NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
These consolidated financial statements
of Graphene &Solar Technologies Limited (GSTX or the Company) have been prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP). In the opinion of management, these financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Certain
information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with
U.S. GAAP have been omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. These financial statements
should be read along with Graphene & Solar Technologies’ audited financial statements as of September 30, 2021.
Going Concern – The Company
has incurred cumulative net losses since inception of $59,705,339 at March 31, 2022. Accordingly, it requires capital to fund working
capital deficits and for future operating activities to take place. The Company’s ability to raise new funds through the
future issuances of debt or common stock is unknown. The obtainment of additional financing, the successful development of a plan
of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue
operations. The ability of the Company to continue its operations is dependent on management’s plans, which include the raising
of capital through debt and/or equity markets, with some additional funding from other traditional financing sources, including
term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company
may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no
assurance that the Company will be able to raise any additional capital and therefore raise doubt about the Company’s ability
to continue as a going concern.
Future issuances of the Company’s
equity or debt securities will be required for the Company to finance operations and continue as a going concern. The financial
statements do not include any adjustments that may result from the outcome of these uncertainties.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Principles of Consolidation and Basis
of Presentation — The consolidated financial statements include the accounts of Graphene & Solar Technologies Limited
and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements can be found
in the Company’s Annual Report in form 10-K for the year ended September 30, 2021.
Use of Estimates - The preparation
of financial statements in conformity with GAAP 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. Actual results could differ from those estimates.
Significant estimates include but are
not limited to the estimated useful lives of equipment for purposes of depreciation and the valuation of common shares issued for
services, equipment and the liquidation of liabilities.
Cash and Cash Equivalents-Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
As of March 31, 2022 and 2021, the Company had $4,196 and $147 in cash, respectively, and no cash equivalents.
Derivative Financial Instruments
– The Company accounts for freestanding contracts that are settled in a company’s own stock, including common stock
warrants, to be designated as an equity instrument or generally as a liability. A contract so designated is carried at fair value
on a company’s balance sheet, with any changes in fair value recorded as a gain or loss in a company’s results of operations.
The Company records all derivatives
on the balance sheet at fair value, adjusted at the end of each reporting period to reflect any material changes in fair value,
with any such changes classified as changes in derivatives valuation in the statement of operations. The calculation of the fair
value of derivatives utilizes highly subjective and theoretical assumptions that can materially affect fair values from period
to period. The recognition of these derivative amounts does not have any impact on cash flows.
At the date of the conversion of any
convertible debt, the pro rata fair value of the related embedded derivative liability is transferred to additional paid-in capital.
There was no derivative activity in
fiscal quarter ending March 31, 2022. Therefore, no derivative liabilities were recorded during the quarter ended March 31, 2022.
Stock-Based Compensation -ASC
718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based
payment transactions in which employee and non-employee services are acquired. Transactions include incurring liabilities, or issuing
or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation
rights. Share-based payments to employees and non-employees, including grants of employee stock options, are recognized as compensation
expense in the financial statements based on their fair values on the grant date. That expense is recognized over the period during
which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the
vesting period).
During the quarter ended March
31, 2022, the Company issued no shares of the Company’s common stock.
Total stock-based compensation
expense was $12,382,500 and $405,000 for the six-months ended March 31, 2022, of which $9,485,000 (13,500,000 shares) were issued
to directors and considered related parties.
Foreign Currency Translations
– The functional currency of the Company’s foreign subsidiary is primarily the respective local currency. Assets and
liabilities of the Company’s foreign subsidiary are translated into U.S. Dollars at the year-end exchange rate, and revenues
and expenses are translated at average monthly exchange rates. Translation gains and losses are recorded as a component of accumulated
other comprehensive income (loss) within stockholders’ equity. All other foreign currency transaction gains and losses are
included in other (income) expense, net.
Earnings Per Share - Basic earnings per share have
been calculated based upon the weighted-average number of common shares outstanding. Diluted earnings per share were not calculated
as such potential shares would be anti-dilutive.
Reclassifications
- Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The
reclassifications had no effect on net loss, working capital or equity previously reported.
NOTE 3 – NOTES PAYABLE
The Company’s indebtedness as
of March 31, 2022 and September 30, 2021 were as follows:
Schedule of Debt
| Description |
|
March
31,
2022 |
|
September
30, 2021 |
| |
|
|
|
|
| Convertible
notes |
|
$ |
168,967 |
|
|
$ |
168,967 |
|
| Notes
Payable |
|
$ |
78,705 |
|
|
$ |
60,000 |
|
| Other
loans |
|
|
5,745 |
|
|
|
5,623 |
|
Notes
Payable and Other Loans
During
2015 and 2016, the Company executed promissory notes payable with six individuals with an aggregate principal balance of $60,000. The
notes were due on demand and included interest at 10%. As of March 31, 2022 and September 30, 2021, the total promissory notes payable
balance was $99,701 and $96,710 including accrued interest of $39,701 and $36,710, respectively. On January 15, 2019, the holder of a
note with a principal balance of $10,000 made demand for payment. To date, the note has not been paid.
During the year ended September
30, 2020 a Company Advisor, loaned the Company $5,781. The loan is a demand note at zero interest.
Convertible Notes Payable
As of March 31, 2022 and September
30, 2021, noteholders representing $70,747 in outstanding principal had not requested the exchange of shares of common stock. As
of March 31, 2022 and September 30, 2021, the exchange obligation payable was $ 163,576.88 and $158,285.37 including accrued interest
of $92,829 and $48,493, respectively. As of March 31, 2022 and September 30, 2021, the exchange obligation was for 49,419 shares
and 47,820 shares of common stock, respectively.
On February 1, 2016, the Company
issued convertible secured note payable of $30,000 to an individual. The note was due on January 31, 2017 and included interest
at 10%. The note was convertible at discretion of the holder into common shares of the Company at the rate of $0.50 per shares.
The Company has not extended the maturity date and the note is in default. As of March 31, 2022 and September 30, 2021, the total
convertible note payable balance was $48,493 and $46,997, including accrued interest of $18,493 and $16,997 respectively. As of
March 31, 2022 and 2021, the exchange obligation was for 96,986 shares and 93,995 shares of common stock, respectively.
On December 5, 2019, the Company issued a convertible
note payable in the amount of $68,220. The convertible note bear interest at 10% and matures on December 5, 2021 the principal
and accrued interest of this convertible note can be converted at the discretion of the holder into common shares at 45% discount
to the ADR 20 days prior to notification of conversion. The majority shareholder agreed to increase authorized shares, if needed,
in order to settle this debt. This note was discounted for the full amount and the amount of amortization during the period was
$0.
NOTE 4- RELATED PARTY
PGRNZ Limited, a management company
controlled by the Company’s Chief Executive Officer, and a Company Director, provides management services to the Company
for which the Company is charged $75,000 (AUD) quarterly, approximately $56,115 (US). During the three months ended March 31, 2022
and 2021, the Company incurred charges to operations of $13,468 (US) and $16,888 (US), respectively, with respect to this arrangement.
As of March 31, 2022 and September 30,
2021, accrued expenses due to PGRNZ and other related parties was $1,191,781 and $947,826 respectively.
During
six-months period ended March 31, 2022, the Company approved and issued 10,000,000 shares ($7,000,000) to Rod Young who
became a related party during first quarter reporting period. The shares were approved, issued, and fully expensed during that
period.
During
six-months period ended March 31, 2022 and 2021, stock-based compensation expense relating to directors, officers, affiliates and
related parties was $2,485,000 (3,500,000 shares) and $1,030,150 (2,000,000 shares), respectively.
NOTE 5 – STOCKHOLDERS’
EQUITY
Other than for Stock based compensation
(see Note 2), 1,200,000 new common shares were issued during the six- month period ending March 31, 2022 for net proceeds totaling
$46,921.
The Company has a total of 5,778,366
shares that remain approved, reserved and outstanding and not yet issued by the Transfer Agent at March 31, 2022
NOTE 6 – COMMITMENTS & CONTINGENCIES
Contingencies
From time to
time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal
course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate)
may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome
of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal
costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot
assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us
in the future, and these matters could relate to prior, current or future transactions or events. As of March 31, 2022, there were
no pending or threatened litigation against the Company.
NOTE 7 – INTANGIBLE ASSETS/PATENTS
We capitalize external costs, such as filing
fees and associated attorney fees, incurred to obtain issued patents and patent license rights. We expense costs associated with
maintaining and defending patents subsequent to their issuance in the period incurred. We amortize capitalized patent costs for
internally generated patents on a straight-line basis for 7 years, which represents the estimated useful lives of the patents.
The seven-year estimated useful life for internally generated patents is based on our assessment of such factors as: the integrated
nature of the portfolios being licensed, the overall makeup of the portfolio over time, and the length of license agreements for
such patents. The estimated useful lives of acquired patents and patent rights, however, have been and will continue to be based
on a separate analysis related to each acquisition and may differ from the estimated useful lives of internally generated patents.
The average estimated useful life of acquired patents is 6.7 years. We assess the potential impairment to all capitalized net patent
costs when events or changes in circumstances indicate that the carrying amount of our patent portfolio may not be recoverable.
Schedule of Finite Lived Intangible Assets
| |
|
March 30, 2022 |
|
March 30, 2021 |
| Patents |
|
|
6,879,745 |
|
|
|
— |
|
| Accumulated amortization |
|
|
(592,385 |
) |
|
|
— |
|
| Total patent costs, net |
|
|
6,287,360 |
|
|
|
— |
|
NOTE 8 – SUBSEQUENT EVENTS
The Company has evaluated events
occurring subsequent to March 31, 2022 through to the date these financial statements were issued and has identified no additional
events requiring disclosure.