Notes to Unaudited Interim Financial Statements
January 31, 2018
1. ORGANIZATION AND BUSINESS OPERATIONS
Planet Resources, Corp (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on April 24, 2008. In May 2009 the Company also began to look for other types of business to pursue that would benefit the shareholders. In order to pursue businesses that may not be in the mining industry the name of the Company was changed with the approval of the Directors and Shareholders to Bakhu Holdings, Corp. on May 4, 2009 (“Bakhu, or the “Company”).
As of March 2015, the officers and management of Bakhu Holdings, Corp had abandoned the Company and ceased communications with Alexander Deshin, its majority shareholder. Management had stopped reporting under Section 15(d) and failed to file the necessary reports with the Nevada Secretary of State. Mr. Deshin, for fear of loss of his investment desired to hire a professional firm to attempt to revive the company and replace its management.
Mr. Deshin executed an irrevocable proxy appointing of Somerset Capital Ltd as his proxy for the purposes of executing its duties under NRS 78.655 on March 25, 2015 which is attached as Exhibit 99.1. Robert Stevens is the president of Somerset Capital Ltd. This proxy was executed for the purposes of attempting to protect the interest of Mr. Deshin and all other stockholders and creditors and remove the officers and directors of the Company. Specifically, the proxy states “for the purposes of appointing a Receiver under NRS 78.655 for the purposes of corporate reorganization and removal of any current officers and directors of the company.” Our legal counsel advised us that a more powerful remedy was available under NRS 78.630, and Somerset Capital Ltd. subsequently filed for a Petition and Writ of Injunction and the Appointment of a Receiver under NRS 78.630.
A Petition for Writ of Injunction and the Appointment of a Receiver under NRS 78.630 was filed on July 6, 2015 in Nevada’s Eighth Judicial District. The petition was granted and ordered on August 20, 2015. The petition and order are attached as Exhibit 99.2. Somerset Capital Ltd’s Writ of injunction and Application for Receiver was granted in its entirety, and Somerset Capital Ltd, through the appointed Receiver, Robert Stevens was granted the authority to conduct the business of Bakhu Holdings, Corp.
Bakhu has been dormant since April 30, 2011. In Case Number A-14-720990-C, Nevada’s8th Judicial District appointed Robert Stevens as Receiver for Bakhu on August 20, 2015. All activity reflected on this Report and the financials included within is that of the Receiver.
The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. For the period from inception, April 24, 2008 through January 31, 2018 the Company has accumulated losses of $250,838.
Reverse Stock Split
On January 12, 2018 the Company effected a 1 for 200 reverse split of the Company’s issued and outstanding common stock which reduced the outstanding shares from approximately 45,000,000 shares to 260,037 shares outstanding as of January 31, 2018. In connection with the split, any shareholder who owned shares as of the record date and would have received less than 100 post-split shares after effecting the split, received 100 post-split shares. Accordingly, all references to the numbers of common shares and per share data in the accompanying financial statements have been adjusted to reflect this retroactive split on a retroactive basis, unless indicated otherwise
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a)
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
b)
Going Concern
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses since inception resulting in an accumulated deficit of $250,838 as of January 31, 2018 and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company emerging from Receivership status.
c)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
d)
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
e)
Foreign Currency Translation
The Company’s functional currency and its reporting currency is the United States dollar.
f)
Financial Instruments
The carrying value of the Company’s financial instruments approximates their fair value because of the short maturity of these instruments.
g)
Stock-based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
h)
Income Taxes
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
i)
Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 105,”Earnings per Share”. ASC 105 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement.
Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. Diluted EPS excludes all potentially dilutive shares if their effect is anti-dilutive.
j) Professional fees
With the exception of accounting fees and audit fees, substantially all professional fees presented in the financial statements represent hours of work performed by the Court appointed Receiver and his staff to help the Company emerge from Receivership by obtaining external financing. The fees are expensed as incurred as a liability of the Company and the reimbursement of these fees incurred by Receiver is dependent on the amount of financing obtained.
k)
Fiscal Periods
The Company’s fiscal year end is July 31.
3. COMMON STOCK
The authorized capital of the Company is 150,000,000 common shares with a par value of $ 0.001 per share.
4. INCOME TAXES
As of January 31, 2018, the Company had net operating loss carry forwards of approximately $250,838 that may be available to reduce future years’ taxable income through 2029. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
5. RELATED PARTY TRANSACTIONS
At various times, the Company’s Receiver extended short term financing to the Company at an interest rate of 15%. As of January 31, 2018, the Company’s Receiver had extended $8,829 in short term borrowings to the Company. These borrowings were incurred to help us pay for certain expenses associated with the Company’s Receivership status.
6. NOTES PAYABLE
On May 19, 2016, the Company’s Receiver arranged $10,000 in short term financing with a third party in the form of a Receiver certificate, at an interest rate of 10%.
Additionally, in order to maintain and preserve the assets of Bakhu, the Company, pursuant to a filing ‘in Nevada’s Eighth Judicial District in Case #A-15-720990-C, the Company sold a $50,000 face value Promissory Note and received $25,000 in proceeds. Under the terms of the Promissory Note, the Note will be paid in full upon the sale of the Company or any other transaction that would involve the issuance of more than 50% of the Company’s securities. This Promissory Note a priority secured lien with conversion into 51% of the Company’s outstanding securities if a change of control transaction resulting in the $50,000 payout does not occur by October 16, 2018.
The Company recorded the $25,000 difference between the face value of the Note and the amount that was funded of $25,000 as debt discount and is being amortized as interest expense over one-year period. The Company did not assign any value to the conversion feature of the Note because the 51% of the common stock of the Company had a negative book value of as of January 31, 2018 and continues to have a negative book value.
During the six-month period ended January 31, 2018, the Company recorded $7,140 in interest expense from the amortization of debt discount