The accompanying notes are an integral part of these
unaudited condensed financial statements.
The accompanying notes are an integral part of these
unaudited condensed financial statements.
The accompanying notes are an integral part
of these unaudited condensed financial statements.
The accompanying notes are an integral part of these
unaudited condensed financial statements.
Notes to the Condensed Financial Statements
February 28, 2022
(Unaudited)
NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION
AND ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or
omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes
normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation
of such financial statements. Although management believes the disclosures and information presented are adequate to make the information
not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company’s audited
financial statements and notes thereto included in its May 31, 2021 Annual Report on Form 10-K. As a result of acquiring the Fat Brain
technology, the Company is launching business operations. Operating results for the nine months ended February 28, 2022 are not necessarily
indicative of the results to be expected for year ending May 31, 2022.
Revenue Recognition – The Company's sources
of revenue are from the sale of intellectual property licenses and technology, including services to configure, test and deploy FatBrain
solutions on client servers, and providing training and support to a client’s staff. Revenues are reported net of returns.
In accordance with Accounting Standards
Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company
recognizes revenue upon the transfer of promised technologies or services to customers in an amount that reflects the consideration to
which the Company expects to be entitled in exchange for promised technologies or services. The Company applies the following five-step
revenue recognition model in accounting for its revenue arrangements:
The ASC
606 criteria the Company uses to recognize revenue comprise of the following:
1.
Contract with the customer – The Company acquired the contractual rights to the Angelina Agreement, dated May
10, 2021. This agreement comprises a subsisting, identifiable contract between Tempus Inc. (an unrelated entity) and the Company,
reflecting that the parties have approved the agreement and are committed to fulfilling their obligations. Each party's rights are
identifiable and the payment terms are quarterly subscriptions fees and transactions revenues.
2.
Performance obligations – The Company builds the software solution called Angelina FX which logs into a customer's
general ledger, such as QuickBooks, and automatically determines the amount of savings a customer would enjoy if using the Angelina FX
rate versus what they actually paid, as reflected in an FX Fair Value Report.
3.
Transaction price – The economic considerations are clearly spelled out in the Angelina Agreement
comprising
estimated annual subscription revenue, plus a share of the transaction revenue earned from the application.
4.
Allocation of transaction price – The quarterly payment earned under the subscription obligation for using our service
is $43,447.
5.
Revenue recognition – The revenue is recognized when the subscription obligation of providing, hosting and operating
the software has been performed. The Company recognized revenue of $86,894 during the nine months ended February 28, 2022. Costs of revenue
consist of amortization of the underlying software utilized in the Angelina Agreement. During the nine months ended February 28, 2022,
the Company recognized software amortization of $16,416.
Basic and Diluted Loss Per Share – Basic loss
per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted
loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding
during the period. There are no potentially dilutive securities outstanding, so basic and diluted loss per share is the same.
Intangible Assets – The Company relies on guidance
under ASC 350, Intangibles – Goodwill and Other, to account for intangible assets. Intangible assets are either
amortized over their finite lives as determined by management or their contractual lives, or analyzed periodically for impairment if indefinite-lived.
A periodic review is made of the assets for impairment.
Software Costs – The Company follows ASC 985-20,
Costs of Computer Software to be Sold, Leased, or Marketed, whereby costs incurred during the period of planning and design, prior
to the period determining technological feasibility, for all software developed to be sold to external users has been charged to operations
in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market
have been expensed as research and development. Purchased software that has reached technological feasibility and that has no alternative
use, other than existing licenses or contracts for which it is being utilized, is capitalized at cost and amortized ratably over the term
of the underlying contract.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred losses since inception, has limited cash flows from operations,
and has only recently launched revenue-generating activities. Its activities have been limited for the past several years and it is dependent
upon financing to continue operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s
plan to further develop and market our technology.
In addition, the COVID-19 pandemic could have an impact
on our ability to obtain financing to fund our operations. The Company is unable to predict the ultimate impact at this time.
NOTE 3 – RELATED PARTY TRANSACTIONS
The financial statements include related party transactions, which as of
February 28, 2022 and May 31, 2021, included loans from an officer of the Company totaling $23,500. The loans had an original due date
of June 30, 2014, but principal and interest maturities have been extended to June 30, 2022. The loans are not collateralized, and bear
interest at 8% per annum. Interest expense was $1,410 for the nine months ended February 28, 2022, resulting in accrued interest of $22,627
and $21,217 at February 28, 2022 and May 31, 2021, respectively.
During the nine months ended February 28, 2022, a stockholder paid for
administrative and professional services totaling $4,500, resulting in amounts payable to the stockholder of $10,500 and $6,000 as of
February 28, 2022 and May 31, 2021, respectively. On May 31, 2018 the stockholder converted $92,500 of its accounts payable to a promissory
note, which bears interest at 8% per annum and is due on demand. Due to subsequent additional advances, the promissory note totaled $119,200
at February 28, 2022 and May 31, 2021. Interest expense was $7,152 for the nine months ended February 28, 2022, resulting in accrued interest
of $31,897 and $24,745 at February 28, 2022 and May 31, 2021, respectively.
NOTE 4 – NOTES PAYABLE
During the nine months ended February 28, 2022 and
2021, the Company borrowed $38,500 and $5,000, respectively, from a third party, resulting in notes payable of $108,300 and $69,800 at
February 28, 2022 and May 31, 2021, respectively. The notes are due on demand, are not collateralized, and bear interest at 8% per annum.
Interest expense was $4,941 for the nine months ended February 28, 2022, resulting in accrued interest of $34,989 and $30,048 at February
28, 2022 and May 31, 2021, respectively.
NOTE 5 – SUBSCRIPTION AGREEMENTS
Beginning on October 26, 2021, the Company entered into private subscription
agreements with investors under the Securities Act. The subscription agreement provided that the issuance of the common shares
was conditioned upon the Company increasing the number of authorized shares of common stock to at least 250,000,000, pursuant to Florida
law. Any proceeds received for a subscription would be delivered to the Company and would be held in escrow with the Company’s attorney,
without interest, until closing, which is the later of the Company’s first trade or the increase in authorized shares becomes effective.
Upon closing, the proceeds currently held in escrow will become the property of the Company. As of February 28, 2022, closing has not
occurred, and the Company has agreed to sell an aggregate of 22,990,000 shares to nine investors totaling $10,450,000, held in escrow.
NOTE 6 – INTANGIBLE ASSET ACQUISITION
On October 23, 2021, the Company executed an “IT Asset Contribution
Agreement” with FatBrain, LLC, an unrelated entity, for certain intellectual properties, including patents pending, proprietary
technology, licenses, software, development plans and contractual rights. The intellectual property is comprised of an AI Technology with
many commercial applications, the first being “Angelina FX”. As consideration, the Company issued 10,000,000 shares of common
stock to FatBrain, LLC’s material non-controlling member, Peter B. Ritz. The mutually-agreed upon asset fair market value of $348,000
was allocated 100% to the Angelina FX software due to the assignment of contractual rights to the Company of a licensing agreement previously
entered into on May 7, 2021 between FatBrain and a non-related party, Tempus, Inc. This transaction resulted
in a change in control of the Company, whereby Mr. Ritz is the owner of 97.6% of the Company’s issued and outstanding common stock.
The estimated term of the licensing
agreement is 60 months from the agreement’s inception on May 7, 2021. During the period of October 23, 2021 (the date of the IT
Asset Contribution Agreement) through February 28, 2022, the Company recorded $16,416
of software amortization expense as cost of sales. The remaining carrying value of the software of $331,584
at February 28, 2022 is being amortized ratably over the remainder of the license term as follows:
| | |
| | |
Year ended May 31: |
2022 | | |
$ | 31,188 | |
2023 | | |
| 78,792 | |
2024 | | |
| 78,792 | |
2025 | | |
| 78,792 | |
2026 | | |
| 64,020 | |
Total | | |
$ | 331,584 | |
On February 25, 2022, LZG International entered into the Intellagents,
LLC Asset Purchase Agreement. LZG agreed to purchase Intellagents’ assets for three million dollars ($3,000,000), subject to adjustments
and the assumption of certain liabilities. At the Closing Date, LZG will pay two hundred thousand dollars ($200,000) in cash and will
issue 2,800,000 shares of common stock to Intellagents. The shares will be valued at two million eight hundred thousand dollars ($2,800,000),
$1.00 per share. The amount of shares may be adjusted if the LZG common stock is trading under $1.00 on the Closing Date. Post-closing
adjustments may be used based upon a working capital statement to be provided by LZG based upon the current assets, less current liabilities,
determined as of the Closing Date.
NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date
through the date the financial statements were issued and has determined that there are no such events that would have a material impact
on the financial statements.
In this report references to “LZG International,” “LZG,”
“the Company,” “we,” “us,” and “our” refer to LZG International, Inc.
FORWARD LOOKING STATEMENTS
The U.S. Securities and Exchange Commission (“SEC”) encourages
reporting companies to disclose forward-looking information so that investors can better understand future prospects and make informed
investment decisions. This report contains these types of statements. Words such as “may,” “intend,” “expect,”
“believe,” “anticipate,” “estimate,” “project,” or “continue” or comparable
terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements.
You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. All forward-looking
statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could
cause actual results to differ materially from those described in the forward-looking statements.