GSTX 10-Q
Graphene & Solar Technologies Ltd (GSTX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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GRAPHENE & SOLAR TECHNOLOGIES LIMITED
FORM 10-Q
TABLE OF CONTENTS
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Condensed Consolidated Balance Sheets (Unaudited) | 3 |
| Item 2. | Condensed Consolidated Statements of Operations (Unaudited) | 4 |
| Item 3. | Condensed Consolidated Statement of Stockholders’ Deficiency (Unaudited) Three Months Ended December 31, 2021 and 2020 | 5 |
| Item 4. | Condensed Consolidated Statements of Cash Flows (Unaudited) | 6 |
| Item 5. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 11 |
| Item 6. | Controls and Procedures. | 14 |
| PART II OTHER INFORMATION | 16 | |
| Item 1 | Legal Proceedings | 16 |
| Item 1A | Risk Factors | 16 |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 16 |
| Item 3 | Defaults on Senior Securities | 16 |
| Item 4 | Mine Safety Disclosures | 16 |
| Item 5 | Other Information | 16 |
| Item 6. | Exhibits. | 16 |
| SIGNATURES | 17 | |
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GRAPHENE & SOLAR TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| December 31, | September 30, | |||||||
| 2021 | 2021 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other receivable | ||||||||
| Total Current Assets | ||||||||
| Other Assets: | ||||||||
| Furniture and equipment, net of depreciation $ | ||||||||
| Intellectual property – at cost, net of amortization | ||||||||
| Other intangible assets – at cost | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and other payable | $ | $ | ||||||
| Accrued interest payable | ||||||||
| Due to related party | ||||||||
| Notes payable – in default | ||||||||
| Convertible notes payable, net of discount $ | ||||||||
| Other loans and payables | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock: shares authorized; $ par value; shares issued and outstanding | ||||||||
| Common stock: shares authorized; $ par value; and shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Stock Receivable | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Deficit | ||||||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GRAPHENE & SOLAR TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ending December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues | $ | $ | ||||||
| Operating expenses | ||||||||
| Professional Services | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Other income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net Income (Loss) | ( | ) | ( | ) | ||||
| Other Comprehensive Income | (9,246 | ) | (82,637 | ) | ||||
| Net Comprehensive Loss | $ | ( | ) | $ | ( | ) | ||
| Income (Loss) per share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GRAPHENE & SOLAR TECHNOLOGIES LIMITED
(Formerly Solar Quartz Technologies Corporation)
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(Unaudited)
Three Months Ended December 31, 2021 and 2020
| Accumulated | Total | |||||||||||||||||||||||||||
| Common Stock | Additional | Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Paid-in | Receivable | Deficit | Income | Deficit | ||||||||||||||||||||||
| Balance, September 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares issued in connection with the sale of common stock | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Accumulated | Total | |||||||||||||||||||||||||||
| Common Stock | Additional | Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Paid-in | Receivable | Deficit | Income | Deficit | ||||||||||||||||||||||
| Balance, September 30, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares issued in connection with the sale of common stock | ||||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GRAPHENE & SOLAR TECHNOLOGIES Limited
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three-Month Period Ended December 31, 2021 and 2020
(Unaudited)
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net Income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income/(loss) to net cash from operating activities: | — | — | ||||||
| Stock-based compensation | ||||||||
| Depreciation expense | ||||||||
| Amortization of intangibles | ||||||||
| Amortization of discount | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued interest payable | ||||||||
| Pre-Payments | ( | ) | ||||||
| Other receivable | ( | ) | ||||||
| Due to related parties | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Due to Affiliates | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Issuance of short term note payable, net of OID | ||||||||
| Net cash from financing activities | ||||||||
| Effect of currency translations to cash flow | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
| Supplemental cash flow information | Quarter ended December 31, | |||||||
| 2021 | 2020 | |||||||
| Interest paid | $ | $ | ||||||
| Taxes | ||||||||
| Noncash investing and financing activities: | ||||||||
| Debt discount | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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GRAPHENE & SOLAR TECHNOLOGIES Limited
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’s audited financial statements as of September 30, 2021.
Going Concern – The Company has incurred
cumulative net losses since inception of $
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 subsidiary. 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.
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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 December 31, 2021 and September 30, 2021, the Company had $4,789 and $3,728 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 December 31, 2021. Therefore, no derivative liabilities were recorded during the quarter ended December 31, 2021.
During the quarter ended December 31, 2021,
the Company issued 18,386,364 shares of the Company’s common stock to members of the Board of Directors, employees and consultants.
The fair value of the shares, as determined by reference market price of the Company’s common stock on each grant date, aggregated
$
During the quarter ended December 31, 2020, the Company issued 3,100,000 shares of the Company’s common stock to members of the Board of Directors, employees and consultants. The fair value of the shares, as determined by reference market price of the Company’s common stock on each grant date, aggregated $405,000.
Total stock-based compensation expense was
$
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.
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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 December 31, 2021 and September 30, 2021 were as follows:
| Description | December 31, 2021 | September 30, 2021 | ||||||
| Convertible notes | $ | $ | ||||||
| Notes Payable | $ | $ | ||||||
| Other loans | ||||||||
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 December 30, 2021 and September 30, 2021, the total promissory notes payable balance was $98,222 and $96,710 including accrued interest of $38,222 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 $5,811. The loan is a demand note at zero interest.
Convertible Notes Payable
As of December 31, 2021 and September 30, 2021, noteholders representing $70,747 in outstanding principal had not requested the exchange of shares of common stock. As of December 31, 2021 and September 30, 2021, the exchange obligation payable was $160,960 and $158,285 including accrued interest of $90,213 and $87,538, respectively. As of December 31, 2021 and September 30, 2021, the exchange obligation was for 48,628 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 December 31, 2021 and September 30, 2021, the total convertible note payable balance was $47,753 and $46,997, including accrued interest of $17,753 and $16,997 respectively. As of December 31, 2021 and September 30, 2021, the exchange obligation was for 95,507 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 matured 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 $5,151.
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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 $50,914 (US). During the three months ended Dec 31, 2021 and 2020, the Company incurred charges to operations of $50,914 (US) and $50,914 (US), respectively, with respect to this arrangement.
As of December 31, 2021 and September 30, 2021, accrued
expenses due to PGRNZ and other related parties was $
During
December 2021, the Company approved and issued shares ($
During
the quarters ended December 31, 2021 and 2020, stock-based compensation expense relating to directors, officers, affiliates and related
parties was $
NOTE 5 – STOCKHOLDERS’ EQUITY
Common shares were issued resulting in an increase
to capital stock of $196 and an increase to Additional Paid-in Capital of $
NOTE 6 – 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.
| December 31, 2021 | September 30, 2021 | |||||||
| Patents | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Total patent costs, net | ||||||||
NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated events occurring subsequent to December 31, 2021 through to the date these financial statements were issued and has identified no additional events requiring disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q.
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
FORWARD LOOKING STATEMENTS
The information contained in this Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties, including among other things, statements regarding our capital needs, business strategy and expectations. Any statement which does not contain a historical fact may be deemed to be a forward-looking statement. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating forward looking statements, you should consider various factors outlined in our Form 10-K report for the year ended September 30, 2021, filed with the U.S. Securities Exchange Commission (“SEC”) and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these statements or disclose any difference between our actual results and those reflected in these statements.
Overview
We are primarily focused on the early development of new graphene enabled photovoltaic solar modules, including graphene enabled covered thin-film solar panels. In this production initiative, we entered into a non-binding Letter of Intent for a joint venture with NanoGraphene, Inc. (doing business as GrapheneCA), a New York based manufacturer with five years’ experience in the manufacture of pure graphene and of the development of newly evolving graphene enhanced high-tech applications, to jointly develop graphene enhanced solar solutions. Of substantial importance, the principal of GrapheneCA has twelve years of experience in the design, construction and establishment of numerous thin film solar production factories through-out the U.S., Europe and Asia. As of September 30,2021, the joint venture has not been formed nor have there been any operations related to the joint venture.
The development of graphene enhanced combination silicon materials is currently one of the most intensive areas of research and development, attracting major interests from most world University research divisions and new technology players. Massachusetts Institute of Technology has actually manufactured graphene solar panels.
US Thin-Film Corporation (USTFC) was registered in April 2021 in the State of Nevada USA as a wholly owned subsidiary of Graphene & Solar Technologies Limited. On August 23 2021, the Company closed a Share Sale and Purchase Agreement through its wholly owned subsidiary, US Thin-Film Corporation with CIMA Nanotech Holdings Limited, “CNHL”, (a Cayman Island Registered company) to acquire its wholly owned subsidiary company Cima Specialty Materials Ltd and its wholly owned subsidiary companies, one of which holds the valuable portfolio of patents.
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The portfolio includes several unique and specialised patents, patent applications and new inventions. They cover proprietary transparent conductive thin-film patented technologies from (1) basic manufacturing, (2) chemical formulation, (3) coating processes,(4) final product construct, to (5) transparent conductive thin film technology. Confirming the acquired patent assets as being extremely valuable for US Thin-Film Corporation and its parent, GSTX.
Operational Overview.
GRAPHENE - HIGH PURITY MANUFACTURING – This facility will focus on establishing high efficiency and volume graphene production facilities to achieve high-quality, eco-friendly, and scalable graphene production in 2022/3. This initial factory will produce 1.5 tonnes per month (expanding to 12 tonnes +) of medical grade and industrial graphene suitable for applications such as cement 3D printing resin- coatings, epoxy resins and composites, as well as high-end medical connections of brain stem cells and lenses.
GREEN HYDROGEN PRODUCTION & AMBIENT AIR – WATER HARVESTING - Water scarcity is at the center of the world’s most significant challenges. The United Nations estimates approximately 30% of the world’s population will face severe water shortages by 2025. Management of the Company has developed a unique proprietary water harvesting technology utilizing modular, self-contained units that can be solar or grid powered, and deployed in urban and rural environments. The water harvester will extract moisture from the ambient air and collect as 100% pure fresh water. Each domestic water harvester will be capable of generating 30-50 liters (8-13 gal) of pure fresh water per day for personal use, with commercial models collecting up to 50,000 liters (13,000 gal) initially per day. The 100% pure H20 extracted from the atmosphere is also the perfect feed stock for the extraction of pure green hydrogen which is also planned as a major production initiative of a production facility complex.
Graphene Material.
Graphene, a new material, was discovered in 2004 by two UK based Russian university professors who were awarded the Nobel Prize in 2010 for their discovery. Graphene is a 2D material, (one atom thickness) made from graphite/carbon atoms, and whilst still largely unknown to the world is rapidly becoming a new industrial revolution in its own right with more than 8,800 patent applications for graphene and graphene enabled product applications having been filed recently. We have taken an early-stage leading-edge position in this evolving new technological field of graphene enabling and enhancement, specifically to focus upon development of graphene enabled photovoltaic solar panels. Subject to available capital we plan to work with GrapheneCA and other graphene developers to develop a new range of graphene enhanced thin-film solar module associated applications.
Graphene is the world’s thinnest and strongest material ever, with remarkable electrical, thermal and optical properties being the most conductive material ever scientifically measured. A sheet of graphene material is only one single atom in thickness and is referred to as a 2D nano-material having almost no measurable depth, only length and width. Graphene is also highly transparent and can be easily flexed and stretched 25% of its size without breaking. However, it is also 200 times stronger than steel and harder than a diamond. It is said that it would take the weight of an elephant balanced on a needlepoint to break through a single one-atom thick graphene sheet. Graphene material is completely impermeable, even a helium atom (the smallest) cannot pass through graphene. The advent of graphene and the introduction of the extraordinary benefits from combining graphene with existing solar industry materials to thereby create an entirely new range of solar grade materials with dramatically increased attributes and properties not previously believed possible before the advent of graphene is therefore of vital importance to the company.
Our main focus remains dedicated to our original premise of developing new leading-edge technologically advanced solar materials and applications, many of which when combined with graphene will ultimately expand the horizons of what is now possible relevant to the generating capacity of solar panels to sensitivity levels not achievable before the invention of graphene. Researchers have already established that the combination of graphene with existing solar materials and solar panel applications can increase the generating efficiency for conventional solar panels from 10%-12% sensitivity in thin-film solar applications, to recently achieved 17% -22% plus.
Subject to available funding this combination of existing solar industry materials, and silicon combined with graphene will also greatly benefit our company in ultimately achieving our sales revenues and profitability targets for the benefit of our stockholders.
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There are thousands of additional unique attributes and properties that make graphene a highly versatile material wit seemingly amazing properties similar to no material other with significant undeveloped potential. The number and variations of possible applications is virtually limitless, including graphene solar panels, graphene super capacitors (game changing graphene batteries that can recharge 5 to 10 times more quickly) than lithium-ion batteries, and cost-effective highly efficient water filtration and purification systems. Researchers have demonstrated graphene-based transistors, flexible networks, quantum dots, spintronic devices, integrated circuits and semiconductor as well as DNA sequencers and drug delivery applications. Adding 1% graphene to plastic makes it electronically conductive.
Results of Operations
For the fiscal quarters ended December 31, 2021 and December 31, 2020 we generated no revenues, and thus no cost of sales or gross profits.
For the fiscal quarters ended December 31, 2021 and December 31, 2020, we incurred $12,834,847 and $627,100, respectively, in operating expenses.
For the fiscal quarter ended December 31, 2021 we recorded other expenses of $20,593 while in the fiscal quarter ended December 31, 2020 we incurred expenses of $14,276 both items are represented by accrued interest on debt. Other income of $4,682 was earned in the fiscal quarter, December 31, 2021 and $2,191 in fiscal quarter, December 31, 2020.
For the fiscal quarter ended December 31, 2021, we reported net loss of $12,850,758 while in the fiscal quarter ended December 31, 2020, we reported a net loss before taxes of $639,185.
For the periods ended December 31, 2021 and September 30, 2021, our cash positions were $4,789 and $3,728 respectively.
As of December 31, 2021, we had total current liabilities of $3,725,404 while as of September 30, 2021, we had total current liabilities of $3,539,553, an increase of about 5%. Accrued interest payable increased from $154,412 to $161,061 on notes and other loans payable that decreased from $6,383 to $5,677 other accounts payable and related party debt that increased from $947,826 to $1,040,838 during the period.
Liquidity and Capital Resources
As of December 31, 2021, we had $25,766 in current assets and $3,725,404 in current liabilities. Accordingly, we had a working capital deficit of $3,699,638.
Operating activities used $44,949 for the quarter ended December 31, 2021, as compared to $113,232 for the quarter ended December 31, 2020.
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Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
For a discussion of our accounting policies and related items, please see the Notes to the Financial Statements, included in Item 1.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive and Interim Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive [and Financial Officer], or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020, based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”).
As of period covered by this Quarterly Report on Form 10-Q, we have concluded that our internal control over financial reporting was ineffective. The Company’s assessment identified certain material weaknesses which are set forth below:
Functional Controls and Segregation of Duties
Because of the Company’s limited resources, there are limited controls over information processing.
There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible.
Accordingly, as the result of identifying the above material weakness we have 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.
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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of our Principal Executive and Financial Officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.
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.
Roger May, our Principal Executive Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework (2013). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management has addressed the underlying causes for our weaknesses in internal control since early FY 2020. Our efforts to raise both debt and equity capital soon will allow us to undertake additional engagement of external independent consultants to assist with the processing of data and drafting financial reports on a timely basis in future reporting periods.
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PART II
ITEM 1. LEGAL PROCEEDINGS
The are no legal proceedings at the date of this filing. Legal guidance only has been sought in relation the mining leases as referenced above under Current Business & Operations section.
ITEM 1A. RISK FACTORS
Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our annual report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Please see Note 5 to our Financial Statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GRAPHENE & SOLAR TECHNOLOGIES LIMITED | ||
| Date: July 29, 2022 | By: | /s/ Roger May |
| Chief Executive Officer and Director | ||
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