |
|
January 9, 2019 |
| Dusty
Vereker |
|
42 |
|
Director |
|
February 19, 2019 |
The
Board of Directors has no nominating, audit or compensation
committee at this time.
Term of Office
Each
director is elected by the Board of Directors and serves until his
or her successor is elected and qualified, unless he or she resigns
or is removed earlier. Each of our officers is elected by the Board
of Directors to a term of one (1) year and serves until his or her
successor is duly elected and qualified, or until he or she is
earlier removed from office or resigns.
Background and Business Experience
The
business experience during the past five years of the person
presently listed above as an Officer or Director of the Company is
as follows:
Richard Hylen: Mr. Hylen is 72 years old. As the
Founder of Satel Inc., the Managing Director of Turner Broadcasting
Far East LTD, and a Senior Executive of Viacom’s San Francisco
cable company, Richard has over 35 years of experience providing
video and Internet using the most advanced technologies including:
cable, fiber, satellite, wireless and CAT5 not only domestically,
but to over 50 countries worldwide. His skill set encompasses
successfully negotiating complicated licensing agreements with
governmental entities, creating joint venture partnerships,
developing strategic distribution relationships, financing,
designing, installing and managing advanced technologies to provide
consumers with video and Internet services. Hylen used his
extensive corporate management expertise combined with his
technical knowledge to create Satel, recognized as one of the
nation’s largest providers of DirecTV to high rise buildings in a
major metropolitan market.
Baron Tennelle: Mr. Tennelle is 39 years old and
attended Mesa College in San Diego, California where he studied
mathematics. He attended Blackstone Career Institute in San Diego
to study law under a Legal Assistant program regarding real
property, torts, personal injury, contracts and partnerships. His
12 years in business has afforded him the experience in working in
management positions for service oriented companies, along with
sales and marketing. His recent 4 years have landed him experience
as a Data Analyst for Restaurant Revolution Technologies, and a
paralegal for Miller Legal LLP. Mr. Tennelle will oversee the
business direction and maintain core business objectives and
compliance for Proscere Bioscience.
Dusty Vereker : Ms. Vereker is 42 years old and has
been a marketing professional for more than a decade. She is a
seasoned manager with experience in directing sales for medium to
large size corporations, where she earned her credit to increasing
revenue. She brings 8 years’ experience in sales and 4 years’
experience in human resources. She is a graduate of Grossmont
College, and served as an Administrative Instructor to the US Naval
Sea Cadet Corps. Dusty will assist our team in growing sales for
Proscere Bioscience and implement an Oversight-Committee for the
corporation.
Identification of Significant Employees
We
have no significant employees.
Family Relationship
We
currently do not have any officers or directors of our Company who
are related to each other.
Involvement in Certain Legal Proceedings
During
the past ten years no director, executive officer, promoter or
control person of the Company has been involved in the
following:
|
(1) |
A
petition under the Federal bankruptcy laws or any state insolvency
law which was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or
property of such person, or any partnership in which he was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing; |
|
(2) |
Such
person was convicted in a criminal proceeding or is a named subject
of a pending criminal proceeding (excluding traffic violations and
other minor offenses); |
|
(3) |
Such
person was the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities: |
|
i. |
Acting
as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity; |
|
ii. |
Engaging
in any type of business practice; or |
|
iii. |
Engaging
in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities
laws; |
|
(4) |
Such
person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or
State authority barring, suspending or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in paragraph (f)(3)(i) of this section, or to be
associated with persons engaged in any such activity; |
|
(5) |
Such
person was found by a court of competent jurisdiction in a civil
action or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended, or
vacated; |
|
(6) |
Such
person was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading Commission
has not been subsequently reversed, suspended or
vacated; |
|
(7) |
Such
person was the subject of, or a party to, any Federal or State
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of: |
|
i. |
Any
Federal or State securities or commodities law or regulation;
or |
|
ii. |
Any
law or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or |
|
iii. |
Any
law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or |
|
(8) |
Such
person was the subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as
defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member. |
Audit Committee and Audit Committee Financial
Expert
As of
December 31, 2018, the Company did not have an audit committee or
an audit committee financial expert (as defined in Item 407 of
Regulation S-K) serving on its Board of Directors. All current
members of the Board of Directors lack sufficient financial
expertise for overseeing financial reporting responsibilities. The
Company has not yet employed an audit committee financial expert on
its Board due to the inability to attract such a person.
Code of Ethics
As of
December 31, 2018, the board of directors had not adopted a code of
ethics due to Company’s limited number of executive officers and
employees that would be covered by such a code and the Company’s
limited financial resources. We anticipate that we will adopt a
code of ethics when we increase either the number of our directors
and officers or the number of our employees.
Compliance with Section 16(a) of the Exchange
Act
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors, and persons who beneficially
own more than 10% of a registered class of our equity securities to
file with the Securities and Exchange Commission initial statements
of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common shares and other
equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required
by the Securities and Exchange Commission regulations to furnish us
with copies of all Section 16(a) reports they file. Based on our
review of the copies of such forms received by us, and to the best
of our knowledge, all executive officers, directors and persons
holding greater than 10% of our issued and outstanding stock have
filed the required reports in a timely manner during the year
ending December 31, 2018.
ITEM 11. EXECUTIVE
COMPENSATION
The
table set forth below summarizes the annual and long-term
compensation for services in all capacities to us payable to our
officer and director for the nine months ended December 31, 2018
and December 31, 2017. Our Board of Directors may adopt an
incentive stock option plan for our executive officers that would
result in additional compensation.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Incentive
Plan |
|
|
Compensation |
|
|
All
Other |
|
|
|
|
|
Name
and |
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
|
principal
position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Richard
Hylen, President, |
|
|
2018 |
|
|
|
50,871 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,871 |
|
|
Chief
Executive Officer, |
|
|
2017 |
|
|
|
42,360 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
42,360 |
|
|
Secretary
and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrative Disclosure to Summary Compensation
Table
On
October 29, 2018, the Board of Directors appointed Richard N. Hylen
as the new Chief Executive Officer, Chairman of the Board,
President, Secretary, and Treasurer of the Company, effective
November 1, 2018. Richard has been provided with an Employment
Agreement that includes the issuance of 500 Preferred Series B
Control Shares, and an annual salary of $120,000, which can be
accumulated at 6% interest and converted to restricted common stock
at fair market value at the time of conversion. During the nine
months ended December 31, 2018 and 2017, the Company recorded
$50,871 and $42,360, respectively, in accrued wages and
interest.
Outstanding Equity Awards at Fiscal Year-End
No
executive officer received any equity awards, or holds exercisable
or exercisable options, as of the nine months ended December 31,
2018.
Long-Term Incentive Plans
There
are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive
officers.
Compensation Committee
We
currently do not have a compensation committee of the Board of
Directors. The Board of Directors as a whole determines executive
compensation.
Compensation of Directors
Our
directors receive no extra compensation for their service on our
Board of Directors.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
Security Ownership of Management
The
following table sets forth certain information concerning the
number of shares of our common stock owned beneficially as of
December 31, 2018, by: (i) each of our directors; (ii) each of our
named executive officers; and (iii) each person or group known by
us to beneficially own more than 5% of our outstanding shares of
common stock. Unless otherwise indicated, the shareholders listed
below possess sole voting and investment power with respect to the
shares they own.
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
Name
and Address |
|
|
|
Beneficially |
|
|
Percent |
|
|
Title
of Class |
|
of
Owner |
|
Relationship
to Company |
|
Owned
(1) |
|
|
Owned
(2) |
|
|
Common
Stock |
|
Richard
Hylen |
|
President,
Chief Executive Officer, Secretary, Treasurer and
Chairman |
|
|
102,368,421 |
|
|
|
94.72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
102,368,421 |
|
|
|
94.72 |
% |
| |
1. |
The
number and percentage of shares beneficially owned is determined
under rules of the SEC and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which
the individual has sole or shared voting power or investment power
and also any shares which the individual has the right to acquire
within 60 days through the exercise of any stock option or other
right. The persons named in the table have sole voting and
investment power with respect to all shares of common stock shown
as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to
this table.
|
| |
2. |
The
percentage shown is based on denominator of 108,077,937 shares of
common stock issued and outstanding for the company as of December
31, 2018. |
Changes in Control
There
are no present arrangements or pledges of the Company’s securities,
which may result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
None
of the directors or executive officers of the Company, nor any
person who owned of record or was known to own beneficially more
than 5% of the Company’s outstanding shares of its Common Stock,
nor any associate or affiliate of such persons or companies, has
any material interest, direct or indirect, in any transaction that
has occurred during the past fiscal year, or in any proposed
transaction, which has materially affected or will affect the
Company.
With
regard to any future related party transaction, we plan to fully
disclose any and all related party transactions in the following
manor:
|
● |
Disclosing
such transactions in reports where required; |
|
● |
Disclosing
in any and all filings with the SEC, where required; |
|
● |
Obtaining
disinterested directors consent; and |
|
● |
Obtaining
shareholder consent where required. |
The
Company is periodically advanced noninterest bearing operating
funds from related parties. The advances are due on demand and
unsecured. As of December 31, 2018 and December 31, 2017, the
Company owed related parties $152,067 and $0, respectively. During
the nine months ended December 31, 2018 and December 31, 2017, the
Company recorded imputed interest of $2,982 and $0, respectively,
to the statement of operations with a corresponding increase to
additional paid in capital. As of December 31, 2018 and December
31, 2017, the Company recorded accounts payable due to related
parties of $31,629 and $0, respectively.
Director Independence
For
purposes of determining director independence, we have applied the
definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which
shares of Common Stock are quoted does not have any director
independence requirements. The NASDAQ definition of “Independent
Officer” means a person other than an Executive Officer or employee
of the Company or any other individual having a relationship,
which, in the opinion of the Company’s Board of Directors, would
interfere with the exercise of independent judgment in carrying out
the responsibilities of a director. According to the NASDAQ
definition, we have no independent directors.
Review, Approval or Ratification of Transactions with Related
Persons
We
are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICES
The following table shows the fees that were billed for the audit
and other services provided by our auditors for the years ended
December 31, 2018 and December 31, 2017:
|
|
|
2018 |
|
|
2017 |
|
| Audit Fees |
|
$ |
30,000 |
|
|
$ |
15,000 |
|
| Audit-Related
Fees |
|
|
— |
|
|
|
— |
|
| Tax Fees |
|
|
— |
|
|
|
— |
|
| All
Other Fees |
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
30,000 |
|
|
$ |
15,000 |
|
Audit Fees
We
incurred approximately $30,000 in fees to our principal independent
accountants for professional services rendered in connection with
the audit and reviews of our financial statements for the nine
months ended December 31, 2018.
We
incurred approximately $15,000 in fees to our principal independent
accountants for professional services rendered in connection with
the audit and reviews of our financial statements for the nine
months ended December 31, 2017.
Audit-Related Fees
The
aggregate fees billed during the nine months ended December 31,
2018 and 2017 for assurance and related services by our principal
independent accountants that are reasonably related to the
performance of the audit or review of our financial statements (and
are not reported under Item 9(e)(1) of Schedule 14A was $0 and $0,
respectively.
Tax Fees
The
aggregate fees billed during the nine months ended December 31,
2018 and 2017 for professional services rendered by our principal
accountant tax compliance, tax advice and tax planning were $0 and
$0, respectively.
All Other Fees
The
aggregate fees billed during the nine months ended December 31,
2018 and 2017 for products and services provided by our principal
independent accountants (other than the services reported in Items
9(e)(1) through 9(e)(3) of Schedule 14A) was $0 and $0,
respectively.
PART IV
ITEM 15. EXHIBITS.
|
* |
Filed
Pursuant to Rule 406T of Regulation S-T, the Interactive Data
Files on Exhibit 101 hereto are deemed not filed or part of a
registration statement or prospectus for purposes of Sections 11 or
12 of the Securities Act of 1933, as amended, are deemed not filed
for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, and otherwise are not subject to liability under
those sections. |
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company caused this report to be signed
on its behalf by the undersigned, thereunto duly
authorized.
SIMLATUS
CORPORATION
Dated:
May 8, 2019
|
/s/ Richard Hylen |
|
| Richard Hylen |
| President, Chief Executive Officer and Principal
Financial Officer |
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