NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2014
(UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
Plandaí Biotechnology, Inc.’s
(the “Company” or “Plandaí”) consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities
that might be necessary should the Company be unable to continue as a going concern.
The Company's continued existence is dependent
upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance
the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.
Plandaí and its subsidiaries focus on
the production of proprietary botanical extracts for the nutriceutical and pharmaceutical industries. The company grows much of
the live plant material used in its products on a 3,000 hectare estate it operates under a 49-year notarial lease in the Mpumalanga
region of South Africa. Plandaí uses a patented extraction process that is designed to yield highly bioavailable products
of pharmaceutical-grade purity. The first product to be brought to market is Phytofare™ Catechin Complex, a green-tea derived
extract that has multiple potential wellness applications. The company’s principle holdings consist of land, farms and infrastructure
in South Africa. The Company is actively pursuing additional financing and has had discussions with various third parties, although
no firm commitments have been obtained. Management believes these efforts will generate sufficient cash flows from future operations
to pay the Company's obligations and realize positive cash flow. There is no assurance any of these transactions will occur.
These financial statements should be read in
conjunction with the Company’s annual report for the year ended June 30, 2013 previously filed on Form 10-K. In management’s
opinion, all adjustments necessary for a fair statement of the results for the interim periods have been made. All adjustments made
were of a normal recurring nature.
Organization
On November 17, 2011, the Company, through
its wholly-owned subsidiary, Plandaí Biotechnologies, Inc., consummated a share exchange with Global Energy Solutions, Inc.
(“GES”), an Irish corporation. Under the terms of the share exchange, GES received 76,000,000 shares of the Company’s
common stock that had been previously issued to Plandaí in exchange for 100% of the issued and outstanding capital of GES.
Concurrent with the share exchange, the Company sold its subsidiary, Diamond Ranch, Ltd., together with its wholly-owned subsidiary,
Executive Seafood, Inc., to a former officer and director of Diamond Ranch. Under the terms of the sale, the purchasers assumed
all associated debt as consideration. During the three months ended September 30, 2011 and through the date of the share exchange,
Diamond Ranch, Ltd. and Executive Seafood, Inc. had negligible revenues from operations, generated a net loss of $126,000, and
as of September 30, 2011, liabilities exceeded assets by over $5,000,000. The Company subsequently changed its name to Plandaí
Biotechnology, Inc. and dissolved GES.
For accounting purposes, the share exchange
has been treated as a reverse merger since the acquired entity now forms the basis for operations and the transaction resulted
in a change in control, with the acquired company electing to become the successor issuer for reporting purposes. The accompanying
financial statements have been prepared to reflect the assets, liabilities and operations of Plandaí Biotechnology, Inc.
exclusive of Diamond Ranch Foods since the acquisition and sale were executed simultaneously. For equity purposes, the shares issued
to acquire GES (76,000,000 shares) have been shown to be issued and outstanding since inception, with the previous balance outstanding
(25,415,300 shares Common) treated as a new issuance as of the date of the share exchange. The additional paid-in capital and retained
deficit shown are those of Plandaí and its subsidiary operations.
In management’s opinion, all adjustments
necessary for a fair statement of the results for the presented periods have been made. All adjustments made were of a normal
recurring nature.
Basis of Presentation
The Company’s financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The accompanying financial statements represent the consolidated results of operations for the three and nine months ended March
31, 2014.
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies for Plandaí
Biotechnology, Inc. and its wholly-owned subsidiaries, is presented to assist in understanding the Company's financial statements.
The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation
of the financial statements.
Use of Estimates
The financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America. In preparing the financial statements, management
is required to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the balance sheet and statement of operations for the year then ended. Actual results
may differ from these estimates. Estimates are used when accounting for allowance for bad debts, collect ability of accounts receivable,
amounts due to service providers, depreciation and litigation contingencies, among others.
Cash and Cash Equivalents
For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents
to the extent the funds are not being held for investment purposes.
Revenue recognition
The Company presently derives its revenue from
the sale of timber and agricultural products produced on its farm and tea estate holdings in South Africa. Revenue is recognized
when the product is delivered to the customer. Once production of the Company’s Phytofare™ botanical extracts commences
in 2014, revenues will be recognized when product is shipped.
Concentration of Credit Risk
The Company has no significant off-balance
sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.
Property and equipment
Property and equipment are stated at cost less
accumulated depreciation and amortization. The Company provides for depreciation and amortization using the straight-line
method over the estimated useful lives of the related assets, which range from three to five years.
Maintenance and
repair costs are expensed as they are incurred while renewals and improvements which extend the useful life of an asset are capitalized. At
the time of retirement or disposal of property and equipment, the cost and related accumulated depreciation and amortization are
removed from the accounts and any resulting gain or loss is reflected in the results of operations.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360, formerly
SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets,
the Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable.
The assessment of possible impairment is based on the Company’s ability to recover the carrying value of its assets based
on estimates of its undiscounted future cash flows. If these estimated future cash flows are less than the carrying value of the
asset, an impairment charge is recognized for the difference between the asset's estimated fair value and its carrying value. As
of the date of these financial statements, the Company is not aware of any items or events that would cause it to adjust the recorded
value of its long-lived assets for impairment.
Earnings per Share
Basic gain or loss per share has been computed
by dividing the loss for the period applicable to the common stockholders by the weighted average number of common shares outstanding
during the years. At March 31, 2014, the Company had one convertible debenture outstanding that if-converted would result in 673,741
new common shares being issued. At June 30, 2013, the Company had one convertible debenture outstanding that if-converted would
result in 340,984 new common shares being issued.
Income Taxes
The Company accounts for income taxes under
ASC Topic 740, formerly SFAS No. 109,
Accounting for Income Taxes,
as clarified by ASC Topic 740, formerly FASB Interpretation
No. 48,
Accounting for Uncertainty in Income Taxes,
(“FIN No. 48”). Deferred tax assets and liabilities are
determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided
when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company adopted the provisions of ASC Topic
740, formerly FIN No. 48 on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement
of Financial Accounting Standards No. 5,
Accounting for Contingencies.
As required by ASC Topic 450, formerly FIN No. 48,
the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold,
the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being
realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied ASC Topic 740, formerly
FIN No. 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC Topic
740, formerly FIN No. 48, the Company did not recognize any change in the liability for unrecognized tax benefits.
The Company is subject to income taxes in the
U.S. federal jurisdiction and that of South Africa. Tax regulations within each jurisdiction are subject to the interpretation
of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer
subject to U.S. federal, state and local income tax examinations by tax authorities for the years before April 1, 2007.
The Company is not currently under examination
by any federal or state jurisdiction.
The Company’s policy is to record tax-related
interest and penalties as a component of operating expenses.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Emerging Growth Company
We qualify as an “emerging
growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage
of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.
Fair Value of Financial Instruments
Fair value of certain of the Company’s
financial instruments including cash and cash equivalents, accounts receivable, account payable, accrued expenses, notes payables,
and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in
accordance with ASC 820, “Fair Value Measurements and
Disclosure” defines fair value, establishes
a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about
fair value investments.
Fair value, as defined in ASC 820, is the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or
most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the
risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified
into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or
more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability,
and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use
of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting
measurement as follows:
Level 1
Quoted prices (unadjusted) in active markets
that are accessible at the measurement date for identical assets or liabilities; The Company values it’s available for sale
securities using Level 1.
Level 2
Quoted prices for similar assets or liabilities
in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than
quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable
market data for substantially the full term of the assets or liabilities; and
Level 3
Unobservable inputs for the asset or liability
that are supported by little or no market activity and that are significant to the fair values.
Fair value measurements are required to be
disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value
measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including
a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following:
(i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and
a description of where those gains or losses included in earning are reported in the statement of income.
Advertising
Advertising costs are expensed as incurred.
Principles of Consolidation
Plandaí Biotechnology, Inc. and its
subsidiaries, are encompassed in the following entities, which have been consolidated in the accompanying financial statements:
|
Cannabis Biosciences, Inc.
|
100% owned
by Plandaí Biotechnology, Inc.
|
|
|
Phyto Nutricare, Inc.
|
100% owned
by Plandaí Biotechnology, Inc.
|
|
|
Phyto Pharmacare, Inc.
|
100% owned
by Plandaí Biotechnology, Inc.
|
|
|
Dunn Roman Holdings—Africa, Ltd
|
100% owned
by Plandaí Biotechnology, Inc.
|
|
|
Breakwood Trading 22 (Pty) Ltd.
|
74%
owned by Dunn Roman Holdings-Africa
|
|
|
Green Gold Biotechnologies (Pty) Ltd.
|
84%
owned by Dunn Roman Holdings-Africa
|
|
During the year ended June 30, 2013, the Company
determined that the entity, Global Energy Solutions, was unnecessary to operations and decided to dissolve that corporation, resulting
in the stock of Dunn Roman Holdings-Africa being held directly by Plandaí. All liabilities were either satisfied or forgiven
and all bank accounts closed. There were no operations in Global Energy Solutions during the periods presented. Global Energy Solutions
was officially dissolved during the year ended June 30, 2013.
All intercompany balances have been eliminated
in consolidation.
Straight-lining of Lease Obligation
Plandaí’s subsidiaries have two
long-term, material leases which either have escalating terms or include several months of “free” rent, including the
49-year notarial lease for the Senteeko Tea Estate. In accordance with US Generally Accepted Accounting Principles, the Company
has calculated a straight-line monthly cost on the leases and recorded the corresponding difference between the amount actually
paid and the amount calculated as a Capitalized Lease Obligation. As of March 31, 2014, the amount of this deferred liability was
$1,290,341..
Recent Accounting Pronouncements
Recent accounting pronouncements that the Company
has adopted or that will be required to adopt in the future are summarized below.
All recent accounting pronouncements issued
by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have
a material impact on the Company's present or future financial statements.
NOTE 3 –LOANS FROM RELATED PARTIES
As of March 31, 2014, the Company had an outstanding
loans from a director in the amount of $12,186, which represented unpaid reimbursement of office expenses, including rent, from
prior periods. During the quarter ended March 31, 2014, the company converted $482,958 payable to the Company’s Chief Executive
Officer into 2,036,000 shares of restricted common stock, which represented the fair value of the shares on the date of conversion.
NOTE 4 - LINE OF CREDIT
During the year ended June 30, 2012, the company
entered into a line of credit agreement for $500,000 which was later increased to $1,000,000. The line of credit matures on January
5, 2014 and bears interest at the rate of ten percent (10%) per annum. As of December 31, 2013, the balance drawn down on the credit
line was $777,503 and accrued interest was $104,997. On December 31, 2013, the company converted the balance outstanding plus accrued
interest into 5,000,000 shares of restricted common stock.
NOTE 5 – DEBENTURE PAYABLE
In May 2013, the Company issued an 8% interest
rate convertible debenture in the amount of $103,500 which becomes due and payable in February 2014. The debenture is convertible
into common stock of the Company at a discount of 42% off the market price of the Company’s common stock six months after
issuance (November 2013). The Company repaid the debenture in full on November 11, 2013.
On August 20, 2013, the Company executed two
convertible promissory notes totaling $550,000. The notes bear interest at the rate of 8% per annum and become due and payable
six months from the date of issuance. During the first 90 days from issuance, the notes are repayable without incurring any interest
charges. The Company was advanced $210,000 against the two notes. During the quarter ended March 31, 2014, $149,729 of the unpaid
principal plus accrued interest was converted into 2,717,035 shares of restricted common stock.
On November 13, 2013, the Company executed
a convertible promissory note of $113,500, which included prepaid interest of $10,000. The note bore interest at 10% per annum
and was due and payable twelve months from the date of issuance. At the holder’s option, the
unpaid principal and interest was convertible into common stock at a 42% discount to market after six months. During the quarter
ended March 31, 2014, the Company repaid the debenture and all associated interest.
The Company has recorded a derivative liability
of $352,120 as of March 31, 2014 representing the estimate value of the shares over and above the amount of debentures that would
be issued on conversion. During the nine months ended March 31, 2014, the Company recorded $2,086,436 as derivative interest expense
which was then offset against additional paid in capital when the debentures were converted.
NOTE 6 – LONG-TERM DEBT
In June 2012, the Company, through the majority-owned
subsidiaries of Dunn Roman Holdings, Inc., executed final loan documents on a 100 million Rand (approx. $13 million USD) financing
with the Land and Agriculture Bank of South Africa. The total loan is comprised of multiple agreements totaling, between Green
Gold Biotechnologies (Pty) Ltd. and Breakwood Trading 22(Pty) Ltd., 100 million rand. The loans all bear interest at the rate of
prime plus 0.5% per annum and are all due in seven years. In addition, the loans have a 25-month “holiday” in which
no payments or interest are due until 25 months after the first drawn down of funds. The loans are collateralized by the assets
and operations, including the Senteeko lease, agriculture production and receivables of Dunn Roman Holdings, which is the African
operating arm of Plandaí. In addition, Dunn Roman Holdings was required to grant a 15% profit share agreement to the Land
Bank which extends through the duration of the loan agreements (7 years unless pre-paid). The profit share agreement extends only
to profits generated by Dunn Roman Holdings exclusive of operations of Plandaí and outside of South Africa. By way of loan
covenants, the borrowing entities are required to maintain a debt to equity ratio of 1.5:1, interest coverage ratio of 1.5:1, and
security coverage ratio of 1:1. The Company notified the Land Bank that these covenants have been out of compliance since the inception
of the loan and subsequently received a letter from the Land Bank which suspends these loan covenants.
As of March 31, 2014, a total of $8,414,166
had been drawn down against the loans by Green Gold Biotechnologies (Pty) Ltd., which was used to purchase fixed assets that will
be employed in South Africa to produce the company’s botanical extracts. Additionally, $2,327,479 had been drawn down against
the loans by Breakwood Trading22 (Pty) Ltd. to fund the rehabilitation of the Senteeko Tea Estate, including the repair of roads,
bridges, and onsite worker housing, and the pruning, weeding and fertilizing of plantation.
During the year ended June 30, 2012, the Company
issued 1,500,000 shares of restricted common stock to three individuals in exchange for shares of Dunn Roman Holdings stock which
had been previously issued. The acquired Dunn Roman shares were then provided to thirds parties in order to comply with the BEE
provisions associated with the loan from the Land Bank of South Africa, which required that 15% of Dunn Roman be black owned. The
Company has therefore determined to treat the value of the shares issued to acquire the Dunn Roman stock ($585,000) as a cost of
securing the financing and recorded as a loan discount which will be amortized over the life of the loan (7 years) once payment
of the loan commences in July 2014.
As of March 31, 2014, the loan balance was:
|
Loan Principal
|
|
$
|
10,741,645
|
|
|
Less: Discount
|
|
|
585,000
|
|
|
|
|
|
|
|
|
Net Loan per Books
|
|
$
|
10,156,645
|
|
|
|
|
|
|
|
During the quarter ended December 31, 2013, the company borrowed
$250,000 from an unrelated third party. The note bears interest at 6% per annum and is due June 30, 2015. During the quarter ended
March 31, 2014, the company borrowed and additional $950,000 from this same entity and under identical terms.
NOTE 7 – CURRENCY ADJUSTMENT
The Company’s principal operations are
located in South Africa and the primary currency used is the South African Rand. Accordingly, the financial statements are first
prepared in using Rand and then converted to US Dollars for reporting purposes, with the average conversion rate being used for
income statement purposes and the closing exchange rate as of March 31, 2014 applied to the balance sheet. Differences resulting
from the fluctuation in the exchange rate are recorded as an offset to equity in the balance sheet.
As of March 31, 2014, the cumulative currency translation adjustments were $311,115.
NOTE 8 – FIXED ASSETS
Fixed assets, stated at cost, less accumulated
depreciation at March 31, 2014 consisted of the following:
|
|
|
March 31,
2014
|
|
|
|
|
|
|
|
Total Fixed Assets
|
|
$
|
9,138,608
|
|
|
Less: Accumulated Depreciation
|
|
|
(244,922
|
)
|
|
|
|
|
|
|
|
Fixed Assets, net
|
|
$
|
8,893,686
|
|
|
|
|
|
|
|
Depreciation expense
Depreciation expense for the three and nine
months ended March 31, 2014 was $43,744 and $142,808, respectively.
NOTE 9 – COMMON STOCK
During the nine months ended March 31, 2014, the Company engaged
in the following common stock transactions:
|
|
·
|
A total of 1,230,033 shares of restricted common stock were issued in exchange for proceeds
of $615,000.
|
|
|
·
|
A total of 250,000 shares that had been issued in prior periods for services previously rendered
were cancelled.
|
|
|
·
|
A total of 5,000,000 shares of restricted common stock were issued
in satisfaction of a credit line and accrued interest totaling $882,500.
|
|
|
·
|
A total of 2,717,035 shares of restricted common stock were issued
in satisfaction of convertible debentures and associated interest totaling $149,729.
|
|
|
·
|
A total of 2,036,0000 shares of restricted common stock were issued
in satisfaction of a note payable of $499,797 to the company’s Chief Executive Officer.
|
|
|
·
|
A total of 9,380,000 shares of restricted common stock were issued
for services previously rendered, which included $261,000 in services from the prior year which had been recorded as Stock Subscription
Payable as of June 30, 2013.
|
|
|
·
|
A total of 1,100,000 shares of restricted common stock were issued
to acquire 15% interest in Dunn Roman Holdings and 10% interest in Green Gold Biotechnologies, both of which were, at the time
of the transaction, majority owned subsidiaries of the Company.
|
|
|
·
|
On February 4, 2014, the Company closed on an agreement to acquire
the license to the intellectual property and trade name associated with “Diego Pellicer.” Under the terms of the agreement,
the Company granted warrants to purchase 5,000,000 shares of the Company’s stock at a purchase price of $0.01 per share.
|
|
|
·
|
On February 4, 2014, the Company executed an stock purchase agreement
in the amount of $15,300,000 which permits the Company to sell shares, at its option generally based on current market prices for
the 30 month period commencing upon the execution of the stock purchase agreement, subject to the registration of resale of the
underlying shares with the Securities and Exchange Commission. The Company received $300,000 in proceeds under the agreement in
exchange for 480,000 shares of restricted common stock sold upon the execution of the stock purchase agreement. An additional 540,000
shares of restricted common stock were issued as consideration for executing the Agreement. The value of the shares on the date
of issuance, $459,000, has been treated as financing costs
.
|
NOTE 10 – NON-CONTROLLING INTEREST
Plandaí owns 100% of Dunn Roman Holdings—Africa,
which in turn owns 74% of Breakwood Trading 22 (Pty), Ltd. and 84% of Green Gold Biotechnologies (Pty), Ltd., in order to be compliant
with the Black Economic Empowerment rules imposed by the South African Land Bank. While the Company, under the Equity Method of
Accounting, is required to consolidate 100% of the operations of its majority-owned subsidiaries, that portion of subsidiary net
equity attributable to the non-controlling ownership, together
with an allocated portion of net income or net loss incurred by the subsidiaries, must be reflected on the consolidated financial
statements. On the balance sheet, non-controlling interest has been shown in the Equity Section, separated from the equity of Plandaí,
while on the income statement, the non-controlling shareholder allocation of net loss has been shown in the Consolidated Statement
of Operations.
NOTE 11 – CAPITALIZED LEASE OBLIGATIONS
In February 2012, the Company entered into
a long-term (49 year) lease of tea, avocado, macadamia and timber plantation estates totaling roughly eight thousand acres in South
Africa. Under the terms of the lease, the Company is required to pay annual rent of R250,000 ($30,000) plus an annual dividend
of 26% of net income generated from the use of the property with a R500,000 ($60,000) annual minimum dividend. The first payment
of R20,883 ($2,610) was due April 2012, but by mutual agreement this payment was extended until funding is received under the loan
from the Land Bank of South Africa. On March 1, 2012, the Company entered into a 10 year lease for office space for its subsidiary
Dunn Roman Holdings. Under the terms of the lease, payments are $2,500 a month.
Both of these leases either have escalating
terms or included several months of “free” rent, including the 49-year notarial lease for the Senteeko Tea Estate.
In accordance with US Generally Accepted Accounting Principles, the Company has calculated a straight-line monthly cost on the
leases and recorded the corresponding difference between the amount actually paid and the amount calculated as a Capitalized Lease
Obligation. As of March 31, 2014, the amount of this deferred liability was $1,290,341.
NOTE 12 – RELATED PARTY TRANSACTION
In addition to the loans payable and receivables
as discussed above, the Company had the following related party transactions during the nine months ended March 31, 2014.
Compensation to Officers and Management
Pursuant to three employment agreements executed
on March 1, 2013 by the Company with two of its officers and one manager, the Company is also obligated to issue 4,000,000 common
shares at the end of each completed year for services rendered to the Company. The Company valued the 4,000,000 shares at the closing
stock price on the date of the executed agreement which was $0.06 per share. At December 31, 2013, the Company accrued compensation
expense for services completed in the amount of $1,056,600, which was been recorded as Stock Subscription Payable. In January 2014,
the Company issued a total of 8,000,000 shares of common stock under these agreements to satisfy its obligations for the service
years ended March 1, 2013 and March 31 2014.
NOTE 13 – SUBSEQUENT EVENTS
Management has evaluated subsequent events
pursuant to the requirements of ASC Topic 855 and has determined that no material subsequent events exist through the date of this
filing.