ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-K. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Overview
As a result of the sale of Vanguard’s (VNGE) oil and gas properties in June of 2014, as discussed in Item 1 of this report, we no longer had any oil and gas assets or related operations during the periods reported through June 30, 2017, resulting in no revenue or revenue related expenses. Further, in spite of the significant acquisition on July 1, 2017, the asset has not yet begun to be exploited, thus we continued through the end of the period reported to have no revenue or revenue related expenses.
During the fiscal year ended September 30, 2016, the Company issued 23,025 common shares in satisfaction of $76,190 of convertible debt resulting in $76,190 in gain on debt extinguishment.
New Business Activities
With the acquisition of Solar Quartz Technologies Limited we now own mining exploration and development rights to significant deposits of High Purity Quartz that we have determined in our evaluation of independent reports and considered judgment to have an aggregate market value of $530,000,000. The reserves are adequate to provide the Company with adequate resources for 25-30 years of production. See Item 1 Business for greater details.
We are currently actively securing interim working capital in order to complete mining plans and build a pre-processing plant in Townsville, North Queensland, Australia, build upon our already significant management team and market HPQ and HPQS to established markets with whom our management team have had prior relationships. These organizational efforts will also include securing significant new capital for the acquisition of a site and the building of the pre-processing plant. Upon completion, that plant will enable the Company to upgrade its newly mined HPQS to a higher level of purity (HPQS) that has a significant world-wide demand for use in the production of advanced PV solar Panels and all high-end electronics, lighting, telecom, optic and microelectronics. Failure to secure these financings will have a negative impact on the Company’s ability to continue as a going concern.
Results of Operations
For the fiscal years ended September 30, 2016 and September 30,2017 we generated no revenues, and thus no cost of sales or gross profits.
For the fiscal years ended September 30, 2016 and September 30, 2017, we incurred $64,790 and $142,834 respectively in operating expenses. This represents a 221% increase year over year. The operating expense increases are due to the acquisition of Solar Quartz Technologies Limited, which had much more administrative activity in FY 2017, primarily in the form of professional services and other general and administrative expenses.
For the fiscal year ended September 30, 2016 we recorded other income of $71,620 while in September 30, 2017 we incurred expenses of $17,488. The income in FY 2016 was entirely due to a Gain on Debt Extinguishment of $91,102, offsetting interest expenses totaling $19,482 as against net interest totaling $17,488 in FY 2017.
For the year ended September 30, 2016 we reported net income before taxes of $6,830 while in the fiscal year ended September 30, 2017 we reported a net loss before taxes of $160,322. Since there were no tax obligations in either year, net income / loss in each year was the same as that reported before taxes.
For the fiscal years ended September 30, 2016 and September 30, 2017, our cash increased from $35 to $10,738, all attributable to loans to the company from affiliated and non-affiliated parties to meet expenses. In the fiscal year ended September 30, 2017 we reported $418,755 due to affiliated parties that was an obligation on the books of Solar Quartz Technologies Limited upon its acquisition. Other receivables reported in the fiscal year ended September 30, 2017 was extinguished during the fiscal year ended September 30, 2017.
As of September 30, 2016, we had total current liabilities of $260,606 while as of September 30, 2017, we had total current liabilities of $1,009,674, an increase of 387%. Of that amount, $418,755 was attributable to Solar Quartz Technologies Limited upon its acquisition. Current liabilities increased from $48,212 to $364,009 from September 30, 2016 to September 30, 2017, an increase of 655%, of which $317,648 was attributable to Solar Quartz Technologies Limited. Accrued interest payable increased from $36,044 to $45,000, all attributable to accruals on convertible notes payable.
Liquidity and Capital Resources
As of September 30, 2017, we had $37,628 in total current assets and $1,009,674 in total current liabilities. Accordingly, we had a working capital deficit of $972,046.
Operating activities used $120,821 in cash for the year ended September 30, 2017, as compared with $34,970 for the year ended September 30, 2016, representing an increase of 245% year over year. Our increase in cash used in operating activities was due to increased professional and contract labor costs as a result of the combination of the companies. The increases were attributable to the operating loss of $160,323 for the year ended September 30, 2017 as compared to net income of $6,830 in the fiscal year ended September 30, 2016.
Cash from financing activities in the year ended September 30, 2017, included increases in amounts due to affiliates of $73,155 compared to $3,000 in the year ended September 30, 2016. And the issuance of stock generated $1 in the year ended September 30, 2016 while it used $2,234 in the year ended September 30, 2017.
Contractual Obligations
Principal balances of our material future contractual obligations as of September 30, 2017, were as follows:
|
|
Total
|
|
|
2017
|
|
|
|
|
|
|
|
|
2012 Convertible notes
|
|
$
|
70,747
|
|
|
$
|
70,747
|
|
Notes Payable
|
|
$
|
85,000
|
|
|
$
|
85,000
|
|
Critical Accounting Policies and New Accounting Pronouncements
The Company’s critical accounting policies are as described below
Principles of Consolidation and Basis of Presentation
— The consolidated financial statements include the accounts of Solar Quartz Technologies Corporation and its subsidiary, Solar Quartz Technologies Limited. Solar Quartz’s significant accounting policies are consistent with those discussed in the audited financial statements as of September 30, 2017 and 2016. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company’s fiscal year-end is September 30. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Cash and Cash Equivalents
—The Company considers all highly liquid instruments purchased with a maturity date of three months or less to be cash equivalents.
Debt Issuance Costs
—Costs incurred in connection with the issuance of long-term debt are capitalized and amortized over the term of the related debt.
Conversion Feature Liability and Warrant Liabilities
—The conversion feature liability and warrant liabilities are
recorded at fair value based upon valuation models utilizing relevant factors such as expected life, estimated volatility, risk-free interest and expected dividend rate. Changes in the fair value of these liabilities are reported in the statements of operations.
Stock-Based Compensation
—The Company accounts for employee stock-based compensation using the fair value method. The fair value attributable to stock options is calculated based on the Black-Scholes option pricing model and is amortized to expense over the service period which is equivalent to the time required to vest the stock options.
Income Taxes
—Income taxes are provided based on the liability method for financial reporting purposes. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.
Uncertain tax positions are recognized in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
The Company is required to file federal income tax returns in the United States and in various state and local jurisdictions. The Company’s tax returns filed since inception are subject to examination by taxing authorities in the jurisdictions in which it operates in accordance with the normal statutes of limitations in the applicable jurisdiction.
Earnings Per Share
– Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding. Diluted earnings per share have been calculated based upon the weighted-average number of common and potential shares.
Business Combinations
– The Company follows the provisions of ASC 805 in accounting for business combinations. Acquisitions under common control are accounted for using the carryover basis of any assets from the acquired company.
Reclassifications
– Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The reclassifications had no effect on net loss, working capital or equity previously reported.
Recently Issued Accounting Pronouncements
– Various accounting standards updates have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries. No new accounting pronouncements have been issued that are likely to have a material impact to the Company’s consolidated financial statements.
Fair Value Measurements
—The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of long-term debt was determined by discounting future cash flows using rates currently available to the Company for debt with similar terms and remaining maturities. The Company calculated that the estimated fair value of the long-term debt is not significantly different than the carrying value of the debt. The participation liability associated with outstanding long-term debt was determined by utilizing a present value factor of 10 applied to proved developed reserves associated with the wells drilled with the proceeds of the notes.
Fair value is defined as the price that would be received to sell an asset or price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in determining fair value are classified for disclosure purposes according to a hierarchy that prioritizes those inputs based upon the degree to which they are observable. The three levels of the fair-value-measurement hierarchy are as follows:
|
·
|
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
|
|
·
|
Level 2—Inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
·
|
Level 3—Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
In determining fair value, the Company utilizes observable market data when available, or models that incorporate observable market data. In addition to market information, the Company incorporates transaction-specific details that, in management’s judgment, market participants would take into account in measuring fair value. The Company utilizes the most observable inputs available for the valuation technique employed. If a fair value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement of both financial and nonfinancial assets and liabilities are characterized based upon the lowest level of input that is significant to the fair value measurement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Solar Quartz Technologies Corporation
We have audited the accompanying consolidated balance sheets of Solar Quartz Technologies Corporation as of September 30, 2017 and 2016, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 audit 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 audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Solar Quartz Technologies Corp. at September 30, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 to the consolidated financial statements, the Company sold its oil and gas properties, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ Thayer O’Neal Company, LLC
Thayer O’Neal Company, LLC
Houston, Texas
January 15, 2018
SOLAR QUARTZ TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,738
|
|
|
$
|
35
|
|
Due from Affiliate
|
|
|
26,890
|
|
|
|
|
|
Other receivables
|
|
|
|
|
|
|
966
|
|
Total Current Assets
|
|
|
37,628
|
|
|
|
1,001
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
Furniture & Equipment
|
|
|
92,653
|
|
|
|
|
|
Quartz Deposits
|
|
|
30,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
160,280
|
|
|
$
|
1,001
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
364,009
|
|
|
$
|
48,212
|
|
Accrued interest payable
|
|
|
45,060
|
|
|
|
36,044
|
|
Accrued liabilities
|
|
|
26,011
|
|
|
|
17,511
|
|
Short term notes payable
|
|
|
85,000
|
|
|
|
85,000
|
|
Other liabilities
|
|
|
92
|
|
|
|
92
|
|
Due to Affiliated Parties
|
|
|
418,755
|
|
|
|
3,000
|
|
Current portion of notes payable, net of discount $- and $71,754
|
|
|
70,747
|
|
|
|
70,747
|
|
Total Current Liabilities
|
|
|
1,009,674
|
|
|
|
260,606
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
|
Preferred stock, $0.00001 par value; 50,000,000 shares authorized; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.00001 par value; 500,000,000 and 50,000,000 shares authorized; 224,426,229 and 979,109 shares issued and outstanding
|
|
|
2,245
|
|
|
|
11
|
|
Additional paid-in capital
|
|
|
5,888,210
|
|
|
|
6,319,911
|
|
Accumulated deficit
|
|
|
(6,739,849
|
)
|
|
|
(6,579,527
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Deficit
|
|
|
(849,394
|
)
|
|
|
(259,605
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Deficit
|
|
$
|
160,280
|
|
|
$
|
1,001
|
|
The accompanying notes are an integral part of these consolidated financial statements.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Year ending September 30
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Professional Services
|
|
|
95,905
|
|
|
|
|
|
General and administrative
|
|
|
46,929
|
|
|
|
64,790
|
|
Total Operating Expenses
|
|
|
142,834
|
|
|
|
64,790
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(142,834
|
)
|
|
|
(64,790
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
Other income
|
|
|
27
|
|
|
|
-
|
|
Interest income
|
|
|
1
|
|
|
|
-
|
|
Interest expense
|
|
|
(9,016
|
)
|
|
|
(12,408
|
)
|
Other interest costs
|
|
|
(8,500
|
)
|
|
|
(7,074
|
)
|
Gain on debt extinguishment
|
|
|
|
|
|
|
91,102
|
|
Total Other Income (Expenses)
|
|
|
(17,488
|
)
|
|
|
71,620
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) before Income Taxes
|
|
|
(160,322
|
)
|
|
|
6,830
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(160,322
|
)
|
|
$
|
6,830
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) per Share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
36,569,260
|
|
|
|
1,002,134
|
|
The accompanying notes are an integral part of these consolidated financial statements.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' DEFICIT
For the years ended September 30, 2017 and 2016
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2015
|
|
|
979,109
|
|
|
$
|
10
|
|
|
$
|
6,319,889
|
|
|
$
|
(6,586,357
|
)
|
|
$
|
(266,458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for debt settlement
|
|
|
23,025
|
|
|
|
1
|
|
|
|
22
|
|
|
|
-
|
|
|
|
23
|
|
Net Income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,830
|
|
|
|
6,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2016
|
|
|
1,002,134
|
|
|
|
11
|
|
|
|
6,319,911
|
|
|
|
(6,579,527
|
)
|
|
|
(259,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for asset acquisition
|
|
|
223,424,095
|
|
|
|
2,234
|
|
|
|
(431,601
|
)
|
|
|
-
|
|
|
|
(429,467
|
)
|
Net Income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(160,322
|
)
|
|
|
(160,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2017
|
|
|
224,426,229
|
|
|
$
|
2,245
|
|
|
$
|
5,888,210
|
|
|
$
|
(6,739,849
|
)
|
|
$
|
(849,394
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Twelve Months ended September 30,
|
|
2017
|
|
|
2016
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
(160,323
|
)
|
|
$
|
6,830
|
|
Adjustments to reconcile net income/(loss) to net cash from operating activities:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
-
|
|
|
|
19,455
|
|
Gain on debt extinguishment
|
|
|
-
|
|
|
|
(91,101
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
966
|
|
|
|
(966
|
)
|
Accounts payable
|
|
|
35,455
|
|
|
|
27,995
|
|
Accrued interest payable
|
|
|
9,016
|
|
|
|
-
|
|
Accrued liabilities
|
|
|
8,500
|
|
|
|
-
|
|
Due to/from Affiliate
|
|
|
(14,436
|
)
|
|
|
3,000
|
|
Other liabilities
|
|
|
-
|
|
|
|
(183
|
)
|
Net cash from operating activities
|
|
|
(120,821
|
)
|
|
|
(34,970
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of Furniture & Equipment
|
|
|
(4,103
|
)
|
|
|
-
|
|
Net cash from investing activities
|
|
|
(4,103
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
148
|
|
|
|
23
|
|
Due to Affiliates
|
|
|
73,155
|
|
|
|
-
|
|
Issuance of short term note payable
|
|
|
-
|
|
|
|
35,000
|
|
Net cash from financing activities
|
|
|
73,303
|
|
|
|
35,023
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(51,621
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
62,358
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
10,737
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Issuance of shares for investment in subsidiary
|
|
$
|
2,234
|
|
|
$
|
|
|
Issuance of shares for settlement of debt
|
|
$
|
-
|
|
|
$
|
1
|
|
The accompanying notes are an integral part of these consolidated financial statements.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION
We were incorporated in Colorado on June 21, 2010 as Vanguard Energy Corporation (Vanguard) and until June 2014 were involved in the exploration and development of oil and gas properties in southeast Texas. We were never able to earn a profit and in January of 2013 we began investigating the possibility of selling our oil and gas properties. The sale of our oil and gas properties represented the sale of substantially all our assets in June of 2014.
The following history of events describes how the current entity Solar Quartz Technology Corporation acquired its subsidiary Solar Quartz Technologies Limited and all entities described below other than Vanguard were entities under common control.
On June 20, 2016, SQTNZ agreed to acquire Solar Quartz Technologies Pte. Ltd., A Singapore Corporation, (SQTSG) in a transfer of shares or a swap for 122 shares (100%). SQTSG (formerly known as Auzsolar Pte. Ltd.) held ownership of quartz mineral rights.
On October 1, 2016, Australian Oil and Gas Holdings, Inc., our parent company, (AOGH), (formerly known as Anasazi Energy Corporation (ANSZ) and subsequently known as Solar Quartz Technologies, Inc. (SQTI)), entered into a Reorganization and Stock Purchase Agreement and acquired Solar Quartz Technologies Limited., a New Zealand Corporation, (SQTNZ). AOGH issued 201,182,000 shares (95%) in exchange for 100% of SQTNZ shares outstanding.
On July 1, 2017, Vanguard acquired SQTNZ from SQTI in a share exchange wherein Vanguard issued 213,402,755 new shares of common stock to SQTI in exchange for 122 (100%) of the common shares of SQTNZ. The assets acquired in this exchange were reflected in our financial statements at SQTI’s historical cost basis of $30,000 as it was considered an acquisition of assets from entities under common control. The issuance of these shares was equivalent to 95% of the Company’s shares issued, as we committed to issue an additional 10,021,224 shares to those holders of our common stock immediately prior to the acquisition. These actions resulted in a total of 224,426,229 shares outstanding.
SQTNZ is a corporation that has no prior business activity other than being the title owner of the exclusive mining and development rights for two High Purity Quartz (HPQ) deposits known as Quartz Hill (represented by leases ML 30235, ML 30236 and ML 30237) and White Springs (represented by leases ML 30238 and ML 30239) located in North Queensland, Australia.
HPQS is an essential primary material for the manufacture of: Photo-Voltaic (PV) solar panels; Semiconductors; all High-end Electronic products; Fiber Optical cables; Halogen Lamps; HD and LCD television screens; and Epoxy Mounding Compounds (EMC).
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Principles of Consolidation and Basis of Presentation
— The consolidated financial statements include the accounts of Solar Quartz Technologies Corporation and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents
- The Company considers all highly liquid instruments purchased with a maturity date of three months or less to be cash equivalents.
Debt Issuance Costs
- Costs incurred in connection with the issuance of long-term debt are capitalized and amortized over the term of the related debt.
Conversion Feature Liability and Warrant Liabilities
- The conversion feature liability and warrant liabilities are recorded at fair value based upon valuation models utilizing relevant factors such as expected life, estimated volatility, risk-free interest and expected dividend rate. Changes in the fair value of these liabilities are reported in the statements of operations.
Stock-Based Compensation
- The Company accounts for employee stock-based compensation using the fair value method. The fair value attributable to stock options is calculated based on the Black-Scholes option pricing model and is amortized to expense over the service period which is equivalent to the time required to vest the stock options.
Income Taxes
- Income taxes are provided based on the liability method for financial reporting purposes. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.
Uncertain tax positions are recognized in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
The Company is required to file federal income tax returns in the United States and in various state and local jurisdictions. The Company’s tax returns filed since inception are subject to examination by taxing authorities in the jurisdictions in which it operates in accordance with the normal statutes of limitations in the applicable jurisdiction.
Earnings Per Share
- Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding. Diluted earnings per share have been calculated based upon the weighted-average number of common and potential shares.
Business Combinations
- The Company follows the provisions of ASC 805 in accounting for business combinations. Acquisitions under common control are accounted for using the carryover basis of any assets from the acquired company.
Reclassifications
- Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The reclassifications had no effect on net loss, working capital or equity previously reported.
Recently Issued Accounting Pronouncements
- Various accounting standards updates have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries. Recently accounting pronouncements have been issued that are likely to have a material impact to the Company’s consolidated financial statements. These include accounting standards as they apply to leases. The Company will treat its development of mineral rights under standards for operating leases commonly applied in mineral extraction industries.
Fair Value Measurements
- The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of long-term debt was determined by discounting future cash flows using rates currently available to the Company for debt with similar terms and remaining maturities. The Company calculated that the estimated fair value of the long-term debt is not significantly different than the carrying value of the debt.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair value is defined as the price that would be received to sell an asset or price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in determining fair value are classified for disclosure purposes according to a hierarchy that prioritizes those inputs based upon the degree to which they are observable. The three levels of the fair-value-measurement hierarchy are as follows:
|
·
|
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
|
|
·
|
Level 2—Inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
·
|
Level 3—Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
In determining fair value, the Company utilizes observable market data when available, or models that incorporate observable market data. In addition to market information, the Company incorporates transaction-specific details that, in management’s judgment, market participants would take into account in measuring fair value. The Company utilizes the most observable inputs available for the valuation technique employed. If a fair value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement of both financial and nonfinancial assets and liabilities are characterized based upon the lowest level of input that is significant to the fair value measurement.
NOTE 3 – GOING CONCERN
The sale of the Company’s oil and gas properties, raised substantial doubt of the Company to continue as a going concern. The Company also has an accumulated deficit at this point and has experienced net losses for the most part throughout its history. The Company will need additional financing to continue its operations over the next twelve months, and while management believes it will secure such financing, there can be no guarantee that it will occur.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. These financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate.
NOTE 4 – REORGANIZATION
On July 1, 2017, the Company acquired all of the shares of Solar Quartz Technologies Limited, a company incorporated in New Zealand (“SQTNZ”) and has recorded it as reorganization of entities under common control
.
These shares were purchased from Solar Quartz Technologies, Inc. (“SQTI”). We subsequently changed our name to Solar Quartz Technologies Corporation in Colorado and with FINRA, and have also been cleared by FINRA to use the new trading symbol SQTX. During July 2017 the Company issued 213,402,755 new shares of common stock to SQTI in exchange for 122 (100%) of the common shares of SQTNZ. The cost of this acquisition was recorded at $30,000. The difference between the consideration and the equity of the acquired entity was charged to additional paid-in capital. The issuance of these shares was equivalent to 95% of the Company’s shares issued, as we committed to issue an additional 10,021,224 shares to those holders of our common stock immediately prior to the acquisition. These actions resulted in a total of 224,426,229 shares outstanding. The Company does not anticipate any further reorganization of its common stock. We plan to apply to trade on the more senior OTCQX exchange or NASDAQ. The mineral rights owned by SQTNZ were acquired from Solar Quartz Technologies Pte., formerly known as Auzsolar Pte Ltd, a Singapore corporation, all companies under common control.
SQTNZ is a corporation that has no prior business activity other than being the title owner of the exclusive mining and development rights for two High Purity Quartz (HPQ) deposits known as Quartz Hill (represented by leases ML 30235, ML 30236 and ML 30237) and White Springs (represented by leases ML 30238 and ML 30239) located in North Queensland, Australia.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
HPQS is an essential primary material for the manufacture of: Photo-Voltaic (PV) solar panels; Semiconductors; all High-end Electronic products; Fiber Optical cables; Halogen Lamps; HD and LCD television screens; and Epoxy Mounding Compounds (EMC).
NOTE 5 – INCOME TAXES
The Company operates in the United States; accordingly, federal and state income taxes have been provided based upon the tax laws and rates of the U.S. The Company has incurred losses since inception and, accordingly has a net operating loss carry forward as of September 30, 2017, of approximately $5,916,688. Since the Company has, on a cumulative basis, experienced net losses for tax purposes, the provisions for income taxes consists of the following:
Description
|
|
2017
|
|
|
2016
|
|
Tax provision at expected tax rate (35%)
|
|
$
|
(56,113
|
)
|
|
$
|
2,391
|
|
Increase (decrease) to valuation allowance
|
|
|
56,113
|
|
|
|
(2,391
|
)
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 6 – STOCKHOLDERS’ EQUITY
Preferred Stock
— In July 2017 the Company increased its authorized preferred stock from 5,000,000 to 10,000,000 shares authorized none issued or outstanding.
Common Stock
—In July 2017 the Company increased its authorized common shares from an aggregate of 100,000,000 shares to an aggregate of 500,000,000 shares of common stock with $0.00001 par value.
Treasury Stock
— There were 14,355 shares previously accounted for as treasury charged to income as a cancellation of treasury shares for the year ended September 30, 2015.
Common shares of 23,025 were issued in conjunction with the settlement of debt during the year ended September 30, 2016, resulting in increases to common stock of $1, and additional paid-in capital of $22. Common shares of 223,424,095 were issued for the purchase of Solar Quartz Technologies Limited (New Zealand) during the year ended September 30, 2017, resulting in increases to common stock of $2,234, and paid-in capital of ($431,701).
NOTE 7 – STOCK-BASED COMPENSATION
On January 10, 2011, the Board of Directors approved a Non-Qualified Stock Option Plan (the “Plan”) which authorizes the issuance of up to 1,500,000 shares of Company common stock to persons that exercise options granted pursuant to the Plan. The Company’s employees, directors, officers, consultants and advisors are eligible to be granted options pursuant to the Plan, provided however, that bona fide services must be rendered by such consultants or advisors, and such services must not be in connection with the offer or sale of securities in a capital-raising transaction. As of September 30, 2017, no options were outstanding.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
fice Lease
– The Company leases a virtual office lease in The Woodlands, Texas until June 30, 2019 at $197 per month.
SOLAR QUARTZ TECHNOLOGIES CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – CONVERTIBLE NOTES PAYABLE
The Company’s material future contractual obligations by fiscal year as of September 30, 2017 were as follows:
|
|
Total
|
|
|
2017
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
$
|
70,747
|
|
|
$
|
70,747
|
|
|
|
-
|
|
Notes Payable
|
|
$
|
85,000
|
|
|
$
|
85,000
|
|
|
|
-
|
|
The notes payable bear interest at 10% and are due on demand. The convertible notes bear interest at 15% and are also due on demand. The principal and accrued interest of these notes can be converted at the discretion of the holders into common shares at $3.31/share.
The Company has contractual capital commitments outstanding in the principal balance of $70,474 at September 30, 2017. Accrued interest of $45,060 is due in addition to the principal balance of the Convertible notes.
NOTE 10 – RELATED PARTY
As of September 30, 2017, the amount due from affiliates was $26,890 and due to affiliates was $418,755. The entire amount was taken over from SQTNZ which essentially came from shareholders of Australian Oil and Gas Holdings Inc.
NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table summarizes the financial liabilities measured at fair value on a recurring basis as of September 30, 2017 and 2016:
Description
|
|
|
Level
|
|
|
September 30,
2017
|
|
|
September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Notes
|
|
|
1
|
|
|
$
|
70,474
|
|
|
$
|
70,474
|
|