Annual Transition Report (10-kt)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KT

(Mark One)

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

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 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)


Nevada		20-2675800
(State or other jurisdiction of Incorporation)		(IRS Employer Identification Number)
	175 Joerschke Drive, Ste. A Grass Valley, CA 95945 (Address of principal executive offices)

	(530) 205-3437 (Registrant’s Telephone Number)

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.

Large accelerated filer	o		Accelerated filer	o

Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x

Emerging growth company	o	{

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

		Page
	PART I

Item 1	Business	4
Item 1A	Risk Factors	9
Item 1B	Unresolved Staff Comments	9
Item 2	Properties	10
Item 3	Legal Proceedings	10
Item 4	Mine Safety Disclosures	10

	PART II

Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6	Selected Financial Data	12
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	15
Item 8	Financial Statements and Supplementary Data	16
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39
Item 9A	Controls and Procedures	39
Item 9B	Other Information	40

	PART III

Item 10	Directors, Executive Officers and Corporate Governance	40
Item 11	Executive Compensation	43
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13	Certain Relationships and Related Transactions, and Director Independence	45
Item 14	Principal Accounting Fees and Services	45

	PART IV

Item 15	Exhibits, Financial Statement Schedules	47

	Signatures	48

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

(M&K CPAS LOGO)

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

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

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

Variable

80,400

EMA Financial

11/9/2016

11/9/2017

24%

Variable

468,729

Emunah Funding #1

10/18/2017

10/18/2018

Variable

110,000

Emunah Funding #2

10/18/2017

10/18/2018

Variable

20,000

Emunah Funding #3

10/18/2017

10/18/2018

Variable

30,000

Emunah Funding #4

10/20/2018

7/20/2018

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

Variable

40,000

James Powell

9/7/2015

Demand

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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	$	—

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.

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.

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.

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:

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:

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.

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

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.

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.

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.

Exhibit Number	Description of Exhibit	Filing
3.1	Articles of Incorporation	Filed with the SEC on June 8, 2007 as part of our Registration of Securities on Form SB-2.
3.1a	Amended Articles of Incorporation	Filed with the SEC on November 11, 2009, on our Current Report on Form 8-K.
3.2	Bylaws	Filed with the SEC on June 8, 2007 as part of our Registration of Securities on Form SB-2.
31.01	Certification of Principal Executive Officer Pursuant to Rule 13a-14	Filed herewith.
31.02	Certification of Principal Financial Officer Pursuant to Rule 13a-14	Filed herewith.
32.01	Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith
101.INS	XBRL Instance Document	Furnished herewith.
101.SCH	XBRL Taxonomy Extension Schema Document	Furnished herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Furnished herewith.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document	Furnished herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Furnished herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Furnished herewith.

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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