Company Quick10K Filing
Visium Technologies
Price0.00 EPS-0
Shares190 P/E-0
MCap0 P/FCF-0
Net Debt-0 EBIT-1
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
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VISM 10K Annual Report

Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
Item 13. Certain Relationship and Related Party Transactions, and Director Independence.
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Note 1: Organization, Description of Business and Going Concern
Note 2: Summary of Significant Accounting Policies
Note 3: Derivative Liability
Note 4: Convertible Notes Payable and Note Payable
Note 5: Obligations To Asc Recap, Llc
Note 6: Settlement with Ibc Funds, Llc
Note 7: Stockholders' Deficit
Note 8: Income Taxes
Note 9: Related Party Transactions
Note 10: Subsequent Events
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Visium Technologies Earnings 2015-06-30

Balance SheetIncome StatementCash Flow
0.10.10.0-0.0-0.1-0.12012201420172020
Assets, Equity
0.10.10.0-0.0-0.1-0.12012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

10-K 1 form10-k.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

 

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

 

For the fiscal year ended June 30, 2015

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to _________.

 

Commission file number 000-25753

 

NUSTATE ENERGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Florida   87-0449667
(State of Incorporation)   (IRS Employer
Identification No.)

 

401 E. LAS OLAS BOULEVARD, SUITE 1400

FORT LAUDERDALE, FL 33301

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (954) 712-7487

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] 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 [  ] 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 [  ]

 

Indicate by check mark whether the registrant 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

 

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, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  Large accelerated filer [  ] Accelerated filer [  ]
     
  Non-accelerated filer [  ] Smaller reporting company [X]
  (Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

The aggregate market value of the common equity voting shares of the registrant held by non-affiliates on December 31, 2014 was $746,757, at a share price of $0.0005 on that date. For purposes of this calculation, an aggregate of xxx shares of Common Stock were held by non-affiliates of the registrant on December 31, 2014 and have been included in the number of shares of Common Stock held by affiliates.

 

The number of the registrant’s shares of Common Stock outstanding as of April 5, 2016: 7,717,954,802

 

In this Annual Report on Form 10-K, the terms the “Company,” “NuState,” “we,” “us” or “our” refers to Nustate Energy Holdings, Inc., unless the context indicates otherwise.

 

 

 

 
 

 

WARNING CONCERNING FORWARD LOOKING STATEMENTS

 

CERTAIN STATEMENTS IN THIS ANNUAL REPORT CONTAIN OR MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED UTILIZING NUMEROUS ASSUMPTIONS AND OTHER FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, OUR ABILITY TO IMPLEMENT OUR BUSINESS MODEL, RAISE SUFFICIENT CAPITAL TO FUND OUR OPERATING LOSSES AND PAY OUR ONGOING OBLIGATIONS, ECONOMIC AND MARKET CONDITIONS AND FLUCTUATIONS, GOVERNMENT AND INDUSTRY REGULATION, COMPETITION, AND OTHER FACTORS. MOST OF THESE FACTORS ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. YOU SHOULD CONSIDER THE AREAS OF RISK DESCRIBED IN CONNECTION WITH ANY FORWARD-LOOKING STATEMENTS THAT MAY BE MADE HEREIN. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS AND READERS SHOULD CAREFULLY REVIEW THIS ANNUAL REPORT IN ITS ENTIRETY, INCLUDING THE RISKS DESCRIBED IN PART I. DESCRIPTION OF BUSINESS - RISK FACTORS. EXCEPT FOR OUR ONGOING OBLIGATIONS TO DISCLOSE MATERIAL INFORMATION UNDER THE FEDERAL SECURITIES LAWS, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO ANY FORWARD-LOOKING STATEMENTS, TO REPORT EVENTS OR TO REPORT THE OCCURRENCE OF UNANTICIPATED EVENTS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND YOU SHOULD NOT RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE RISKS AND UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS.

 

2
 

 

NUSTATE ENERGY HOLDINGS, INC.

2015 ANNUAL REPORT ON FORM 10-K

 

Table of Contents

 

PART I 4
   
Item 1. Business 4
   
Item 1A. Risk Factors 4
   
Item 1B. Unresolved Staff Comments 6
   
Item 2. Properties 6
   
Item 3. Legal Proceedings 6
   
Item 4. Mine Safety Disclosures 6
   
PART II 6
   
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 6
   
Item 6. Selected Financial Data 6
   
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 7
   
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
   
Item 8. Financial Statements and Supplementary Data 11
   
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 12
   
Item 9A. Controls and Procedures 12
   
Item 9B. Other Information 12
   
PART III 13
   
Item 10..Directors, Executive Officers and Corporate Governance 13
   
Item 11. Executive Compensation 14
   
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters 15
   
Item 13. Certain Relationship and Related Party Transactions, and Director Independence 15
   
Item 14. Principal Accountant Fees and Services 16
   
PART IV 17
   
Item 15. Exhibits and Financial Statement Schedules 17

 

3
 

 

PART I

 

Item 1. Business

 

Overview

 

NuState Energy Holdings, Inc. is a technology company specializing in providing pertinent, real-time information to the worldwide transportation and security industries. NuState’s proprietary software, GPSTrax, is built on an Open Architecture platform for the logistics and telematics industries.

 

We believe there are many opportunities to leverage and monetize our software technology by licensing it to companies that provide green technology solutions to medium and large logistics companies. In November 2014, NuState Energy Holdings, Inc. signed a definitive agreement with The Ronn Motor Group, with offices in Dalian, China and the United States, to license and market GPSTrax in China and other international markets.

 

NuState is launching a new GPSTrax Value-Added Reseller (VAR) Program, focusing on opportunities in consumer-based solutions such as asset tracking. The VAR Program will increase awareness, availability and support of the GPSTrax solution at a time when a growing number of companies are looking to update and optimize their solutions. We expect to generate revenues from this Program during fiscal 2016.

 

Our software technology provides validation and verification of fuel cost consumption reporting and fuel tax credits to logistics companies. The software also is designed to document the exact amount of reduction of harmful emissions that results from the alternative energy products. This data will enable users in certain countries to generate emissions credits that are tradable under the protocol of the Kyoto Treaty.

 

Through our existing relationships in the country of Suriname, NuState is evaluating several projects in the alternative renewable energy market in Suriname. NuState has been in discussions with AMPS, NV (“AMPS”), based in Paramaribo, Suriname, to enter into a license agreement with its partner, The Ronn Motor Group, in relation to the purchase of GPSTrax© for their multi-million dollar alternative energy projects. AMPS focuses on providing engineering, procurement and construction management (EPC) services, Power Transmission & Distribution, Renewable and Conventional Energy as well as Power Management Systems to Suriname and its fellow Caribbean Community members.

 

Employees

 

At April 8, 2016, we had 2 full time employees.

 

Our principal offices are located at 401 E. Las Olas Boulevard, Suite 1400, Fort Lauderdale, FL 33301. Our telephone number is (954) 712-7487.

 

Our common stock is quoted on the OTC Pink under the symbol “NSEH”.

 

Item 1A. Risk Factors

 

The common shares of our Company are considered speculative. You should carefully consider the following risks and uncertainties in addition to other information in this annual report in evaluating our Company and our business before purchasing our common shares. Our business, operating or financial condition could be harmed due to any of the following risks:

 

Our auditors have raised substantial doubts as to our ability to continue as a going concern.

 

Our financial statements have been prepared assuming we will continue as a going concern. Since inception we have experienced recurring net losses which losses caused an accumulated deficit of approximately $42.2 million as of June 30, 2015. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

We currently have a working capital deficit and negative cash flow from operations, and are uncertain if and when we will be able to pay our current liabilities.

 

Our working capital deficit was approximately $5.9 million as of June 30, 2015. This deficit consists of $6,130 in current assets, offset by $5,891,396 in current liabilities. In addition we had negative cash flow from operations for the year ended June 30, 2015 and of approximately $179,000 and $129,000, respectively. We do not have any liquid or other assets that can be liquidated to pay our current liabilities while we continue to incur additional liabilities to our officer and certain service providers who are working to prepare the documents required to be filed with the Securities and Exchange Commission to enable our common shares to be registered for trading. Since we currently have limited operations, the only ways we have of paying our current liabilities are to issue our common or preferred shares to our creditors or to issue unsecured promissory notes which may include certain features such as convertibility into common or preferred shares or warrants to purchase additional common or preferred shares in the future.

 

We currently do not have sufficient capital to finance the anticipated recurring costs of being a publicly-traded company.

 

As of February 28, 2016, we had minimal cash on hand. We anticipate incurring incremental annual costs of approximately $180,000 related to being a publicly-traded company. We will need to raise additional capital to support our public-company-related activities.

 

4
 

 

We had $4,812,946 of convertible notes, notes payable, settlements due, and accrued interest payable as of June 30, 2015, of which of this amount $1,661,227 currently past due, and do not have the funds necessary to pay these obligations.

 

In addition to funding our operating expenses, we need capital to pay various debt obligations totaling approximately $4.8 million as of June 30, 2015 which are either currently past due or which are due in the current fiscal year. Currently, there is $1,421,730 principal amount of the convertible notes payable which is past due, $90,241 principal of the notes payable which is past due, and $778,462 of accrued interest which is past due. The interest on the past due principal amounts will continue to accrue monthly at their stated rates. Holders of past due notes do not have a security interest in our assets. In addition, there is a settlement amount due to ASC Recap, LLC of $2,372,513 and notes payable in the amount of $150,000 due to ASC Recap, LLC. The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our operations.

 

We have $598,400 of undeclared accumulative dividends as of June 30, 2015 and we may not be able to settle this obligation in cash or stocks.

 

In addition to funding our operating expenses, we need capital to pay undeclared accumulative dividends totaling approximately $598,400 as of June 30, 2015. The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our operations.

 

In the event we consummate a transaction with a profitable company, we may not be able to utilize our net operating loss carryover which may have a negative impact on your investment.

 

If we enter into a combination with a business that has operating income, we cannot assure you that we will be able to utilize all or even a portion of our existing net operating loss carryover for federal or state tax purposes following such a business combination. If we are unable to make use of our existing net operating loss carryover, the tax advantages of such a combination may be limited, which could negatively impact the price of our stock and the value of your investment. These factors will substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

Economic conditions may affect our ability to obtain financing and to complete a merger or acquisition.

 

Due to general economic conditions, rapid technological advances being made in some industries, and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital which we will need. In the presence of these economic conditions, we may have difficulty raising sufficient capital to support the investigation of potential business opportunities, and to consummate a merger or acquisition. These factors substantially increase the uncertainty, and thus the risk, of investing in our shares.

 

There are a number of factors related to our common stock which may have an adverse effect on our shareholders.

 

Shareholders’ interests in our Company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities. In the event that we are required to issue additional shares, enter into private placements to raise financing through the sale of equity securities or acquire business interests in the future from the issuance of shares of our common stock to acquire such interests, the interests of existing shareholders in our Company will be diluted and existing shareholders may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we do issue additional shares, it will cause a reduction in the proportionate ownership and voting power of all existing shareholders.

 

We have certain provisions in our Articles of Incorporation and Bylaws, and there are other provisions under Florida law, that may serve to make a takeover of our Company more difficult.

 

Provisions of our articles of incorporation and bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders. Provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of Florida law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation’s disinterested stockholders.

 

Our common stock is quoted in the over the counter market on the OTC Pink.

 

Our common stock is quoted on the OTC Pink. OTC Pink offers a quotation service to companies that are unable to list their securities on an exchange or for companies, such as ours, whose securities are not eligible for quotation on the OTC Bulletin Board. The requirements for quotation on the OTC Pink are considerably lower and less regulated than those of the OTC Bulletin Board or an exchange. Because our common stock is quoted on the OTC Pink, it is possible that even fewer brokers or dealers would be interested in making a market in our common stock which further adversely impacts its liquidity.

 

The tradability of our common stock is limited under the penny stock regulations which may cause the holders of our common stock difficulty should they wish to sell their shares.

 

Because the quoted price of our common stock is less than $5.00 per share, our common stock is considered a “penny stock,” and trading in our common stock is subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a “penny stock,” including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because few broker or dealers are likely to undertake these compliance activities and this limited liquidity will make it more difficult for an investor to sell his shares of our common stock in the secondary market should the investor wish to liquidate the investment. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and the lack of a liquid market.

 

5
 

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2. Properties.

 

We rent our principal executive offices from an unrelated third party on a month-to-month basis for a monthly rental of $350.

 

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 any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Our common shares are quoted on the OTC Pink Quotation System under the symbol “NSEH,” but trade infrequently.

 

The high and low bid prices of our common stock for the periods indicated below are as follows:

 

Fiscal Year Ended June 30, 2015  High   Low 
           
Quarter Ended September 30, 2014  $0.0019   $0.0001 
Quarter Ended December 31, 2014  $0.0029   $0.0001 
Quarter Ended March 31, 2015  $0.0006   $0.0001 
Quarter Ended June 30, 2015  $0.0002   $0.0001 

 

Fiscal Year Ended June 30, 2014  High   Low 
         
Quarter Ended September 30, 2013  $0.0070   $0.0011 
Quarter Ended December 31, 2013  $0.0045   $0.0015 
Quarter Ended March 31, 2014  $0.0041   $0.0008 
Quarter Ended June 30, 2014  $0.0030   $0.0003 

 

Stockholders

 

As of March 18, 2016, there were 442 stockholders of record of our Common Stock.

 

Dividend Policy

 

We have not paid any cash dividends since 2008 and do not anticipate or contemplate paying dividends in the foreseeable future, with the exception of dividends on our Series B Preferred Shares. It is the present intention of management to utilize all available funds for the development of our business. The holders of Series B Preferred Stock are entitled to receive annual dividends of 10% payable in cash or shares of our common stock, at our option.

 

At June 30, 2015, the Company’s undeclared cumulative dividends aggregated $598,400.

 

Unregistered issuance of Securities

 

None.

 

Share Repurchases

 

None.

 

Item 6. Selected Financial Data.

 

Not Applicable.

 

6
 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following information should be read in conjunction with our financial statements and accompanying notes included in this Annual Report on Form 10-K.

 

Overview

 

The company was incorporated in Nevada as Jaguar Investments, Inc. during October 1987. During March 2003, a wholly owned subsidiary of the Company merged with Freight Rate, Inc., a development stage company in the logistics software business. During May 2003, the Company changed its name to Power2Ship, Inc. During October 2006, the Company merged with a newly formed, wholly owned subsidiary, Fittipaldi Logistics, Inc., a Nevada corporation, with the Company surviving but its name changed to Fittipaldi Logistics, Inc. effective November 2006. During December 2007, the Company merged with a newly formed, wholly owned subsidiary, NuState Energy Holdings, Inc., a Nevada corporation, with the Company surviving but renamed NuState Energy Holdings, Inc. effective December 2007.

 

On February 12, 2009, the Company filed Form 15 to terminate registration of its common stock under section 12(g) of the Securities Exchange Act of 1934 and subsequently has not submitted any filings to the Securities and Exchange Commission. During the period from February 2009 through April 2010, the Company had several changes to its officers and directors and moved its offices twice. The Company’s Chairman and President since April 2010, and its Chief Executive Officer from July 2010 through July 2015, is Kevin Yates and its Chief Executive Officer since July 2015 is Kathleen Roberton. The Company’s headquarters is located at 401 E. Las Olas Boulevard, Suite 1400, Fort Lauderdale, FL 33301. Since April 2010, the Company’s current management developed, and began implementing, the following strategic plan designed to increase the Company’s shareholders’ value:

 

  1. Improve the Company’s balance sheet by reducing liabilities and regaining use of certain of its intellectual property and software,
     
  2. Settle litigation,
     
  3. Identify potential merger or acquisition candidates with whom the Company could enter into a transaction upon the Company achieving items 1 and 2 above, and
     
  4. License its intellectual property and software, also known as My Driver’s Seat, which it regained in April 2010.

 

This strategic plan has resulted in the following material events:

 

Reduced Liabilities

 

Since filing its Form 10-Q for the quarterly period ended September 30, 2008, total liabilities have decreased by $3,796,554 or 39% from $9,687,950 on September 30, 2008 to $5,891,396 on June 30, 2015.

 

In August 2012, its former subsidiaries CXT and P2SI each filed a Voluntary Bankruptcy Petition and Schedules in the United States Bankruptcy Court in the District of South Carolina. On October 19, 2012, the Company was awarded the bankruptcy and has filed the proper paperwork and as a result has reduced its liabilities by $1,875,581.

 

Regained Use of Intellectual Property

 

As part of an agreement entered into with Rentar Environmental Solutions, Inc. (“Rentar”) in April 2010, the Company agreed to share with Rentar all right, title and interest in and to intellectual properties and software, My Driver’s Seat, which it had developed for the worldwide transportation and security industries and had sold in April 2008 to Rentar Logic, a Delaware corporation and an affiliate of Rentar. The intellectual property that the Company agreed to share with Rentar included a patent titled “Dynamic and Predictive Information System and Method for Shipping Assets and Transport”.

 

Licensing Use of Intellectual Property

 

NuState Energy Holdings, Inc. signed a definitive agreement with The Ronn Motor Group, with offices in Dalian, China and the United States, to license and market NuState’s IP software, GPSTrax©, for use by Ronn Motor Group’s partners in China and other international markets. On February 26, 2016, we agreed to suspend the definitive agreement with Ronn Motor Group as Ronn Motor Group is going through a corporate restructuring. On February 26, 2016 we entered into a binding Letter of Intent with MK Technologies LLC (a related party to Ronn Motor Group), in relation to the purchase of its fuel enhancement technologies and all its Assets, for total consideration of $2,000,000. $1,000,000 will be paid at closing, with the balance of the purchase price paid out in accordance with a mutually approved royalty agreement and paid consulting agreement, and $1,000,000 to be paid in stock, cash, or a combination on a mutually agreed schedule.

 

7
 

 

Results of Operations

 

Selling, General, and Administrative Expenses

 

For the year ended June 30, 2015, selling, general and administrative expenses were $358,656 as compared to $405,045 for the year ended June 30, 2014, a decrease of $46,388 or approximately 11.5%. For the years ended June 30, 2015 and 2014 selling, general and administrative expenses consisted of the following:

 

   2015   2014   Increase/(Decrease)   %
Change
 
Accounting expense  $15,000   $28,850   $(13,850)   (48.00)%
Consulting fees   99,841    110,400    (10,559)   (9.60)%
Legal fees   -    20,000    (20,000)   (100.00)%
Salaries   240,000    240,000    -    0.00%
Travel   1,830    4,094    (2,264)   (55.30)%
Other   1,985    1,700    284    16.70%
   $358,656   $405,045   $(46,388)   (11.50)%

 

The decrease in selling, general and administrative expenses during fiscal 2015, when compared with the prior year, is primarily due to a decrease in legal fees of $20,000 due to less legal activity, a decrease in accounting fees of $13,850, and a decrease in general consulting fees of $10,559.

 

   Years ended 
   June 30, 
   2015   2014 
Derivative Liability expense  $-   $(204,283)
           
Gain (loss) on change in fair value of derivative liabilities  $60,481   $(2,006)

 

Derivative liability expense during fiscal 2014 resulted from the beneficial conversion features of two new convertible notes payable issued during that year that had initial derivative liabilities in excess of their principal amounts.

 

Changes in fair value of derivative liabilities results from the changes in the fair value of the derivative liability due to the application of ASC 815, resulting in either income or expense, depending on the difference in fair value of the derivative liabilities between their measurement dates. The decrease in fair value of derivative liabilities recognized during fiscal 2015 is primarily due to the decrease in the market price of our common stock. The decrease in fair value of derivative liabilities recognized during fiscal 2014 is primarily due to an increase of our common stock quoted price between measurement dates and during such periods, respectively.

 

Interest Expense

 

   Years Ended     
   June 30,   % 
   2015   2014   Change 
Interest Expense  $310,864   $191,716    62.1%

 

Interest expense represents the stated interest of notes and convertible notes payable as well as the amortization of debt discount. The increase in interest expense during fiscal 2015 is primarily due to increased amortization of debt discount of $62,328, along with an increase in interest-bearing liabilities.

 

Loss on Settlement of Debt

 

   Years Ended   % 
   June 30,   Change 
   2015   2014     
Loss on settlement of debt  $(339,421)  $(564,557)   44.4%

 

On October 9, 2014, the Company entered into a Settlement Agreement with IBC Funds, LLC (“IBC’). This agreement was approved by the Manatee County, Florida Court on October 10, 2014. Pursuant to the Settlement Agreement, the Company agreed to settle approximately $259,000 of outstanding liabilities (the “IBC Claim Amount”) by issuing IBC 859,000,000 shares of its common stock at a price per share equal to fifty percent of the lowest sales price of the common stock during the fifteen day trading period preceding the request of payment. In the event the Company was delinquent on issuance of the Company’s shares upon request by IBC, the discount would be increased by five percent and by an additional five percent for each additional delinquency until all settlement shares had been received. At no time could IBC and its affiliates collectively own more than 4.99% of the outstanding shares of common stock. During October 2014, IBC paid an aggregate of $66,000 to various Company creditors. On February 12, 2015 IBC issued a letter of default to the Company. The Company issued to IBC an additional 429,371,000 common shares valued at $116,874.

 

8
 

 

Liquidity and Capital Resources

 

   Balance at June 30, 
   2015   2014 
Cash  $6,130   $65 
Accounts payable and accrued expenses   440,642    437,921 
Accrued compensation   342,000    167,000 
Notes, convertible notes, accrued interest, and settlement payable to ASC Recap, LLC   4,812,946    4,436,501 

 

 

At June 30, 2015 and 2014, 100% of our total assets consisted of cash.

 

We do not have any material commitments for capital expenditures.

 

The objective of liquidity management is to ensure that we have ready access to sufficient funds to meet commitments and effectively implement our growth strategy. Our primary sources are financing activities such as the issuance of notes payable and convertible notes payable. In the past, we have mostly relied on debt and equity financing to provide for our operating needs.

 

We were unable to generate sufficient funds from operations to fund our ongoing operating requirements through June 30, 2015. As of February 28, 2016 we had approximately $3,000 on hand. We may need to raise funds to enhance our working capital and use them for strategic purposes. If such need arises, we intend to generate proceeds from either debt or equity financing.

 

We intend to finance our operations using a mix of equity and debt financing. We do not anticipate incurring capital expenditures for the foreseeable future. We anticipate that we will need to raise approximately $180,000 per year in the near term to finance the recurring costs of being a publicly-traded company, and $120,000 to implement a plan of operations, with additional funding necessary to pay our outstanding obligations. In the long-term, we anticipate we will need to raise a substantial amount of capital to complete an acquisition. We are unable to quantify the resources we will need to successfully complete an acquisition. If these funds cannot be obtained, we may not be able to consummate an acquisition or merger, and our business may fail as a result.

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis. The Company has used net cash in its operating activities of approximately $179,000 and $129,000 during the years ended June 30, 2015 and 2014, respectively, and has a working capital deficit of approximately $5.9 million and $5.4 million at June 30, 2015 and 2014, respectively. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future, once a merger with an operating company is consummated. Management plans may continue to provide for its capital requirements by issuing additional equity securities and debt and the Company will continue to find possible acquisition targets. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.

 

   Years Ended 
   June 30, 
   2015   2014 
Cash flows from operating activities:          
Net loss  $(960,388)  $(1,367,607)
Non-cash Adjustments:          
Loss on debt settlement   339,421    564,557 
Amortization of debt discount   106,164    43,836 
(Gain) loss on change in derivative liability   (60,481)   2,006 
Derivative liability expense   -    204,283 
Loss on restructuring of debt   11,928    - 
Changes in assets and liabilities        - 
Accrued interest   206,700    147,880 
Accrued compensation   175,000    240,000 
Accounts payable and accrued expenses   2,721    36,139 
Net cash used in continuing operations   (178,935)   (128,906)
           
Cash flows from financing activities:          
Proceeds from issuance of convertible notes payable   185,000    128,500 
    185,000    128,500 
           
Net variation in cash  $6,065   $(406)

 

9
 

 

 

Year ended June 30, 2015

 

Net cash used in operations in fiscal year 2015 increased by $50,029 or 38.8% from fiscal year 2014. This cash was obtained through the sale of $185,000 of convertible promissory notes.

 

Year ended June 30, 2014

 

Net cash used in operations in fiscal 2014 decreased by $15,633 or 10.8% from fiscal year 2013. This cash was obtained through the sale of $128,500 of convertible promissory notes.

 

The decrease in cash flows used in operating activities during fiscal 2014, when compared to the prior year period, is primarily due to a decrease in operating expenses and interest expense during fiscal 2014.

 

Capital Raising Transactions

 

Issuance of Convertible Notes Payable

 

We generated proceeds of $185,000 and $128,500 during fiscal 2015 and 2014, respectively, from the issuance of convertible notes payable and promissory notes.

 

Other outstanding obligations at June 30, 2015

 

Obligations to ASC Recap

 

In 2013, certain of the Company’s creditors showed interest in selling their claims against the Company to ASC Recap, LLC (“ASC”); this group also included both current and past management of the Company. This led to the Company signing a Liability Purchase Agreement with ASC on July 23, 2013. This Agreement required the Company to issue shares at a 25% discount from the market price to ASC in amounts equal to the claims purchased from the Company’s creditors. In addition, under the terms of the Agreement, the Company issued a $25,000 non-interest bearing convertible promissory note to ASC.

 

ASC signed a series of Claim Purchase Agreements with certain creditors of the Company to purchase their claims against the Company totaling $2,531,565. These claims consisted of notes payable, convertible notes payable, vendor payables and accrued compensation to the Company’s CEO and to a related party. The Claim Purchase Agreements required ASC to settle the creditors’ claims against the Company for a total of $1,305,996. Each Claim Purchase Agreement stipulated that ASC would pay each creditor the agreed-upon amount in up to twelve (12) monthly installments.

 

In January, 2014, ASC filed a complaint in Leon County, Florida demanding payment for the purchased claims. A settlement agreement was reached on February 6, 2014, and on March 12, 2014 ASC Recap filed a motion in Leon County, Florida which forced the Company to comply. ASC Recap was awarded a $2,531,565 judgement which was to be paid by issuing free trading common stock at a 25% discount from the market price. In addition, on May 6, 2014, the Company issued a $125,000 non-interest bearing convertible promissory note to ASC. Between April and June of 2014, the Company issued to ASC 322,220,000 shares of common stock with an aggregate value of $365,308; in July of 2014, the Company issued 82,980,000 shares of common stock with an aggregate value of $24,894.

 

The carrying amount of the Company’s liability to ASC, exclusive of the convertible notes payable and which is reported in the accompanying balance sheet as settlement payable to ASC Recap, LLC, is $2,372,513 and represents the $2,531,565 originally awarded, less payments/adjustments of $159,052,. The Company also recorded a loss on debt settlement in the accompanying statement of operations of $564,557 as a result of these transactions.

 

The Company ceased issuing shares upon discovering that ASC failed to make its first payment to the creditors on time, did not give verifiable reports to the creditors, or make regular monthly payments as specified in the Claim Purchase Agreement. A provision in each Claim Purchase Agreement stipulated that the “Purchaser (ASC) shall not be obligated to pay any portion of the purchase price in the event of a Default by the Company.” On August 13, 2015 ASC served the Company with a Notice of Default, which per the Agreement, returns the unpaid balance owed to the creditors of the Company.

 

Convertible Notes Payable

 

The Company had convertible promissory notes aggregating approximately $1.4 million and $1.1 million outstanding at June 30, 2015 and 2014, respectively. The accrued interest amounted to approximately $754,000 and $711,000 at June 30, 2015 and 2014, respectively. The Convertible Notes Payable bear interest at rates ranging between 10% and 18% per annum. Interest is generally payable monthly. The Convertible Notes Payable are generally convertible at rates ranging between $0.00125 and $0.0005 per share, at the holders’ option. At June 30, 2015, all convertible promissory notes have matured.

 

Additionally, upon conversion, the holders of $192,000 of convertible promissory notes are also entitled to 19,200,000 warrants, exercisable at a rate of $0.025. The warrants expire 3 years from the date of issuance.

 

10
 

 

Notes Payable

 

The Company had promissory notes aggregating approximately $90,000 at June 30, 2015 and $40,000 at June 30, 2014. The related accrued interest amounted to approximately $24,500 and $19,000 at June 30, 2015 and 2014, respectively. The notes payable bear interest at rates ranging between 8% and 16% per annum. Interest is generally payable monthly. All promissory notes have matured as of June 30, 2015.

 

Warrants

 

As of June 30, 2015, we had no outstanding warrants.

 

Derivative Liability

 

The Corporation recognizes all derivative financial instruments on its balance sheet at fair value. As of June 30, 2015 the Company had $150,000 in notes that are convertible into the Company’s common stock, which contained certain ratchet provisions that reduce the conversion price of the notes. In accordance with ASC 815 the Company determined that the note the conversion features with provisions that reduce the exercise price of the notes did not qualify for a scope exception under ASC 815 as they were determined not to be indexed to the Company’s stock.

 

Derivatives are required to be recorded on the balance sheet at fair value (see Note 12). These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Climate Change

 

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

 

Critical Accounting Policies

 

The Company’s critical accounting policies are as follows:

 

Convertible Instruments - The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815.

 

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments in accordance with EITF 00-19. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional (as that term is described).

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with the provisions of ASC 470 20 “Debt with Conversion Options” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

The Company believes the certain conversion features embedded in convertible notes payable are not clearly and closely related to the economic characteristics of the Company’s stock price. Accordingly, the Company has recognized derivative liabilities in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance at every balance sheet thereafter. The Company uses judgment in determining which valuation is most appropriate for the instrument (e.g., Black Scholes), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 8. Financial Statements and Supplementary Data.

 

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

 

11
 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer, who at June 30, 2015 was also our principal executive and financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Chief Executive Officer concluded that, as of June 30, 2015, our disclosure controls and procedures were not effective in ensuring that material information required to be disclosed 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 SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our Chief Executive Officer to allow timely decisions regarding required disclosure.

 

Management Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2015. In making this assessment, our management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.

 

During our assessment of the design and the effectiveness of internal control over financial reporting as of June 30, 2015, management identified the following material weaknesses:

 

  While we have processes in place, there are no formal written policies and procedures related to certain financial reporting processes;
     
  There is no formal documentation in which management specified financial reporting objectives to enable the identification of risks, including fraud risks;
     
  Our Board of Directors consisted of only one member and we lack the resources and personnel to implement proper segregation of duties or other risk mitigation systems.

 

A material weakness is “a significant deficiency, or a combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected by us in a timely manner.” A significant deficiency, is a deficiency or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.

 

We intend to gradually improve our internal control over financial reporting to the extent that we can allocate resources to such improvements. We intend to prioritize the design of our internal control over financial reporting starting with our control environment and risk assessments and ending with control activities, information and communication activities, and monitoring activities. Although we believe the time to adapt in the next year will help position us to provide improved internal control functions into the future, in the interim, these changes caused control deficiencies, which in the aggregate resulted in a material weakness. Due to the existence of these material weaknesses, our management, including our Chief Executive Officer, concluded that our internal control over financial reporting was not effective as of June 30, 2015.

 

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC that permit smaller reporting companies to provide only the management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

12
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

The following table sets forth the names, ages and principal position of our executive officers and directors as of June 30, 2014:

 

Name   Age   Position
Kevin Yates   50   Chairman of the Board and Chief Executive Officer

 

Business Experience

 

Mr. Kevin Yates has served as Chairman of the Company’s Board of Directors since April 2010 and as the Company’s Chief Executive Officer, Treasurer and Secretary since July 2010. Mr. Yates formally served as Chief Operating Officer of the company in 2006-2007.

 

For the past nine years, Mr. Yates has served as President and Director of PocketMD. Mr. Yates has also served as Director of Mobile Software Team, LLC from August 2008 through July 2012, and C3I Services, LLC from July 2012 to present.

 

Mr. Yates’ devotes approximately 90% of his time to the business and affairs of our company. Mr. Yates experience in working with public companies’ operational strategy and market plan makes him an asset to the Company.

 

There are no family relationships among our directors or executive officers.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires that our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Such executive officers, directors and ten percent stockholders are also required by the SEC rules to furnish to us copies of all Section 16(a) reports that they file. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that they were not required to file a Form 5, we believe that, during the fiscal year ended June 30, 2013, our executive officers, directors and ten percent stockholders complied with all Section 16(a) filing requirements applicable to such persons.

 

Code of Ethics

 

We have adopted a Code of Ethics and Business Conduct to provide guiding principles to our principal executive officer, principal financial officer, and principal accounting officer or controller of our company in the performance of their duties. Our Code of Ethics and Business Conduct also strongly recommends that all directors and employees of our company comply with the code in the performance of their duties. Our Code of Ethics and Business Conduct provides that the basic principle that governs all of our officers, directors and employees is that our business should be carried on with loyalty to the interest of our stockholders, customers, suppliers, fellow employees, strategic partners and other business associates. We believe that the philosophy and operating style of our management are essential to the establishment of a proper corporate environment for the conduct of our business.

 

Generally, our Code of Ethics and Business Conduct provides guidelines regarding:

 

  * conflicts of interest,
     
  * financial reporting responsibilities,
     
  * insider trading,
     
  * inappropriate and irregular conduct,
     
  * political contributions, and
     
  * compliance with laws.

 

A copy of our Code of Ethics has been filed with the Securities and Exchange Commission as an exhibit to this annual report. We will provide a copy, without charge, to any person desiring a copy of the Code of Ethics, by written request to us at our principal offices.

 

Committees of the Board of Directors

 

Our Board of Directors has not yet established any committees, including an Audit Committee, a Compensation Committee or a Nominating Committee. We plan to expand our Board in the future and we will seek to establish an Audit Committee and a Compensation Committee, but this will depend on our ability to attract and retain new directors. The typical functions of such committees are currently being undertaken by the entire Board as a whole. Our Board currently consists of only one member, Mr. Yates.

 

Audit Committee Financial Expert

 

Currently no member of our Board is an audit committee financial expert. We do not currently have the resources to recruit a Board member who would also be a financial expert. We may start our recruiting process for such Board member during fiscal 2016 if our financial position improves.

 

13
 

 

Item 11. Executive Compensation.

 

The following table sets forth, for the last two completed fiscal years, all compensation paid, distributed or accrued for services rendered to us by (i) all individuals serving as our principal executive officer or acting in a similar capacity during the last completed fiscal year, regardless of compensation level; (ii) our two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at the end of the last completed fiscal year and whose total compensation exceeded $100,000; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to (ii) above but for the fact that the individual was not serving as our executive officer at the end of the last completed fiscal year:

 

Summary Compensation Table

 

Name and
Principal
Position
  Year   Salary
($)
   Bonus
($)
   Stock
Awards
   Option
Awards
($) (1)
   Non-Equity
Incentive Plan
Compensation
($)
   Non-
Qualified
Deferred
Compensation
Earnings
   All Other
Compensation
($)(1)
   Total
($)
 
Kevin Yates, Chief   2015    240,000    -    -    -    -    -    97,841    337,841 
Executive Officer   2014    240,000    -    -    -    -    -    110,400    350,400 

 

  (1) Other compensation for Mr. Yates during fiscal 2015 and 2014 represented funds paid to Mobile Software Team, LLC and C3I Services, LLC, related parties by means of common ownership and management to the Company. The related parties provided assistance to Mr. Yates in his duties.

 

Employment Agreements

 

Kevin Yates’ employment agreement

 

On May 6, 2010, we entered in an executive employment agreement with Kevin Yates, as our President. The agreement provides for the following, among other things:

 

  Base annual salary of $240,000;
     
  Base salary may increase from time to time with the approval of our Compensation Committee;
     
  Grant of options convertible in 60,000,000 shares of our common stock and exercisable at $0.0025 per share;
     
  Termination clause: upon death, retirement or permanent disability of Kevin Yates, or at any time by us, or upon thirty-day notice by Kevin Yates
     
  If the employment is terminated by Kevin Yates for good reason, as defined, or by us, other than for cause, as defined, death, retirement or permanent disability of Kevin Yates, Kevin Yates is entitled to two years base salary (currently, the equivalent of $480,000) and unpaid bonuses or incentive compensation, if any.

 

On June 3, 2010, Kevin Yates and the Company suspended the employment agreement for lack of corporate activity. On October 30, 2010, the employment agreement was reinstated. On April 30, 2010, we entered in a consulting agreement with Mobile Software Team, LLC (‘Mobile Software”). Kevin Yates, our Chairman of the Board, also is managing member of Mobile Software. The agreement provides for the following, among other things:

 

  Base annual consulting fee of $120,000;
     
  Grant of warrants convertible in 5,000,000 shares of our common stock at an exercise price of $0.005 per share.
     
  Termination clause: the earliest of April 30, 2012, the date we become a reporting company, or upon 30 day written notice by each party.

 

On April 1, 2012, we entered in a consulting agreement with C3I Services, LLC (‘C3I Services”). Kevin Yates, our Chairman of the Board is also a managing member of C3i Services, LLC. The agreement provides for the following, among other things:

 

  Base annual consulting fee of $120,000;
     
  Termination clause: the earliest of July 1, 2013 the date we become a reporting company, or upon 30 day written notice by each party. C3I Services used proceeds from the consulting agreement to pay certain of our operating expenses. This agreement has been informally renewed on a year-to-year basis, through December 31, 2016.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our Board in the future.

 

14
 

 

Outstanding Equity Awards at Fiscal Year-End

 

There are no outstanding equity awards held as of June 30, 2015 by our Executive Officers and Directors.

 

Director Compensation

 

Our Board of Directors is comprised of Mr. Yates, who is also an executive officer of our company, and does not receive any compensation specifically for his Board services.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

 

At February 29, 2016 we had 7,717,954,802 shares of our Common Stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our Common Stock as of February 29, 2016 by:

 

each person known by us to be the beneficial owner of more than 5% of our Common Stock;
   
our director;
   
each of our executive officers named in the compensation tables in Item 11; and
   
All of our executive officers and director as a group.

 

   COMMON STOCK     
   AMOUNT OF
BENEFICIAL
   % OF   % OF
VOTING
 
NAME  OWNERSHIP   CLASS   CONTROL (1) 
                
Kevin Yates   115,000,000    1.49%   1.71%

 

(1) Percent of Voting Control is based upon the number of issued and outstanding shares of our common stock and our Series Y Convertible Preferred Stock on February 29, 2016. On that date we had 7,717,954,802 outstanding shares of common stock with one vote per share and 87,000 shares of Series Y Convertible Preferred Stock with 200 votes per share for an aggregate of 17,400,000 votes.

 

The following table sets forth securities authorized for issuance under any equity compensation plans approved by our stockholders as well as any equity compensation plans not approved by our stockholder as of June 30, 2015.

 

Plan category  Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
(a)
   Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
   Number of
securities
remaining
available for future
issuance under
equity
compensation
plans (excluding
securities reflected
in column (a))
(c)
 
Equity compensation plans approved by security holders               
2012 Employee Stock Compensation Plan   0    0    0 
Equity compensation plans not approved by security holders   0    0    0 
Total   0    0    0 

 

Item 13. Certain Relationship and Related Party Transactions, and Director Independence.

 

Other than compensation arrangements, we describe below, transactions during our last fiscal year, to which we were a party, in which:

 

  The amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years; and
     
  Any of our directors, executive officers, or holders of more than 5% of our common stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.

 

Warrants

 

During fiscal 2015 and 2014 we issued no warrants to purchase shares of our common stock.

 

During fiscal 2013 we issued warrants to purchase 2,000,000 shares of our common stock, with an exercise price of $0.025 per share and expiring in March 2015 in connection with the sale of common stock.

 

At June 30, 2015 we had no warrants outstanding.

 

15
 

 

Convertible Notes Payable

 

During fiscal 2015 we issued $185,000 of 18% convertible promissory notes with a term of one year. The convertible notes are convertible into shares of our common stock. The conversion price per share in effect on any conversion date shall be equal to the lesser of a) $0.0025 or b) the average closing price of the Company’s shares for the ten days immediately prior to the conversion date, with a floor of $0.00125. As of June 30, 2015, the applicable conversion price based on these terms was the floor price of $0.00125 per share. As of June 30, 2015, $185,000 of principal and $14,282 of accrued interest is outstanding on these convertible notes.

 

During fiscal 2014 we issued convertible notes totaling $128,500. The convertible notes payable matured in September 2015 and are currently past due. The convertible notes bear interest at a rate of 12% per annum, payable upon conversion. The convertible notes are convertible into shares of our common stock at $0.005 per share. The convertible note also bears warrants to purchase our common stock at a price of $0.025 per share upon conversion. The number of warrants to be received by the note holder is equal to one half of the number of common shares issued upon conversion. As of June 30, 2015, $26,927 of principal and accrued interest is outstanding on this convertible note.

 

Common Stock

 

During fiscal 2015 we issued shares of our common stock as follows:

 

On October 9, 2014, we entered into a Settlement Agreement with IBC Funds, LLC (“IBC’). This agreement was approved by the Manatee County, Florida Court on October 10, 2014. Pursuant to the Settlement Agreement, the Company agreed to settle approximately $259,000 of outstanding liabilities (the “IBC Claim Amount”) by issuing IBC 859,000,000 shares of its common stock at a price per share equal to fifty percent of the lowest sales price of the common stock during the fifteen day trading period preceding the request of payment. In the event the Company was delinquent on issuance of the Company’s shares upon request by IBC, the discount would be increased by five percent and by an additional five percent for each additional delinquency until all settlement shares had been received. At no time could IBC and its affiliates collectively own more than 4.99% of the outstanding shares of common stock. During October 2014, IBC paid an aggregate of $66,000 to various Company creditors. On February 12, 2015 IBC issued a letter of default to the Company. The Company issued to IBC an additional 429,371,000 common shares valued at $116,874.

 

In July of 2014, the Company issued 82,980,000 shares of common stock with an aggregate value of $24,894 to ASC Recap.

 

During fiscal 2014 we issued 323,220,000 shares of our common stock as follows:

 

322,220,000 shares issued to pursuant to the Settlement Agreement and Stipulation dated February 6, 2014 that we entered into with ASC Recap, LLC
   
1,000,000 shares issued pursuant to the conversion of $20,000 at a price of $0.005 per share.

 

Director Independence

 

Our sole director is not considered “independent” within the meaning of meaning of Rule 5605 of the NASDAQ Marketplace Rules.

 

Item 14. Principal Accountant Fees and Services

 

The following table summarizes the fees of D’Arelli Pruzansky, P.A., our independent registered public accounting firm billed for each of the last two fiscal years for audit services and other services:

 

Fee Category  2015   2014 
Audit Fees (1)  $15,000   $15,000 
Audit Related Fees   -    - 
Tax Fees (2)   -    - 
All Other Fees   -    - 
           
Total Fees  $15,000   $15,000 

 

(1) Consists of fees for professional services rendered in connection with the financial statements included in our Annual Report on Form 10-K.

 

(2) Consists of fees relating to any tax compliance and tax planning.

 

We do not have an Audit Committee. Our Board of Directors pre-approves all auditing services and permissible non-audit services provided to us by our independent registered public accounting firm. All fees listed above were pre-approved in accordance with this policy.

 

16
 

 

PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

a. Index to Financial Statements and Financial Statement Schedules

 

 

  All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, or are inapplicable, and therefore have been omitted.

 

b. Exhibits

 

Exhibit No.   Description of Exhibit
     
2.1   Merger Agreement Between Jaguar Investments, Inc., Freight Rate, Inc., and Jag2 Corporation (1)
     
2.2   Agreement and Plan of Merger Between Fittipaldi Logistics, Inc. and State Petroleum Distributors, Inc. (30)
     
3.1   Articles of Incorporation (2)
     
3.2   Certificate of Amendment to Articles of Incorporation (3)
     
3.3   Certificate of Amendment to the Articles of Incorporation (4)
     
3.4   Certificate of Voting Powers, Designations, Preferences and Rights to Series B Convertible Preferred Stock (10)
     
3.5   Certificate of Voting Powers, Designations, Preferences and Rights to Series C Convertible Preferred Stock (10)
     
3.6   Certificate of Voting Powers, Designations, Preferences and Rights to Series Y Preferred Stock (5)
     
3.7   Certificate of Correction of Certificate of Voting Powers, Designations, Preferences and Right to Series Y Preferred Stock (5)
     
3.8   Certificate of Amendment to Articles of Incorporation Increasing Authorized Shares of Common Stock to 250,000,000 filed on August 13, 2004 (9)
     
3.9   Certificate of Voting Powers, Designations, Preferences and Rights to Preferred Stock of Series X Convertible Preferred Stock (5)
     
3.10   Bylaws (2)
     
3.11   Amended Bylaws dated March 31, 2003 (5)
     
3.12   Certificate to Set Forth Designations, Preferences and Rights to Series D Convertible Preferred Stock (23)
     
3.13   Certificate to Set Forth Designations, Preferences and Rights to Series E Convertible Preferred Stock (29)
     
3.14   Certificate to Set Forth Designations, Preferences and Rights to Series F Convertible Preferred Stock (29)
     
3.15   Certificate to Set Forth Designations, Preferences and Rights to Series G Convertible Preferred Stock (29)
     
3.16   Certificate to Set Forth Designations, Preferences and Rights to Series H Convertible Preferred Stock (29)
     
3.17   Certificate to Set Forth Designations, Preferences and Rights to Series I Convertible Preferred Stock (29)
     
3.18   Certificate to Set Forth Designations, Preferences and Rights to Series J Convertible Preferred Stock (35)
     
4.1   Form of Common Stock Purchase Warrant to Newbridge Securities Corporation for Business Advisory Agreement (10)
     
4.2   Form of 14.25% secured convertible debenture (35)
     
4.3   $100,000 principal amount promissory note pursuant to settlement agreement with Stokes Logistics Consulting, LLC (35)

 

17
 

 

4.4   $100,000 principal amount 8% secured convertible promissory note (35)
     
4.5   Letter of agreement dated February 8, 2008 evidencing $25,000 principal promissory note to Canberra Financial Services II, Inc. (35)
     
4.6   $14,000 principal 12.5% promissory note for services (35)
     
4.7   Form of unsecured promissory note (35)
     
4.8   Form of non-plan option agreement (10)
     
4.9   Form of common stock purchase warrant (10)
     
4.10   Form of Common Stock Purchase Warrant re: 14.25% secured convertible debentures (10)
     
4.11   Form of Common Stock Purchase Warrant issued to Newbridge Securities Corporation as Placement Agent for 14.25% secured convertible debentures (10)
     
4.12   Form of Series C 10% unsecured convertible debenture (20)
     
4.13   Form of Warrant for Series C 10% unsecured convertible debenture offering (35)
     
4.14   Form of Series D 8% unsecured convertible debenture (35)
     
4.15   Form of 10% convertible debenture (35)
     
4.16   Form of Warrant for Series D 8% unsecured convertible debenture (22)
     
4.17   Articles of Merger between Power2Ship, Inc. and Fittipaldi Logistics, Inc. (25)
     
4.18   Form of Term Sheet for Purchase of Outstanding Debentures (Version 2) (28)
     
4.19   Form of Term Sheet for Purchase of Outstanding Debentures (Version 1) (28)
     
4.20   Form of Non-Plan Stock Option Agreement for Employees (29)
     
4.21   Form of Non-Plan Stock Options Agreement for Executives (29)
     
4.22   Articles of Merger between Fittipaldi Logistics, Inc. and NuState Energy Holdings, Inc. (31)
     
4.23   $10,000 principal amount 12% convertible promissory note (35)
 
4.24   $5,000 principal amount 12% convertible promissory note (35)
     
4.25   $25,000 principal amount 12% convertible promissory note (35)
     
4.26   $25,000 principal amount 12% convertible promissory note (35)
     
4.27   $20,000 principal amount 12% convertible promissory note (35)
     
4.28   $20,000 principal amount 12% convertible promissory note (35)
     
4.29   $5,000 principal amount 12% convertible promissory note (35)
     
4.30   $20,000 principal amount 12% convertible promissory note (35)
     
4.31   $25,000 principal amount 12% convertible promissory note (35)
     
4.32   $25,000 principal amount 18% convertible promissory note (35)
     
4.33   $12,000 principal amount 12% convertible promissory note (35)
     
4.34   $10,000 principal amount 12% convertible promissory note (35)
     
4.35   $20,000 principal amount 12% convertible promissory note (35)
     
4.36   $18,000 principal 12.5% promissory note for services (35)
     
4.37   $30,000 principal amount 12% convertible promissory note (35)

 

18
 

 

4.38   $15,000 principal amount 12% convertible promissory note (35)
     
4.39   $10,000 principal amount 12% convertible promissory note (35)
     
4.40   $25,000 principal amount 18% convertible promissory note (35)
     
4.41   $25,000 principal amount 18% convertible promissory note (35)
     
4.42   $15,000 principal amount 12% convertible promissory note (35)
     
4.43   $25,000 principal amount 12% convertible promissory note (35)
     
4.44   $10,000 principal amount 12% convertible promissory note (35)
     
4.45   $25,000 principal amount 12% convertible promissory note (35)
     
4.46   $10,000 principal amount 12% convertible promissory note (35)
     
10.1   Securities Purchase Agreement (6)
     
10.2   Investor Registration Rights Agreement (6)
     
10.3   2001 Employee Stock Compensation Plan (3)
     
10.4   Employment Agreement with Richard Hersh (8)
     
10.5   Form of Intellectual Property Assignment Agreement between Power2Ship, Inc. and each of Richard Hersh, Michael J. Darden and John Urbanowicz (10)
     
10.6   Security Agreements for 14.25% secured convertible debentures (10)
     
10.7   Registration Rights Agreement for 14.25% secured convertible debentures (10)
     
10.8   Asset Purchase Agreement with GFC, Inc. (14)
     
10.9   Mutual Agreement with Commodity Express Transportation, Inc. (15)
     
10.10   Asset Purchase Agreement with GFC, Inc. (16)
     
10.11   Form of Unsecured Promissory Note (13)
     
10.12   Separation and Severance Agreement with Richard Hersh (23)
     
10.13   Consulting Agreement with Richard Hersh (23)
     
10.14   Consulting Agreement with David S. Brooks and S. Kevin Yates (as amended) (23)
     
10.15   Software Transaction Agreement Between NuState Energy Holdings, Inc., Rentar Environmental Solutions, Inc. and the organizers of a new company to be formed (33)
     
10.16   Capital Contribution Agreement Between Rentar Logic, Inc., Rentar Environmental Solutions, Inc. and NuState Energy Holdings, Inc. (33)
     
10.17   Rentar Logic, Inc. Shareholders Agreement (33)
     
10.18   Voting Trust Agreement Between Rentar Logic, Inc., Rentar Environmental Solutions, Inc. and NuState Energy Holdings, Inc. (33)
     
10.19   NuState/Rentar Agreement April 2010 (35)
     
10.20   Employment Agreement with Kevin Yates (35)
     
10.21   Consulting Agreement with Will Williams (35)
     
10.22   Consulting Agreement with Mobile Software Team, LLC (35)
     
10.23   Consulting Agreement with C3i Sports, LLC (35)
     
14.1   Code of Ethics (11)

 

19
 

 

21.1   Subsidiaries of Registrant (20)
     
31.1   Section 302 Certificate of Chief Executive Officer.*
     
31.2   Section 302 Certificate of Principal Financial Officer.*
     
101.   The following materials from the Company’s Annual Report on Form 10-K for the year ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) related notes to these financial statements.**

 

* Filed herewith.
   
** Furnished herewith.
   
(1) Incorporated by reference to Current Report on Form 8-K filed on March 26, 2003.
   
(2) Incorporated by reference to registration statement on Form 10-SB, as amended.
   
(3) Incorporated by reference to definitive Schedule 14C Information Statement filed on February 2, 2001.
   
(4) Incorporated by reference to definitive Schedule 14C Information Statement filed on April 22, 2003.
   
(5) Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
   
(6) Incorporated by reference to Current Report on Form 8-K filed on July 8, 2004.
   
(7) Incorporated by reference to Current Report on Form 8-K filed on January 3, 2002.
   
(8) Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended March 31, 2003.
   
(9) Incorporated by reference to Preliminary Information Statement on Schedule 14C filed on July 8, 2004.
   
(10) Incorporated by reference to registration statement on Form SB-2, SEC File No. 333-118792, filed on September 3, 2004.
   
(11) Incorporated by reference to Amendment No. 1 to registration statement the Form SB-2, SEC File No. 333-118792, filed on October 20, 2004.
   
(12) Incorporated by reference to Amendment No. 3 to the registration statement on Form SB-2, SEC File No. 333-118792, filed on December 15, 2004.
   
(13) Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended December 31, 2004 filed on February 14, 2005.
   
(14) Incorporated by reference to Current Report on Form 8-K/A filed on February 25, 2005.
   
(15) Incorporated by reference to Current Report on Form 8-K filed on March 25, 2005.
   
(16) Incorporated by reference to Current Report on Form 8-K filed on March 28, 2005.
   
(17) Incorporated by reference to Quarterly Report on Form 10-QSB for the period ended March 31, 2005.
   
(18) Incorporated by reference to Current Report on Form 8-K filed on June 3, 2005.

 

(19) Incorporated by reference to Current Report on Form 8-K filed on July 28, 2005.
   
(20) Incorporated by reference to registration statement on Form SB-2, SEC File No. 333-131832 filed on February 14, 2006.
   
(21) Incorporated by reference to Current Report on Form 8-K filed on February 17, 2006.
   
(22) Incorporated by reference to Amendment No. 1 to registration statement the Form SB-2, SEC File No. 333-131832 filed on May 5, 2006.
   
(23) Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended June 30, 2006 filed on October 13, 2006.
   
(24) Incorporated by reference to Current Report on Form 8-K filed on October 17, 2006.
   
(25) Incorporated by reference to Current Report on Form 8-K filed on October 24, 2006.
   
(26) Incorporated by reference to Current Report on Form 8-K filed on January 26, 2007.

 

20
 

 

(27) Incorporated by reference to Current Report on Form 8-K filed on April 30, 2007.
   
(28) Incorporated by reference to Current Report on Form 8-K filed on July 25, 2007.
   
(29) Incorporated by reference to Annual Report on Form 10-KSB filed on October 15, 2007.
   
(30) Incorporated by reference to Current Report on Form 8-K filed on November 15, 2007.
   
(31) Incorporated by reference to Current Report on Form 8-K filed on December 31, 2007.
   
(32) Incorporated by reference to Current Report on Form 8-K filed on March 25, 2008.
   
(33) Incorporated by reference to Current Report on Form 8-K filed on June 13, 2008.
   
(34) Incorporated by reference to Current Report on Form 8-K filed on October 16, 2008.
   
(35) Incorporated by reference to Registration Statement on Form 10-12G/A filed on June 14, 2013.

 

21
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

NUSTATE ENERGY HOLDINGS, INC.  
   
  By: /S/ Kathleen Roberton  
    Kathleen Roberton  
    Chief Executive Officer  

 

Date: April 11, 2016

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

SIGNATURE   TITLE   DATE
         
      By: /S/ Kathleen Roberton         Chief Executive Officer         April 11, 2016
           
      By: /S/ Kevin Yates         Chief Financial Officer         April 11, 2016

 

22
 

 

TABLE OF CONTENTS

 

Reports of Independent Registered Public Accounting Firm F-2
   
Financial Statements:  
   
Balance Sheets F-3
   
Statements of Operations F-4
   
Statements of Changes in Stockholders’ Deficit F-5
   
Statements of Cash Flows F-6
   
Notes to Financial Statements F-7 - F-18

 

F-1
 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors

 

NuState Energy Holdings, Inc.

 

We have audited the accompanying balance sheets of NuState Energy Holdings, Inc. as of June 30, 2015 and 2014 and the related statements of operations and changes in stockholders’ deficit, and cash flows for each of the two years in the period ended June 30, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NuState Energy Holdings, Inc. as of June 30, 2015 and 2014 and the results of its operations and their cash flows for each of the two years in the period ended June 30, 2015 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had a net loss of approximately $960,000, and cash used in operations of approximately $179,000 for the year ended of June 30, 2015. The Company had a working capital deficit of approximately $5,885,000 and an accumulated deficit of approximately $42,175,000 at June 30, 2015. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

  /s/ D’Arelli Pruzansky, P.A.
   
  Certified Public Accountants

 

Coconut Creek, Florida

 

April 8, 2016

 

5489 Wiles Road, Suite 303       Coconut Creek, FL 33073       Phone 754 205.6417       Fax 754 205.6419

 

F-2
 

 

NUSTATE ENERGY HOLDINGS, INC. AND SUBSIDIARIES

BALANCE SHEETS

 

   June 30, 
   2015   2014 
ASSETS          
Current assets:          
Cash  $6,130   $65 
           
Total current assets   6,130    65 
           
Total assets  $6,130   $65 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current liabilities:          
Accounts payable and accrued expenses  $440,642   $437,921 
Accrued compensation   342,000    167,000 
Accrued interest   778,462    729,853 
Settlement due to ASC Recap LLC   2,372,513    2,505,860 
Convertible notes payable to ASC Recap LLC, net of discount of $106,164 in 2014   150,000    43,836 
Convertible notes payable   1,421,730    1,116,711 
Notes payable   90,241    40,241 
Derivative liabilities   295,808    356,289 
Total current liabilities   5,891,396    5,397,711 
           
Stockholders’ deficit:          
Preferred stock, $0.01 par value, 1,000,000 shares authorized          
Series B ($0.01 par value; 200,000 shares authorized, 149,600 shares issued and outstanding as of June 30, 2015 and 2014)   1,496    1,496 
Series C ($0.01 par value; 20,000 shares authorized, 332 shares issued and outstanding as of June 30, 2015 and 2014)   3    3 
Series D ($0.01 par value; 40 shares authorized, 19 shares issued and outstanding as of June 30, 2015 and 2014)   -    - 
Series E ($0.01 par value; 1,600 shares authorized, no shares issued and outstanding as of June 30, 2015 and 2014)   -    - 
Series F ($0.01 par value; 500 shares authorized, 128 shares issued and outstanding as of June 30, 2015 and 2014)   1    1 
Series G ($0.01 par value; 6 shares authorized, no shares issued and outstanding as of June 30, 2015 and 2014)   -    - 
Series H ($0.01 par value; 1,600 shares authorized, 70 shares issued and outstanding as of June 30, 2015 and 2014)   1    1 
Series I ($0.01 par value; 100,000 shares authorized, 30,000 shares issued and outstanding as of June 30, 2015 and 2014)   300    300 
Series J ($0.01 par value; 80 shares authorized, 2 shares issued and outstanding as of June 30, 2015 and 2014)   -    - 
Series Y ($0.01 par value; 87,000 shares authorized, 87,000 shares issued and outstanding as of June 30, 2015 and 2014)   870    870 
Common stock, $0.001 par value, 10,000,000,000 shares authorized: 2,176,954,202 shares and 805,603,202 shares issued and outstanding at June 30, 2015 and 2014, respectively (See Note 7)   2,176,954    805,603 
Additional paid in capital   34,109,946    35,008,529 
Accumulated deficit   (42,174,837)   (41,214,449)
Total stockholders’ deficit   (5,891,396)   (5,397,646)
           
Total liabilities and stockholders’ deficit  $6,130   $65 

 

See accompanying notes to financial statements.

 

F-3
 

 

NUSTATE ENERGY HOLDINGS, INC. AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

 

   FOR THE YEAR
ENDED
   FOR THE YEAR
ENDED
 
   JUNE 30, 2015   JUNE 30, 2014 
         
Net revenues  $-   $- 
           
Operating expenses:          
Selling, general and administrative   358,656    405,045 
Total operating expenses   358,656    405,045 
           
Loss from operations   (358,656)   (405,045)
           
Other income (expense)          
Derivative liability expense   -    (204,283)
Gain (loss) on change in fair value of derivative liabilities   60,481    (2,006)
Interest expense   (310,864)   (191,716)
Loss on restructuring of debt   (11,928)   - 
Loss on debt settlement   (339,421)   (564,557)
Total other expense   (601,732)   (962,562)
           
Net income (loss)  $(960,388)  $(1,367,607)
           
WEIGHTED AVERAGE COMMON SHARES          
Basic   1,579,346,569    509,277,942 
Diluted   1,579,346,569    509,277,942 
           
NET (LOSS) INCOME PER COMMON SHARE – BASIC AND DILUTED:          
Net loss   (0.00)   (0.00)

 

See accompanying notes to financial statements.

 

F-4
 

 

NUSTATE ENERGY HOLDINGS, INC. AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014

 

   Preferred Stock -   Preferred Stock -   Preferred Stock -   Preferred Stock -   Preferred Stock -   Preferred Stock -   Preferred Stock -   Preferred Stock -   Common             
   Series B   Series C   Series D   Series F   Series H   Series I   Series J   Series Y   Stock   Additional       Total 
   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.01 Par Value   $0.001 Par Value   Paid-in   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance at June 30, 2013, as restated   149,600   $1,496    332   $3    19   $0    128   $1    70    1    30,000    300    2   $0    87,000   $870    482,383,202   $482,383    34,946,441   $(39,846,843)  $(4,415,348)
Issuance of common stock for conversion of debt                                                                                   1,000,000    1,000    19,000         20,000 
                                                                                                          
Issuance of common stock to partially satisfy payable to ASC Recap, LLC                                                                                   322,220,000    322,220    43,088    0    365,308 
                                                                                                          
Net loss for the year ended June 30, 2014                                                                                                  (1,367,607)   (1,367,607)
                                                                                                          
Balance at June 30,2014   149,600    1,496    332    3    19    -    128    1    70    1    30,000    300    2    0    87,000    870    805,603,202    805,603    35,008,529    (41,214,449)   (5,397,647)
                                                                                                          
Issuance of common stock to IBC                                                                                   1,288,371,000    1,288,371    (840,497)   0    447,874 
                                                                                                          
Issuance of common stock to partially satisfy payable to ASC Recap, LLC                                                                                   82,980,000    82,980    (58,086)   0    24,894 
                                                                                                          
Net loss for the year ended June 30, 2015                                                                                                  (960,388)   (960,388)
                                                                                                          
Balance at June 30, 2015   149,600   $1,496    332   $3    19   $-    128   $1    70   $1    30,000   $300    2   $-    87,000   $870    2,176,954,202   $2,176,954   $34,109,946   $(42,174,837)  $(5,891,396 

 

See accompanying notes to financial statements.

 

F-5
 

 

NUSTATE ENERGY HOLDINGS, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

 

   FOR THE YEAR
ENDED
   FOR THE YEAR
ENDED
 
   JUNE 30, 2015   JUNE 30, 2014 
         
Cash flows from operating activities:          
Net income (loss)  $(960,388)  $(1,367,607)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Amortization of debt discount   106,164    43,836 
Interest expense included in the principal amount of convertible notes   -    - 
Loss on debt settlement   339,421    564,557 
(Gain) loss on change in fair value of derivative liabilities   (60,481)   2,006 
Derivative liability expense   -    204,283 
Loss on restructuring of debt   11,928    - 
           
Changes in operating assets and liabilities          
Accounts payable and accrued expenses   2,721    36,139 
Accrued compensation   175,000    240,000 
Accrued interest   206,700    147,880 
Net cash used in operating activities   (178,935)   (128,906)
           
Cash flows from financing activities:          
Proceeds from convertible notes payable   185,000    128,500 
Net cash provided by financing activities   185,000    128,500 
           
Net increase (decrease) in cash   6,065    (406)
           
Cash at beginning of year   65    471 
           
Cash at end of year  $6,130   $65 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for:          
Interest  $-   $- 
Income taxes  $-   $- 
           
Issuance of common stock for conversion of debt  $-   $20,000 
Issuance of common stock to satisfy accrued compensation  $-   $- 

Issuance of common stock to settle liability to IBC Funds

  $447,874   $- 
Issuance of common stock to partially satisfy settlement payable to ASC Recap  $24,894   $365,368 
Satisfaction of accrued compensation as part of the obligation to ASC Recap  $-    745,500 
Satisfaction of convertible notes payable and accrued interest as part of the obligation to ASC Recap  $-   $1,526,157 
Satisfaction of accounts payable and accrued expenses as part of the obligation to ASC Recap  $-    96,076 

 

See accompanying notes to financial statements.

 

F-6
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 1: ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN

 

NuState Energy Holdings, Inc., or the Company, currently is a Florida corporation that was incorporated in Nevada in October 1987. It was formerly known as Jaguar Investments, Inc. between October 1987 and May 2003, Power2Ship, Inc. between May 2003 and November 2006, and Fittipaldi Logistics, Inc. between November 2006 and December 2007.

 

The accompanying financial statements have been prepared on a going concern basis. The Company had a net loss of approximately $960,000 and net cash used in operating activities of approximately $179,000 during the year ended June 30, 2015 and had a working capital deficit of approximately $5.88 million at June 30, 2015. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the 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 reporting amounts of revenues and expenses during the reported period. Actual results will differ from those estimates. Included in these estimates are assumptions used in Black-Scholes-Merton derivative liability valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate and in the valuation allowance of deferred tax assets.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid, temporary, cash equivalents with an original maturity of three months or less when purchased, to be cash equivalents. The Company had no cash equivalents during the years ended June 30, 2015 and 2014.

 

Concentration of Credit Risks

 

The Company is subject to a concentration of credit risk from cash.

 

The Company’s cash account is held at a financial institution and is insured by the Federal Deposit Insurance Corporation, or FDIC, up to $250,000. During the years ended June 30, 2015 and 2014, the Company had not reached a bank balance exceeding the FDIC insurance limit.

 

Derivative Liabilities

 

The Company assessed the classification of its derivative financial instruments as of June 30, 2015 and 2014, which consist of convertible instruments and rights to shares of the Company’s common stock, and determined that such derivatives meet the criteria for liability classification under ASC 815.

 

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.

 

F-7
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

During the year ended June 30, 2015 and 2014, the Company had notes payable outstanding in which the conversion rate was variable and undeterminable. Accordingly, the Company has recognized a derivative liability in connection with such instruments. The Company uses judgment in determining the fair value of derivative liabilities at the date of issuance and at every balance sheet thereafter and in determining which valuation method is most appropriate for the instrument (e.g., Black-Scholes-Merton), the expected volatility, the implied risk free interest rate, as well as the expected dividend rate, if any.

 

Fair Value of Financial Instruments

 

The Company accounts for assets and liabilities measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.

 

ASC 820 defines fair value as 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. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

  Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
     
  Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
     
  Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

 

The Company’s derivative liability is classified as Level 3 financial instrument.

 

Additional Disclosures Regarding Fair Value Measurements

 

The carrying value of cash, accounts payable and accrued expenses, accrued compensation, notes payable and convertible promissory notes payable, approximate their fair value due to the short maturity of these items or the use of market interest rates.

 

Convertible Instruments

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options. Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

ASC 815-40, Contracts in Entity’s own Equity, generally provides that, among other things, if an event is not within the entity’s control, such contract could require net cash settlement and shall be classified as an asset or a liability.

 

The Company determines whether the instruments issued in the transactions are considered indexed to the Company’s own stock. The Company issued certain promissory notes during fiscal 2012 which were convertible at variable rates. Such instruments were deemed to include embedded conversion features until June 23, 2012, at which time, the Company and all except one of the note holders agreed to set a floor on the conversion rate. During fiscal years 2014 the Company’s issued convertible securities with variable conversion provisions that resulted in derivative liabilities.

 

Income Taxes

 

The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

 

The Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions”. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

F-8
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Income Taxes, continued

 

The Company has adopted ASC 740-10-25,Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of June 30, 2015, the Company had not filed tax returns for the tax years ending June 30, 2008 through 2014 and such returns, when filed, potentially will be subject to audit by the taxing authorities for a minimum of three years beyond the filing date under the three-year statute of limitations. The Company has not accrued any potential tax penalties associated with not filing these tax returns. Due to recurring losses, management believes such potential tax penalties, in any, would not be material in amount.

 

Share-Based Payments

 

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation - Stock Compensation”. Under the fair value recognition provisions of this topic, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is the vesting period.

 

The Company has elected to use the Black-Scholes-Merton, or BSM, option-pricing model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

Segment Reporting

 

The Company operates in one business segment which technologies are providing pertinent, real-time information to the worldwide transportation and security industries.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements have been issued but deemed by management to be outside the scope of relevance to the Company.

 

As an emerging growth company, we have elected to use the exemption provided for in the Jumpstart Our Business Startups Act or JOBS Act allowing us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies pursuant to Section 102(b)(1) of the Act.

 

Basic and Diluted Earnings Per Share

 

Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of shares of Common Stock outstanding during each period. Diluted earnings per share are computed using the weighted average number of shares of Common Stock and the dilutive Common Stock share equivalents outstanding during the period. Dilutive Common Stock share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method) and conversion of other securities such as convertible debt or convertible preferred stock. Potential common shares includable in the computation of fully-diluted per-share results are not presented in the financial statements for the year ended June 30, 2014, as their effect would be anti-dilutive.

 

F-9
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Basic and Diluted Earnings Per Share, continued

 

   For the Years ended June 30, 
   2015   2014 
Numerator:          
Net loss from operations  $(358,656)  $(405,045)
Interest expense   (310,864)   (191,716)
Derivative liability expense   -    (204,283)
Loss on settlement of debt   (339,421)   (564,557)
Loss on restructuring of debt   (11,928)   - 
Gain (loss) on change in fair value of derivative liabilities   60,481    (2,006)
Numerator for basic earnings per share- net loss  $(960,388)  $(1,367,607)
           
Denominator:          
Denominator for basic earnings per share-weighted average shares   1,579,346,569    509,277,942 
Effect of dilutive securities-when applicable:          
Convertible promissory notes   3,925,926,920    312,122,746 
Preferred Stock   66,103,200    66,103,200 
Warrants   -    45,047,293 
Denominator for diluted earnings per share—adjusted weighted-average shares and assumed conversions   5,571,376,689    932,551,181 
Earnings (loss) per share:  $-   $- 
Basic and diluted          

 

The weighted-average potentially dilutive common share equivalents outstanding at June 30, 2015 and 2014 are as follows:

 

   2015   2014 
Series B Preferred Stock   2,992,000    2,992,000 
Series C Preferred Stock   33,200    33,200 
Series D Preferred Stock   19,000,000    19,000,000 
Series F Preferred Stock   25,695,000    25,695,000 
Series H Preferred Stock   2,796,000    2,796,000 
Series I Preferred Stock   15,000,000    15,000,000 
Series J Preferred Stock   500,000    500,000 
Series Y Preferred Stock   87,000    87,000 
Convertible notes payable   3,925,926,920    312,122,746 
Warrants   -    45,047,293 
Total   3,992,030,120    423,273,239 

 

NOTE 3: DERIVATIVE LIABILITY

 

The Company accounts for the embedded conversion features included in its convertible instruments as derivative liabilities. The aggregate fair value of derivative liabilities at June 30, 2015 and 2014 amounted to $295,808 and $356,289, respectively. For the year ended June 30, 2015, the Company recorded a gain on the change in fair value of derivative liabilities expense of $60,481. For the year ended June 30, 2014, the Company recorded a derivative liability expense of $204,283 and a loss related to the change in fair value of the derivative liabilities amounting to $2,006. At each measurement date, the fair value of the embedded conversion features was based on the Black-Scholes-Merton method using the following assumptions:

 

    Year Ended June 30,
    2015   2014
Effective Exercise price   0.00005   $.00025 – 0.00065
Effective Market price   0.0001   $.0006 - 0.002
Volatility   465%   426% - 495%
Risk-free interest   0.1%   0.1%
Terms   252 - 365 days   252 - 365 days
Expected dividend rate   0%   0%

 

F-10
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 3: DERIVATIVE LIABILITY, continued

 

Changes in the derivative liabilities during the years ended June 30, 2015 and 2014 are as follows:

 

Derivative liabilities at June 30, 2013  $- 
Issuance of embedded derivatives, recognized as debt discount   150,000 
Derivative liability expense, recognized as other expense   204,283 
Loss on change in fair value of derivative liability, recognized as other expense   2,006 
Derivative liability at June 30, 2014  $356,289 
Gain on change in fair value of derivative liability, recognized as other expense   (60,481)
Derivative liabilities at June 30, 2015  $295,808 

 

NOTE 4: CONVERTIBLE NOTES PAYABLE AND NOTE PAYABLE

 

Convertible Notes Payable

 

At June 30, 2015 and June 30, 2014 convertible debentures consisted of the following:

 

   June 30, 
   2015   2014 
Convertible notes payable  $1,421,730   $1,116,711 
Convertible notes payable to ASC Recap   150,000    150,000 
Unamortized debt discount   -    (106,164)
Total  $1,571,730   $1,160,547 

 

The Company had convertible promissory notes aggregating approximately $1.6 million and $1.2 million at June 30, 2015 and June 30, 2014, respectively. The related accrued interest amounted to approximately $754,000 and $711,000 million at June 30, 2015 and June 30, 2014, respectively. The convertible notes payable bear interest at rates ranging from 10% to 18% per annum. The convertible notes are generally convertible, at the holders’ option, at rates ranging from $0.00125 to $0.0267 per share. At June 30, 2015, approximately $0.8 million of convertible promissory notes had matured, are in default, and remain unpaid.

 

On July 22, 2013 and May 6, 2014, the Company issued to ASC Recap LLC (“ASC”), in connection with the Company’s settlement with ASC of up to approximately $2.5 million in liabilities of the Company, two convertible promissory notes with principal amounts of $25,000 and $125,000, respectively. The July 22, 2013 note matured on March 31, 2014 and remains unpaid. The May 6, 2014 note matured on May 6, 2015, is in default, and remains unpaid. The notes are convertible into the common stock of the Company at any time at a conversion price equal to 50% of the lowest closing bid price of our common stock for the twenty days prior to conversion.

 

Notes Payable

 

The Company had promissory notes aggregating $90,241 and $40,241 at June 30, 2015 and June 30, 2014, respectively. The related accrued interest amounted to approximately $24,489 and $19,170 at June 30, 2015 and June 30, 2014, respectively. The notes payable bear interest at rates ranging from 8% to 16% per annum and are payable monthly. All promissory notes outstanding as of June 30, 2015 have matured and are in default and remain unpaid.

 

Transactions

 

The Company generated proceeds of $185,000 from the issuance of convertible promissory notes with interest rates of 18% during fiscal 2015.

 

The Company generated proceeds of $128,500 from the issuance of 13 convertible promissory notes with interest rates of 18% during fiscal 2014.

 

The Company issued 1,000,000 shares of common stock upon conversion of two convertible promissory notes at contractual rates totaling $20,000 during fiscal 2014 (See Note 6).

 

The Company issued 3,166,667 shares of common stock upon conversion of $10,000 of convertible promissory notes at contractual rates and $5,833 of accrued interest thereon during fiscal 2014.

 

The Company recognized interest expense, including amortization of debt discount, of approximately $311,000 and $192,000 during fiscal 2015 and 2014, respectively.

 

F-11
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 5: OBLIGATIONS TO ASC RECAP, LLC

 

In July, 2013, certain of the Company’s creditors showed interest in selling their claims against the Company to ASC Recap, LLC (“ASC”); this group also included both current and past management of the Company. This led to the Company signing a Liability Purchase Agreement with ASC on July 23, 2013. This Agreement required the Company to issue common shares within five business days of each purchase at a 25% discount from the market price to ASC in amounts equal to the claims purchased from the Company’s creditors. In addition, under the terms of the Agreement, the Company issued a $25,000 non-interest bearing convertible promissory note to ASC, as described in Note 4.

 

ASC signed a series of Claim Purchase Agreements with certain creditors of the Company to purchase their claims against the Company totaling $2,531,565. These claims consisted of notes payable, convertible notes payable, vendor payables and accrued compensation to the Company’s CEO and to a related party. The Claim Purchase Agreements required ASC to settle the creditors’ claims against the Company for a total of $1,305,996. Each Claim Purchase Agreement stipulated that ASC would pay each creditor the agreed-upon amount in up to twelve (12) monthly installments.

 

In January, 2014, the Company had not issued any shares to ASC as required by the agreement. As a result, ASC filed a complaint in Leon County, Florida demanding the prescribed issuance of shares from the Company for the purchased claims. A settlement agreement was reached on February 6, 2014, and on March 12, 2014 ASC Recap filed a motion in Leon County, Florida which forced the Company to comply. ASC Recap was awarded a $2,531,565 judgement which was to be paid by issuing free trading common stock at a 25% discount from the market price. In addition, on May 6, 2014, the Company issued a $125,000 non-interest bearing convertible promissory note to ASC, as described in Note 4. Between April and June of 2014, the Company issued to ASC 322,220,000 shares of common stock with an aggregate market value of $365,308, which reduced the recorded liability by $273,981; in July of 2014, the Company issued 82,980,000 shares of common stock with an aggregate market value of $24,894 (see Note 6).

 

An analysis of the settlement liability due to ASC is as follows:

 

Total creditor claims purchased by ASC - as ratified by the settlement agreement dated February 6, 2014       $2,531,565 
           
Reduction of liability by shares issued between April and June 2014:          
Market value of 322,220,000 common shares issued  $365,308      
Less 25% discount as per settlement agreement   (91,327)   (273,981)
           
Cash Payments and adjustments        (50,599)
           
Liability after issuances of shares, cash payments, and adjustments        2,206,985 
           
Add back the previous reduction of liability by shares issued in consideration of ASC waiving its right to additional shares under the settlement agreement        273,981 
           
Liability as of June 30, 2014 agreed to by the Company and ASC        2,480,966 
           
Accrual to increase in recorded liability by the market value of 82,980,000 common shares issued during July 2014        24,894 
           
Carrying value of settlement liability due to ASC at June 30, 2014        2,505,860 
           
Reduction of liability by shares issued in July 2014        (24,894)
Cash payments and adjustments        (108,453)
Carrying value of settlement liability due to ASC at June 30, 2015       $2,372,513 

 

This resulted in a loss on debt settlement in the accompanying statement of operations for the year ended June 30, 2014, as follows:

 

Market value of 322,220,000 common shares issued between April and June 2014  $365,308 
      
Market value of 82,890,000 common shares issued during July 2014   24,894 
      
Convertible notes payable issued   150,000 
      
Adjustments to recorded liabilities of NuState   24,355 
      
Loss on debt settlement during the year ended June 30, 2014  $564,557 

 

F-12
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 5: OBLIGATIONS TO ASC RECAP, LLC, continued

 

The Company ceased issuing shares upon discovering that ASC had failed to make its first payment to the creditors on time, did not give verifiable reports to the creditors, or make regular monthly payments as specified in the Claim Purchase Agreement. A provision in each Claim Purchase Agreement stipulated that the “Purchaser (ASC) shall not be obligated to pay any portion of the purchase price in the event of a Default by the Company.” On August 13, 2015 ASC served the Company with a Notice of Default, which per the Agreement, returns the unpaid balance owed to the creditors of the Company.

 

NOTE 6: SETTLEMENT WITH IBC FUNDS, LLC

 

On October 9, 2014, we entered into a Settlement Agreement with IBC Funds, LLC (“IBC’). This agreement was approved by the Manatee County, Florida Court on October 10, 2014. Pursuant to the Settlement Agreement, the Company agreed to settle approximately $259,000 of outstanding accounts payable and accrued expenses (the “IBC Claim Amount”) by issuing IBC 1,288,371,000 shares of its common stock at a price per share equal to fifty percent of the lowest sales price of the common stock during the fifteen day trading period preceding the request of payment. In the event the Company was delinquent on issuance of the Company’s shares upon request by IBC, the discount would be increased by five percent and by an additional five percent for each additional delinquency until all settlement shares had been received. At no time could IBC and its affiliates collectively own more than 4.99% of the outstanding shares of common stock. During October 2014, IBC paid an aggregate of $66,000 to various Company creditors. On February 12, 2015 IBC issued a letter of default to the Company.

 

NOTE 7: STOCKHOLDERS’ DEFICIT

 

Common Stock

 

At June 30, 2015 the Company had 1,750,000,000 authorized common shares. On October 5, 2015 the Company increased its authorized common shares to 10,000,000,000.

 

A summary of the issuance of shares of Common Stock, related consideration and fair value of transaction, for the year ended June 30, 2015 was as follows:

 

   Number of shares of common stock   Fair Value at Issuance   Fair Value at Issuance
(per share)
 
             
Issuance of common shares to IBC (see Note 6)   859,000,000   $331,000   $0.0003853 
Issuance of common shares to IBC (see Note 6)   429,371,000   $116,874   $0.000272 
Issuances in to partially satisfy settlement payable to ASC Recap, LLC   82,980,000   $24,894   $0.0003 

 

Preferred Stock

 

All issued and outstanding shares of the Company’s preferred stock have a par value of $0.01 per share and rank prior to any class or series of the Company’s common stock as to the distribution of assets upon liquidation, dissolution or winding up of the Company or as to the payment of dividends. All preferred stock shall have no voting rights except if the subject of such vote would reduce the amount payable to the holders of preferred stock upon liquidation or dissolution of the company and cancel and modify the conversion rights of the holders of preferred stock as defined in the certificate of designations of the respective series of preferred stock.

 

Series B Preferred Stock

 

The Series B Preferred Stock has a stated value of $5.00 per share. Each share of Series B preferred Stock is convertible into 20 shares of the Company’s common stock. In addition, the holders of the preferred stock are entitled to receive annual cumulative dividends of 10% payable in cash or shares of the Company’s common stock, at the Company’s option. At June 30, 2015, the Company had not declared the payment of cumulative dividends aggregating approximately $598,400.

 

Series C Preferred Stock

 

The Series C Preferred Stock has a stated value of $30.00 per share. Each share of Series C Preferred Stock is convertible into 100 shares of the Company’s common stock.

 

F-13
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 7: STOCKHOLDERS’ DEFICIT, continued

 

Preferred Stock, continued

 

Series D Preferred Stock

 

The Series D Preferred Stock has a stated value of $25,000 per share. Each share of the Series D preferred Stock is convertible into 1,000,000 shares of the Company’s common stock. In addition, the holders of the Series D Preferred Stock are entitled to receive a participation interest in the annual net profits generated from any future business activities undertaken by the Company in Brazil.

 

Series F Preferred Stock

 

The Series F Preferred Stock has a stated value of $5,000 per share. Each share of Series F Preferred Stock is convertible into 200,000 shares of the Company’s common stock.

 

Series H Preferred Stock

 

The Series H Preferred Stock has a stated value of $1,000 per share. Each share of Series H Preferred Stock is convertible into the greater of a) $0.025 per share or b) 100% of the average of the three lowest closing bid prices for the ten trading days immediately preceding the Company’s receipt of a notice of conversion.

 

Series I Preferred Stock

 

The Series I Preferred Stock has a stated value of $10.00 per share. Each share of Series I Preferred Stock is convertible into 500 shares of the Company’s common stock.

Series J Preferred Stock

 

The Series J Preferred Stock has a stated value of $2,500 per share. Each share of the Series J Preferred Stock is convertible into the Company’s common shares using a conversion price equal to 50% of the average closing price of the Company’s common stock for the ten trading days immediately preceding the conversion date, although in no instance less than $0.01 per share or greater than $0.03 per share.

 

Series Y Preferred Stock

 

The Series Y Preferred Stock has a stated value and par value of $0.01 and has no liquidity preference. Each share of Series Y Preferred Stock has 203 votes per share and has the right to vote with the common shareholders in all matters. The shares are convertible into one share of the Company’s common stock at the holder’s option subject to an adjustment upon issuing dividends or distributions payable in common stock and reverse or forward stock split. The shares are held by a former Chairman of the Board of the Company.

 

Warrants

 

   Weighted Average   Weighted Average Remaining
Contractual
 
   Warrants   Price per Share   Term 
Outstanding at June 30, 2013   45,047,293   $0.025    1.48 
Granted   -    -      
Exercised   -    -      
Forfeitures   -    -      
Outstanding at June 30, 2014   45,047,293   $0.025    0.48 
Granted   -    -      
Exercised   -    -      
Forfeitures   (45,047,293)   0.025      
Outstanding at June 30, 2015   -   $-    - 

 

F-14
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 7: STOCKHOLDERS’ DEFICIT, continued

 

Options

 

In January 2001, The Company adopted the 2001 Employee Compensation Plan, or the Plan. The Plan provided for stock compensation through awards of shares of the Company’s common stock.

 

The Company’s board of directors may appoint a Compensation Committee to administer the Plan. In the absence of such appointment, the board of directors is responsible for the administration of the Plan. The Company did not appoint a Compensation Committee to administer the Plan. The board of directors has the sole power to award shares of common stock under the Plan, as well as determine those individuals eligible to receive an award of Plan shares. Awards of shares under the Plan may be made as compensation for services rendered, directly or in lieu of other compensation payable, as a bonus in recognition of past services or performance or may be sold to an employee.

 

The maximum number of shares which may be awarded under the plan is 5,000,000. Awards were generally granted to:

 

executive officers, officers and directors (including advisory and other special directors) of the Company;
   
full-time and part-time employees of the Company;
   
natural persons engaged by the Company as consultants, advisors or agents; and
   
a lawyer, law firm, accountant or accounting firm, or other professional or professional firm engaged by the Company.

 

Grants to employees may be made for cash, property, services rendered or other forms of payment constituting lawful consideration under applicable law. Shares awarded, other than for services rendered, may not be sold at less than the fair value of our common stock on the date of grant.

 

The plan terminated in January 2011. The board of directors has absolute discretion to amend the plan with the exception that the board had no authority to extend the term of the plan, to increase the number of shares subject to award under the plan or to amend the definition of “Employee” under the plan.

 

The Company generally recognizes its share-based payments over the vesting period for which such payments are made.

 

The Company had no outstanding options or option activity between July 1, 2013 and June 30, 2015

 

The total compensation cost related to non-vested awards not yet recognized amounted to $0 at June 30, 2015 and 2014. There was no intrinsic value as of June 30, 2015. The Company’s policy is to issue shares pursuant to the exercise of stock options from its available authorized but unissued shares of common stock. It does not issue shares pursuant to the exercise of stock options from its treasury shares.

 

F-15
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 8: INCOME TAXES

 

The Company has not filed its corporate tax returns since fiscal 2007.

 

Due to recurring losses, the Company’s tax provision for the years ended June 30, 2015 and 2014 was $0.

 

A summary of our deferred tax is as follows:

 

   June 30, 2015   June 30, 2014 
Tax benefit of net operating loss carry forward  $10,698,000   $10,476,000 
Less: valuation allowance   (10,698,000)   (10,476,000)
Net deferred tax assets  $-   $- 

 

As of June 30, 2015, the Company had unused net operating loss carry forwards of approximately $27.7 million available to reduce future federal taxable income. Net operating loss carryforwards expire through fiscal years ending 2035. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally a greater than 50% change in ownership).

 

The Company’s ability to offset future taxable income, if any, with tax net operating loss carryforwards may be limited due to the non-filing of tax returns and the impact of the statute of limitations on the Company’s ability to claim such benefits. Furthermore, changes in ownership may result in limitations under Internal Revenue Code Section 382. Due to these limitations, and other considerations, management has established full valuation allowances on deferred tax assets relating to net operating loss carryforward, as the realization of any future benefits from these assets is uncertain.

 

The valuation allowance at June 30, 2015 and 2014 was $10,698,000 and $10,476,000, respectively. The increase during the years ended June 30, 2015 and 2014 was approximately $222,000 and $213,000, respectively.

 

The table below summarizes the differences between our effective tax rate and the statutory federal rate as follows for fiscal 2015 and 2014. The effective tax rate is 35% Federal and 3.6% for State after Federal tax benefit:

 

   2015   2014 
Computed “expected” tax benefit   (35.0%)   (35.0%)
State income taxes, net of federal tax benefit   (3.6%)   (3.6%)
           
Permanent differences   16.1%   23.0%
Subtotal   (22.5%)   (15.6%)
Change in valuation allowance   22.5%   15.6%
Provision for income taxes   —%     —%  

 

NOTE 9: RELATED PARTY TRANSACTIONS

 

During fiscal 2015 and 2014, the Company incurred expenses of $97,841 and $110,400, respectively, to a related party by means of common ownership and management with the Company as compensation to our Chairman of the Board and Chief Financial Officer.

 

F-16
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 10: SUBSEQUENT EVENTS

 

On July 24, 2015, our board of directors appointed Kathleen Roberton as President and Chief Executive Officer. Concurrently with this appointment, Kevin Yates resigned as President and Chief Executive Officer but remained Chairman of the Board to oversee operations and sales development. On October 14, 2015, Ms. Roberton was issued 499,000,000 shares of common stock valued at $49,900 as a performance bonus pursuant to her employment agreement.

 

On August 13, 2015 ASC Recap, LLC issued the Company a letter of default related to its agreement to settle outstanding liabilities and related accrued interest and returned approximately $2,369,000 of liabilities to their original holders including $908,000 of principal and $619,000 of accrued interest thereon, $746,000 in accrued compensation and $96,000 in accounts payable. These balances reflect the payments made by ASC to creditors prior to the default.

 

On September 9, 2015, the Company entered into a one-year consulting agreement with Hippocrates Management Company, Inc. for general business consulting services. The consultant is a related party to Kathy Roberton, our Chief Executive Officer. The contractual payments to the consultant include a payment of $5,000 in cash per month.

 

From July 2015 t through January 2016, we issued $215,000 of short-term, convertible promissory notes to thirteen unaffiliated investors. These notes have an interest rate of 8% and a six-month term and are convertible at a 50% discount to the average closing bid price of our common stock for the 10 days immediately preceding the receipt of a notice of conversion from the investor. The embedded conversion features included in these convertible instruments creates derivative liabilities that will be recorded as current liabilities on the Company’s balance sheet along with discounts on notes payable that will be amortized over the six-month term of the notes.

 

On October 5, 2015, the Company amended its certificate of incorporation to increase the number of its authorized shares of common stock, par value $0.001 per share, to ten billion shares. This amendment was made pursuant to a majority written consent in lieu of a special meeting of shareholders by eight of our shareholders on March 31, 2014 in accordance with the relevant sections of the Nevada Revised Statutes and, subsequently, approved by the Board of Directors.

 

On October 9, 2015, we issued five billion shares of our common stock, twenty-six shares of Series F preferred stock, with a stated value of $5,000 and a par value of $0.001 per share, and three shares of Series H Preferred Stock, with a stated value of $1,000 and a par value of $0.001 per share, to the Company’s current Chairman of the Board in consideration for his forgiveness of $633,000 in accrued compensation. Subsequently, in October 2015, these Series F and Series H preferred shares were exchanged for 532,000 shares of Series A preferred stock. Holders of Series A preferred shares are restricted from converting their shares to common stock for two years (the “Lock-Up Period”). After the Lock-Up Period, they may convert up to one percent of their Series A preferred shares into common shares on a one for one basis each month for four years (the “Leak-Out Period”). However, the conversion price automatically reduces by 86% to $0.035 per share if our common stock is below $0.10 per share. At the end of the Leak-Out Period, up to all of the remaining Series A preferred shares may be converted to common stock at the shareholders’ discretion.

 

On October 14, 2015 a former Chairman of the Board of the Company was issued 80 shares of Series F preferred stock with a stated value of $5,000 and a par value $0.001 per share, and 12 shares of Series H preferred stock, with a stated value of $1,000 and a par value $0.001 per share in consideration for his forgiveness of $412,000 in accrued compensation. Subsequently, in October 2015, these Series F and Series H preferred shares were exchanged for 1,648,000 shares of Series A preferred stock.

 

On October 14, 2015 the 87,000 shares of Series Y preferred stock, owned by the Company’s former Chairman of the Board, were valued at $87,000 and exchanged for 348,000 shares of Series A preferred stock rather than the 87,000 shares of common stock as defined in the designation of the Series Y preferred stock. These shares of Series A preferred stock will be valued at their fair market value and the additional consideration above the market value of the 87,000 shares of common stock will be expensed as additional compensation during the second quarter of fiscal year 2016.

 

On October 16, 2015, preferred shareholders representing a majority of each series of our outstanding preferred stock, except for the Series Y preferred stock, voted to cancel all their shares of preferred stock in exchange for 8,991,840 shares of newly designated Series A preferred stock. The number of shares of newly issued Series A preferred stock issued to each preferred shareholder was calculated by dividing the total stated value of their preferred shares by $0.25.

 

On October 29, 2015, we dissolved the corporation in Nevada and simultaneously incorporated it in Florida. The Florida articles of incorporation authorize the Company to issue ten billion one hundred million shares of stock of which ten billion may be shares of its common stock, par value $0.0001 per share, and one hundred million may be shares of its preferred stock, par value $0.001 per share.

 

In November, 2015, we sold 40,000 shares of Series A preferred stock to one investor for $10,000 and sold 100,000 shares of Series B preferred stock to another investor for $25,000.

 

F-17
 

 

NUSTATE ENERGY HOLDINGS, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 AND 2014

 

NOTE 10: SUBSEQUENT EVENTS, continued

 

In October and November 2015, three existing note holders exchanged an aggregate of $281,910 of their outstanding convertible notes and accrued interest thereon into 1,127,640 shares of Series B preferred stock, par value $0.001. The number of shares of newly designated Series B preferred stock issued to each note holder was calculated by dividing their total principal and accrued interest thereon by $0.25. The holders of the Series B preferred shares are restricted from converting their shares to common stock for two years (the “Lock-Up Period”). After the Lock-Up Period, they may convert up to one percent of their Series B preferred shares into common shares on a one for five basis each month for four years (the “Leak-Out Period”). However, the conversion price automatically reduces by 30% to $0.035 per share if the price of our common stock is below $0.10 per share on a conversion date. At the end of the Leak-Out Period, up to all of the remaining Series B preferred shares may be converted to common stock at the shareholders’ discretion.

 

In February 2016, we settled $946,755 of convertible promissory notes for $546,000 with 9 noteholders resulting in a $400,755 gain on debt settlement that will be recorded in our third quarter of fiscal 2016. Also, these noteholders agreed to exchange the $546,000 of promissory notes for an aggregate of 2,184,000 shares of Series A convertible preferred stock.

 

On February 26, 2016, we agreed to suspend the definitive agreement with Ronn Motor Group as Ronn Motor Group is going through a corporate restructuring. On February 26, 2016 we entered into a binding Letter of Intent with MK Technologies LLC (a related party to Ronn Motor Group), in relation to the purchase of its fuel enhancement technologies and all its Assets, for total consideration of $2,000,000. $1,000,000 will be paid at closing, with the balance of the purchase price paid out in accordance with a mutually approved royalty agreement and paid consulting agreement, and $1,000,000 to be paid in stock, cash, or a combination on a mutually agreed schedule.

 

In March 2016, we issued a $25,000 convertible promissory note to one investor. The conversion price of this note is $0.0002 per share and, unless our Board of Directors adjusts this conversion price, it will remain unchanged upon any changes to the authorized shares of the company.

 

F-18