10-K 1 araoform10k230331.htm AURASOURCE, INC. FORM 10-K MARCH 31, 2023

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

(Mark One)  

[X]

 

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

 

For the fiscal year ended March 31, 2023

OR

 

[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from              to             

 

Commission file number: 000-28585

 

AURASOURCE, INC.

(Exact name of registrant as specified in its charter)

 

     
NEVADA 68-0427395  

(State or other jurisdiction of

incorporation or organization)

 (I.R.S. Employer Identification No.)  

 

2103 E. Cedar St., Suite 6, Tempe, AZ 8281

 (480) 553-1778  
(Address of principal executive offices) Registrant’s Telephone Number  
         

 

 

Securities registered pursuant to Section 12(b) of the Act:

   
Title of each class Name of each exchange on which registered
None None

 

Securities registered pursuant to Section 12(g) of the Act:

  Common Stock, par value $0.001 per share  

 

 

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 Exchange 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 ¨   No  X  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes X No  ¨  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨ Accelerated filer   ¨
Non-accelerated filer  X Smaller reporting company   X
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨ 

 

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 registrant's common stock held by non-affiliates of the registrant on September 30, 2022, the last business day of the registrant's most recently completed second fiscal quarter was $4,932,403 (based on the closing sales price of the registrant's common stock on that date).  

 

At July 25, 2023, there were 69,398,151 shares of the Registrant’s common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None. 

 
 

 

FORWARD-LOOKING STATEMENTS

 

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these statements on our beliefs and assumptions, based on information currently available to us. These forward-looking statements are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, our total market opportunity and our business plans and objectives set forth under the sections entitled “Business” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.”

 

Forward-looking statements are not guarantees of performance. Our future results and requirements may differ materially from those described in the forward-looking statements. Many of the factors that will determine these results and requirements are beyond our control. In addition to the risks and uncertainties discussed in “Business” and “Management's Discussion and Analysis of Financial Condition and Results of Operations,” investors should consider those discussed under “Risk Factors.”

 

These forward-looking statements speak only as of the date of this report. We do not intend to update or revise any forward-looking statements to reflect changes in our business anticipated results of our operations, strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

 

PART I

 

Item 1.   Business

 

General

 

AuraSource, Inc.  and subsidiaries (“AuraSource” or “Company”) was incorporated on March 15, 1990. We have divided our activities into two divisions: AuraMetal and AuraMoto.

 

AuraMetalTM is focused on the development and production of environmentally friendly and cost-effective beneficiation process for complex ore, tailings and slimes materials as industrial application solutions. AuraSource’s core technology includes physical separation, hydrometallurgical and pyrometallurgy processes. We have developed seven patented technologies: 1) ultrafine grinding and 2) ultrafine separation. To date, we have not had any sustainable projects. As such, there can be no assurances that our efforts towards this line of business will succeed. During the year ended March 31, 2023, we formed a 50% owned joint venture to assist in the process of iron ore in New Mexico.

 

On April 1, 2022, we formed, NeoMetals LLC, an Arizona limited liability company, to focus on the development and production of the mineral-rich complex ore of the El Capitan mine, using an environmentally friendly and cost- effective beneficiation process. The Company owns 50% of this joint venture.

 

AuraMotoTM is focused on sourcing various vendors and customers in the automotive industry. We entered into the industry due to our various international sourcing contacts. We have been requested from various parties to source vendors and customers in the automotive industry. This business line is still in development. As this is a new enterprise for the Company, there can be no assurances that our efforts towards this line of business will succeed.

 

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AuraMetal Business

 

AuraSource, Inc. developed the AuraMetal process based on its grinding and separation technologies. This technology separates commercially valuable minerals from other ores both economically and efficiently. It has a broad application in metal beneficiation such as hematite which cannot be concentrated by magnetic separation alone. AuraMetal process improves grade of ore at low cost and with minimal pollution. It is suitable for a multitude of low-grade iron ore beneficiation. To date we have only pilot tested these processes. There can be no assurance that these processes will work on an industrialized scale.

 

AuraSource’s Key Technology

 

Ultrafine Grinding

 

Ultrafine grinding utilizes a fluid shock wave to grind slurry materials into ultrafine scale. The shock wave is generated when pressurized slurry (5-30 magapascal (Mpa)) goes through the grinding chamber. The shock wave carries energy and creates shear, collision and cavitation effects which cause particles in the slurry to reduce to an ultrafine size. As a result, when used in ore grinding, the ore can be pulverized, and its fluidity improved.

 

Ultrafine Separation

 

Ultrafine separation separates different size particles with different densities in the slurry. The minimum particle size for conventional jigging and heavy media cycloning is 0.2 mm which makes it difficult to remove inorganic minerals. The settling velocity of particles in the slurry becomes very low under normal gravity when particles are fine. Particles settling may even stop due to interaction between particles and disturbance caused by other ultrafine particles in the slurry. Therefore, conventional separation equipment based on gravity is not effective. Our technology enables particles separation by applying 10-100 gravity which allows impurities and unwanted substances to be removed. 

 

There can be no assurance we will be able to carry out our plans for our technology. Our ability to pursue this strategy is subject to the availability of additional capital and further development of our technology.  We will also need to finance the cost of effectively protecting our intellectual property rights in the US and abroad where we intend to market our technology and products.

 

Competition

 

The mineral property exploration and development business, in general, is intensively competitive and there is not any assurance that even if commercial quantities of ore are discovered, a ready market will exist for sale of same. Numerous factors beyond the Company’s control may affect the marketability of any substances discovered. These factors include market fluctuations; the proximity and capacity of natural resource markets and processing equipment; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of mineral and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may make it difficult for the Company to receive an adequate return on investment.

 

The Company competes with many companies possessing greater financial resources and technical facilities for the acquisition of mineral concessions, claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees.

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Patent and Trademarks

 

The Company currently relies on patents, unregistered trademarks, and confidentiality of trade secrets.  Our ability to compete effectively will depend on our success in protecting our proprietary technology, both in the US and abroad.  There are numerous patents or patent applications relating to HCF technology. We have filed for patent protection and taken the steps required to obtain international patent protection. Currently, we have received seven patents for our proprietary ultrafine grinding and separation technologies, from the State Intellectual Property Office of the People's Republic of China.

 

No assurance can be given that any patents relating to the AuraMetal technology will be issued by the US or any foreign patent offices.  Further, no assurance can be given that we will receive any patents in the future based on the continued development of the technology, or that the technology patent protection within and/or outside of the US will be sufficient to deter others, legally or otherwise, from developing or marketing competitive products utilizing our technology.  If patent protection is not available for our technology, we plan to treat it as a trade secret.  There can be no assurance we will be successful in this regard.

 

In addition to seeking patent protection, we will rely on trade secrets, know-how and continuing technological advancement to seek to achieve and thereafter maintain a competitive advantage in the HCF market.  Although we have entered into or intend to enter into confidentiality and invention agreements with our employees, consultants and advisors, no assurance can be given that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how.  Moreover, no assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

  

Employees

 

The Company currently has three full and part-time employees and consultants.  The Company engages the services of independent consultants to assist it with management and business development.  We plan to engage additional full-time employees as our business expands.    

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Item 1A.  Risk Factors

 

The following important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could affect (and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations.  Other risks and uncertainties may also affect our results or operations adversely.  The following and these other risks could materially and adversely affect our business, operations, results or financial condition.

 

Risks Related to the Company

 

We have a history of operating losses, and we may never achieve or maintain profitability.

 

We have a limited operating history upon which investors may rely to evaluate our prospects and have only a preliminary business plan upon which investors may consider to evaluate our prospects.  Such prospects must be considered in light of the problems, expenses, delays and complications associated with a business that seeks to commence more significant revenue operations. We have a history of incurring losses from operations. As of March 31, 2023, we had an accumulated deficit of $21,617,294. We expect to incur operating losses until such time, if ever, as we achieve sufficient levels of revenue from operations.  We anticipate our existing cash and equivalents will not be sufficient to fund our business needs. Our ability to achieve profitability will depend on our obtaining additional capital, entering into satisfactory agreements with strategic partners, acquiring additional technology and finding customers for such technology.  There can be no assurance we will ever generate revenues or achieve profitability. Accordingly, we cannot predict the extent of future losses and the time required to achieve profitability, if ever.

 

Investors may lose all of their investment in us.

 

Investment in us involves a high degree of risk.  Investors may never recoup all or part of or realized any return on their investment.  Accordingly, investors may lose all of their investment and must be prepared to do so.

 

We will need additional financing.

 

Our cash requirements may vary materially from those now planned depending on numerous factors, including our ability to obtain new technology, finding customers to use such technology and competition. We may not have sufficient funds to institute our business plan set forth in this report.  We therefore would need to raise additional funds to finance our capital requirements through new financings to achieve the level of operations we anticipate.  Such financings could include equity financing, which may be dilutive to stockholders, or debt financing, which would likely restrict our ability to borrow from other sources.  In addition, such securities may contain rights, preferences or privileges senior to those of the rights of our current stockholders.  We do not have any commitments for additional financing.  There can be no assurance that additional funds will be available on terms attractive to us, or at all.  If adequate funds are not available, we may be required to curtail our development our business plan and/or otherwise materially curtail or reduce our operations.  Alternatively, we may be forced to sell or dispose of our right or assets.  Any inability to raise adequate funds on commercially viable terms could have a material adverse effect on our business, results of operation and financial condition.

 

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Metals and mineral prices are subject to dramatic and unpredictable fluctuations.

 

The market prices of precious metals and other minerals are volatile and cannot be controlled. If the prices of precious metals and other minerals drop significantly, the economic prospects of the Company’s operating mines and projects could be significantly reduced or rendered uneconomic. There is no assurance that even if commercial quantities of ore are discovered, a profitable market may exist for the sale of same. Mineral prices have fluctuated widely, particularly in recent years. The marketability of minerals is also affected by numerous other factors beyond the control of the Company, including government regulations relating to royalties, allowable production and importing and exporting of minerals, the effect of which cannot be accurately predicted.

 

We rely on professionals all over the United States and in China, which are impacted by the global pandemic, causing our resources to be affected. Our business operations have been and may continue to be materially and adversely affected by the COVID-19 pandemic.

 

An outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and has been expanding globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.

 

Restrictive measures have been imposed in major cities in the USA, including Los Angeles, New York, and Phoenix, and throughout the world in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January.

 

In the first quarter of 2020 through 2022, the COVID-19 outbreak has caused disruptions in our operations, which have resulted in delays on existing projects. A prolonged disruption or any further unforeseen delay in our operations could continue to result in increased costs and reduced, or delayed revenue.

 

If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

 

Current global financial conditions.

In recent years, global financial markets have experienced increased volatility and global financial conditions have been subject to increased instability. These had a profound impact on the global economy. Many industries, including the mining sector, were impacted by these market conditions. Some of the key impacts of financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market liquidity. These factors may impact the ability of the Company to obtain equity or debt financing and, if available, to obtain such financing on terms favorable to the Company. If these increased levels of volatility and market turmoil continue, the Company’s operations and planned growth could be adversely impacted and the trading price of the securities of the Company may be adversely affected. 

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The Company has had no production history and does not know if it will generate revenues in the future.

 

The Company has no significant history of producing minerals. The Company has not developed or operated any mines and has no operating history upon which an evaluation of future success or failure can be made. The Company currently has no mining operations of any kind.  The Company’s ability to achieve and maintain profitable mining operations is dependent upon a number of factors, including its ability to successfully build and operate mines, processing plants and related infrastructure.  The Company may not successfully establish mining operations or profitably produce metals.  As such, the Company does not know if it will ever generate revenues.

 

Mining and Mineral Exploration Have Substantial Operational Risks

 

Mining and mineral exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. These risks include but are not limited to:

 

  • major or catastrophic equipment failures;
     
  • mine failures and slope failures;
     
  • failure of tailings facilities;
     
  • ground fall and cave-ins;
     
  • deleterious elements materializing in the mined resources;
     
  • environmental hazards;
     
  • industrial accidents and explosions;
     
  • encountering unusual or unexpected geological formations;
     
  • labor shortages or strikes;
     
  • civil disobedience and protests; and
     
  • natural phenomena such as inclement weather conditions, floods, droughts, rock slides and earthquakes.

 

These occurrences could result in environmental damage and liabilities, work stoppages and delayed production, increased production costs, damage to, or destruction of, mineral properties or production facilities, personal injury or death, asset write-downs, monetary losses, loss of or suspension of permits as a result of regulatory action, reputational damage and other liabilities. The nature of these risks is such that liabilities could exceed policy limits of the Company’s insurance coverage, in which case the Company could incur significant costs that could prevent profitable operations.

 

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Environmental and health and safety risks.

 

The Company’s operations will be subject to environmental regulations promulgated by government agencies from time to time. There is no assurance that environmental regulations will not change in a manner that could have an adverse effect on the Company’s financial condition, liquidity or results of operations, and a breach of any such regulation may result in the imposition of fines and penalties.

 

Environmental legislation is constantly expanding and evolving in ways that impose stricter standards and more rigorous enforcement, with higher fines and more severe penalties for non-compliance, and increased scrutiny of proposed projects. There is an increased level of responsibility for companies, and trends towards criminal liability for officers and directors for violations of environmental laws, whether inadvertent or not. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of the Company’s operations.

 

Exploration activities and/or the pursuit of commercial production of the Company’s mineral claims may be subject to an environmental review process under environmental assessment legislation. Compliance with an environmental review process may be costly and may delay commercial production. Furthermore, there is the possibility that the Company would not be able to proceed with commercial production upon completion of the environmental review process if government authorities do not approve the proposed mine, or if the costs of compliance with government regulation adversely affect the commercial viability of the proposed mine.

 

The development and operation of a mine involves significant risks to personnel from accidents or catastrophes such as fires, explosions or collapses. These risks could result in damage or destruction of mineral properties, production facilities, casualties, personal injury, environmental damage, mining delays, increased production costs, monetary losses and legal liability. The Company may not be able to obtain insurance to cover these risks at economically feasible premiums. Insurance against certain environmental risks, including potential liability for pollution and other hazards as a result of the disposal of waste products occurring from production, is not generally available to companies within the mining industry. The Company may be materially adversely affected if it incurs losses related to any significant events that are not covered by its insurance policies.

 

The Company is subject to significant governmental regulations and related costs and delays may negatively affect business.

 

Mining and mineral processing activities are subject to extensive federal, state, local and foreign laws and regulations governing environmental protection, natural resources, prospecting, development, production, post-closure reclamation, taxes, labor standards and occupational health and safety laws and regulations, including mine safety, toxic substances and other matters. The costs associated with compliance with such laws and regulations are substantial. Possible future laws and regulations, or more restrictive interpretations of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of operations and delays in the development of new properties.

 

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The Company will be required to obtain various governmental permits to conduct exploration, development, construction and mining activities. Obtaining the necessary governmental permits is often a complex and time-consuming process involving numerous federal, provincial, state, and local agencies. The duration and success of each permitting effort is contingent upon many variables not within the Company’s control. In the context of obtaining permits or approvals, the Company will need to comply with known standards, existing laws, and regulations that may entail greater or lesser costs and delays depending on the nature of the activity to be permitted and the interpretation of the laws and regulations implemented by the permitting authority. The failure to obtain certain permits or the adoption of more stringent permitting requirements could have a material adverse effect on business, operations, and properties and the Company may be unable to proceed with exploration and development programs.

 

Federal legislation and implementing regulations adopted and administered by the United States Environmental Protection Agency, Army Corp of Engineers, Forest Service, Fish and Wildlife Service, Mine Safety and Health Administration, and other federal agencies, and legislation such as the Federal Clean Water Act, Clean Air Act, National Environmental Policy Act, Endangered Species Act, and Comprehensive Environmental Response, Compensation, and Liability Act, have a direct bearing on exploration, development and mining operations United States. Due to the uncertainties inherent in the permitting process, the Company cannot be certain that it will be able to obtain required approvals for proposed activities, or that proposed activities will be allowed at all.

 

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, which may require corrective measures including capital expenditures, installation of additional equipment or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may be subject to civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Any such penalties, fines, sanctions or shutdowns could have a material adverse effect on business and results of operations.

 

A substantial portion our business activities will be overseas and we will be subject to all of the risks of international operations.

 

We expect that a substantial portion of our operations will involve performing R&D related to our technology in China and selling services and products related to and licenses for this technology to buyers in China and other international markets. Thus, a substantial portion of our business operations will be subject to the risks of international operations.  Our business, financial condition, and results of operations could be materially adversely affected by changes or uncertainties in the political or economic climates, laws, regulations, tariffs, duties, import quotas, or other trade, intellectual property or tax policies in China and possibly other foreign countries.  We will also be subject to adverse exchange rate fluctuations among Chinese currency and the US dollar since we anticipate that any revenue generated as well as and costs and expenses for our operations in China will be paid in the Chinese RMB.

 

We will continue to incur the expenses of complying with public company reporting requirements.

 

We have an obligation to comply with the applicable reporting requirements of the Exchange Act, as amended, even though compliance with such reporting requirements is economically burdensome.

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We may experience difficulties in the future in complying with Section 404 of the Sarbanes-Oxley Act.

 

As a public company, we will be required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002.  In this regard, we will be required to comply with the internal control requirements of Section 404 of the Sarbanes-Oxley Act.  If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation.  Any inability to provide reliable financial reports could harm our business.   Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations.

 

If we fail to maintain proper and effective internal controls in future periods, it could adversely affect our operating results, financial condition and our ability to run our business effectively and could cause investors to lose confidence in our financial reporting.

 

We may be unable to continue as a going concern if we do not successfully raise additional capital or if we fail to generate sufficient revenue from operations.

 

Primarily as a result of our recurring losses and our lack of liquidity, in connection with our year ended March 31, 2023, we received a report from our independent auditors that includes an explanatory paragraph describing the substantial uncertainty as to our ability to continue as a going concern.

 

Reliance on and experience of our officers and directors.

 

Our officers and directors will be responsible for the management and control of the Company.  Our success will, to a large extent, depend on the quality of the management provided by the officers and directors.  Although our officers and directors believe they have the ability to manage the Company, they can give no assurance their efforts will result in success.   Stockholders have no right or power to take part in the management of the Company.  

 

We may have difficulty managing growth in our business.

 

Because of our small size and the relatively large scale of operations required for our business to yield revenue, growth in accordance with our business plan, if achieved, will place a significant strain on our financial, technical, operational and management resources. As we expand our activities, there will be additional demands on these resources.  The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including issues relating to our performance of R&D activities and retention of experienced scientists, managers and engineers, could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan.  If we are unable to implement these actions in a timely manner, our results may be adversely affected.

 

If we borrow money to expand our business, we will face the risks of leverage.

 

We anticipate we may in the future incur debt to finance our growth.  Our ability to borrow funds will depend upon a number of factors, including the condition of the financial markets.  The risk of loss in such circumstances is increased because we would be obligated to meet fixed payment obligations on specified dates regardless of our revenue.  If we do not meet our debt payments when due, we may sustain the loss of our equity investment in any of our assets securing such debt upon the foreclosure on such debt by a secured lender.

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Our stock price is likely to be highly volatile because of several factors, including a limited public float.

 

The market price of our stock is likely to be highly volatile because there has been a relatively thin trading market for our stock, which causes trades of small blocks of stock to have a significant impact on our stock price. You may not be able to resell our common stock following periods of volatility because of the market’s adverse reaction to volatility.

 

Other factors that could cause such volatility may include, among other things:

 

- announcements concerning our strategy;
- litigation; and
- general market conditions.

 

Our common stock is considered a “penny stock,” any investment in our shares is considered to be a high-risk investment and is subject to restrictions on marketability

 

Our common stock is considered a “penny stock” because it is quoted and traded on the OTC Markets (“OTCMkts”) and it trades for less than $5.00 per share.  The OTCMkts are generally regarded as a less efficient trading market than the NASDAQ Capital or Global Markets or the New York Stock Exchange.

 

The Securities and Exchange Commission (“SEC”) has rules that regulate broker-dealer practices in connection with transactions in “penny stocks.”  Penny stocks generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market.  The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account.  In addition, the penny stock rules require that, prior to effecting a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock.

 

Since our common stock is subject to the regulations applicable to penny stocks, the market liquidity for our common stock could be adversely affected because the regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus your ability to sell our common stock in the secondary market in the future. We can provide no assurance that our common stock will be quoted or listed on the OTCMkts, NASDAQ or any exchange, even if eligible in the future.

 

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We have additional securities available for issuance, including preferred stock, which if issued could adversely affect the rights of the holders of our common stock.

 

Our articles of incorporation authorize issuance of 150,000,000 shares of common stock and 10,000 shares of preferred stock. The common stock and preferred stock can be issued by our Board of Directors (“BOD”) without stockholder approval. Accordingly, our stockholders will be dependent upon the judgment of our BOD in connection with the future issuance and sale of shares of our common and preferred stock, in the event that buyers can be found. Any future issuances of common stock would further dilute the percentage ownership of our Company held by the public stockholders.

 

Risks Related to Doing Business in China

 

A substantial portion sales and operations may be in China.

 

China is a developing country and has a limited history of trade practices as a nation.  Because we will likely direct a substantial amount of our sales efforts to customers in China, we will be subject to the laws, rules, regulations, and political authority of the government of the PRC.  We may encounter material problems while doing business in China, such as in interactions with the Chinese government and the uncertainty of foreign legal precedent pertaining to our business in China.  Risks inherent in international operations also include the following:

 

- local currency instability;
- inflation;
- the risk of realizing economic currency exchange losses when transactions are completed in the Chinese RMB and other currencies;
- the ability to repatriate earnings under existing exchange control laws; and
- political unrest.

 

Changes in import and export laws and tariffs can also materially impact international operations.  In addition, international operations involve political, as well as economic risks, including:

 

- nationalization;
- expropriation;
- contract renegotiations; and
- changes in laws resulting from governmental changes.

 

In addition, we may be subject to rules and regulations of the PRC or the jurisdiction of other governmental agencies in the PRC that may adversely affect our ability to perform under, or our rights and obligations in, our contracts with Chinese companies or government entities.  In the event of a dispute, we will likely be subject to the exclusive jurisdiction of foreign courts.  We may also be hindered or prevented from enforcing our rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity.

 

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Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our competitive position.

 

Some or all of our sales may be made in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including:

 

-   the amount of government involvement;
-    the level of development;
-   the growth rate;
-    the control of foreign exchange; and
-  the allocation of resources.

 

While it is our understanding that the economy in China has grown significantly in the past 20 years, the growth has been uneven, both geographically and among various economic sectors. The government of the PRC has implemented various measures to encourage or control economic growth and guide the allocation of resources.  Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us.  For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

 

The Chinese economy has been transitioning from a planned to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the PRC government. The continued control of these assets and other aspects of the national economy by the PRC government could materially and adversely affect our business.  The PRC government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.  Efforts by the PRC government to slow the pace of growth of the Chinese economy could result in decreased capital expenditure by power plants, which in turn could reduce demand for our products and services.

 

Uncertainties with respect to the Chinese legal system could have a material adverse effect on us.

 

We plan to conduct some of our sales and a substantial portion all of our administrative activities in China.  We will be generally subject to laws and regulations applicable to foreign investment in China.  The PRC legal system is based, at least in part, on written statutes.  Prior court decisions may be cited for reference but may have limited precedential value.  It is our understanding that since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China.  However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.  We cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, the preemption of local regulations by national laws, or the overturn of local government’s decisions by the superior government.  These uncertainties may limit legal protections available to us.  In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

-13- 
 

 

 

Risks Related to an Investment in Our Securities

 

To date, we have not paid any cash dividends and no cash dividends are expected to be paid in the foreseeable future.

 

We do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We intend to retain all earnings for our operations.

 

The application of the “penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

 

As long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject to the “penny stock” rules. The “penny stock” rules impose additional sales practice requirements on broker-dealers which sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser’s written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased liquidity for our common shares and increased transaction costs for sales and purchases of our common shares as compared to other securities.

 

Our common shares are thinly traded and, you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

 

The Company cannot predict the extent to which an active public market for its common stock will develop or be sustained. However, the Company does not rule out the possibility of applying for listing on the Nasdaq National Market or other exchanges.

 

Our common shares historically are "thinly-traded" on the OTCMkts, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent.  This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.  As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

 

-14- 
 

 

 

The market price for our common stock is particularly volatile given our status as a relatively small company with a small and thinly traded “float” and lack of current revenues that could lead to wide fluctuations in our share price.   The price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market.  You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

  

The market for our common stock is characterized by significant price volatility when compared with seasoned issuers, and we expect our share price will continue to be more volatile than a seasoned issuer for the indefinite future.  The volatility in our share price is attributable to a number of factors.  First, as noted above, our common shares are sporadically and/or thinly traded.  As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction.  The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price.  Secondly, we are a speculative or "risky" investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for our current and potential products.  As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.  The following factors may add to the volatility in the price of our common shares: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes; and additions or departures of our key personnel, as well as other items discussed under this "Risk Factors" section, as well as elsewhere in this annual report.

 

Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance.  We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.  However, we do not rule out the possibility of applying for listing on the Nasdaq National Market or other exchanges.

 

Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.  Our management is aware of the abuses that have occurred historically in the penny stock market.  Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.  The occurrence of these patterns or practices could increase the volatility of our share price.

 

-15- 
 

 

Our corporate actions are substantially controlled by our principal shareholders and affiliated entities.  

 

As of July 21, 2023, our principal stockholders and their affiliated entities own 32.04% of our outstanding common shares, representing 32.04% of our voting power. These stockholders, acting individually or as a group, could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. In addition, because of the percentage of ownership and voting concentration in these principal stockholders and their affiliated entities, elections of our BOD will generally be within the control of these stockholders and their affiliated entities. While all of our stockholders are entitled to vote on matters submitted to our stockholders for approval, the concentration of shares and voting control presently lies with these principal stockholders and their affiliated entities. As such, it would be difficult for stockholders to propose and have approved proposals not supported by management. There can be no assurance that matters voted upon by our officers and directors in their capacity as stockholders will be viewed favorably by all stockholders of the company.

 

The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.

 

Our articles of incorporation contain a provision that eliminates the liability of our directors for monetary damages to our company and shareholders to the extent allowed under Nevada law and we are prepared to give such indemnification to our directors and officers to the extent provided by Nevada law.  The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup.  These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.

 

Legislative actions, higher insurance costs and potential new accounting pronouncements may impact our future financial position and results of operations.

 

There have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and there may potentially be new accounting pronouncements or additional regulatory rulings that will have an impact on our future financial position and results of operations. The Sarbanes-Oxley Act of 2002 and other similar rule changes are likely to increase general and administrative costs and expenses. Additionally, there could be changes in certain accounting rules. These and other potential changes could materially increase the expenses we report under generally accepted accounting principles, and adversely affect our operating results.

 

 

-16- 
 

 

The market price for our stock may be volatile which may place downward pressure on our stock price.

 

The market price for our stock may be volatile and subject to wide fluctuations in response to factors including the following:

 

-   actual or anticipated fluctuations in our quarterly operating results;
-     changes in financial estimates by securities research analysts;
-     conditions in alternative energy and coal-based product markets;
-  changes in the economic performance or market valuations of other alternative energy and coal-based products companies;
-    announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;
-    addition or departure of key personnel;
-  intellectual property litigation; and
-  general economic or political conditions in China.

 

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our stock.

 

We will need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our shareholders.

 

We will require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue.  If our resources are insufficient to satisfy our cash requirements, we may seek to sell equity or debt securities or obtain a credit facility.  The sale of equity securities could result in dilution to our shareholders.  The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.  We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

 

Shares eligible for future sale may adversely affect the market.

 

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement (which disappears after one year). Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements.

 

We will incur increased costs as a result of being a public company.

 

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company.  In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by SEC, has required changes in corporate governance practices of public companies.  We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

-17- 
 

 

Item 1B.  Unresolved Staff Comments

 

None.

 

Item 2.  Properties.

 

We currently lease 2,507 square feet of office space at 2103 E. Cedar Street, Suites 6 Tempe, Arizona for $2,565 per month. The lease expires June 30, 2024 and $72,015 is due through the remainder of the lease. We plan to renew this lease under similar terms. We believe that our facilities are adequate to meet our current and near-term needs.

 

Item 3.  Legal Proceedings.

 

We are not a party to any current or pending legal proceedings that, if decided adversely to us, would have a material adverse effect upon our business, results of operations, or financial condition, and we are not aware of any threatened or contemplated proceeding by any governmental authority against us.  To our knowledge, we are not a party to any threatened civil or criminal action or investigation. 

 

Item 4.  Mine Safety Disclosure

 

Not applicable.

-18- 
 

 

PART II

 

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

 

Market Prices

 

The shares of our common stock have been listed and principally quoted on the OTC Markets under the trading symbol “ARAO”.

 

The following table sets forth, for the fiscal quarters indicated, the high and low bid information for our common stock, as reported on the OTC Markets. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

Quarterly period   High   Low
Fiscal year ended March 31, 2023:                
First Quarter   $ 0.14     $ 0.09  
Second Quarter   $ 0.11     $ 0.09  
Third Quarter   $ 0.11     $ 0.09  
Fourth Quarter   $ 0.18     $ 0.11  
Fiscal year ended March 31, 2022:                
First Quarter   $ 0.44     $ 0.25  
Second Quarter   $ 0.54     $ 0.20  
Third Quarter   $ 0.45     $ 0.06  
Fourth Quarter   $ 0.15     $ 0.07  
                 

 

Holders

 

On July 21, 2023, the closing sales price of our common stock as reported on the OTC markets was $0.110 per share.  As of July 21, 2023, there were approximately 900 record holders of our common stock. Our transfer agent is West Coast Stock Transfer, Inc.

Dividends

Holders of common stock are entitled to receive such dividends as the BOD may from time to time declare out of funds legally available for the payment of dividends.  No dividends have been paid on our common stock, and we do not anticipate paying any dividends on our common stock in the foreseeable future. 

 

Recent Sale of Unregistered Securities.

 

During the quarter ended June 30, 2022, the Company issued 190,000 shares of common stock for $9,500.

 

During the quarter ended September 30, 2022, the Company issued 200,000 shares of common stock for $10,000.

 

During the quarter ended December 31, 2022, the Company issued 300,000 shares of common stock for $15,000.

-19- 
 

 

 

During the quarter ended March 31, 2023, the Company issued 500,000 shares of common stock for $50,000.

 

As of March 31, 2023, there are 69,398,151 shares of common stock issued and outstanding.

 

The above issuances of the shares of our common stock to investors is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof and Rule 506 of Regulation D (“Regulation D”) as promulgated by the SEC under the Securities Act, as the shares were sold to accredited investors and were not sold through any general solicitation or advertisement. The shares sold by the Company have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent such registration or an available exemption from registration.

 

Item 6.  Selected Financial Data.

 

Not Applicable.

 

 

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

 

The following discussion should be read in conjunction with the Financial Statements and notes thereto included in Item 8 of Part II of this Annual Report on Form 10-K.

 

Overview

 

We have divided our activities into two divisions: AuraMetal and AuraMoto.

 

AuraMetalTM is focused on the development and production of environmentally friendly and cost-effective beneficiation process for complex ore, tailings and slimes materials as industrial application solutions. AuraSource’s core technology includes physical separation, hydrometallurgical and pyrometallurgy processes. We have developed seven patented technologies: 1) ultrafine grinding and 2) ultrafine separation. To date, we have not had any sustainable projects. As such, there can be no assurances that our efforts towards this line of business will succeed. NeoMetals is part of the AuraMetals division.

 

AuraMotoTM is focused on sourcing various vendors and customers in the automotive industry. We entered into the industry due to our various international sourcing contacts. We have been requested from various parties to source vendors and customers in the automotive industry. This business line is still in development. As this is a new enterprise for the Company, there can be no assurances that our efforts towards this line of business will succeed.

 

Recently Issued Accounting Pronouncements

 

Refer to the notes to the consolidated financial statements for a complete description of recent accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those significant accounting standards that have been adopted during the current year.

 

-20- 
 

 

Critical Accounting Policies

 

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of expenses during the reporting period. On an ongoing basis, we evaluate our estimates which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions. The following accounting policies require significant management judgments and estimates:

 

Revenue Recognition - We recognize revenue in accordance with ASC No. 606, Revenue Recognition. we applied a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied. When we are paid in advance for products or services we classify these amounts as deferred revenue. Upon the receipt of these products at the destination port, we recognize revenue. For services, and we amortized the price over the term of the agreement.

 

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of- In accordance with ASC 360 and ASC 820, we evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. We currently believe there is no impairment of our long-lived assets. There can be no assurance, however, that market conditions will not change or demand for our products under development will continue. Either of these could result in future impairment of long-lived assets. 

 

Fiscal Year 2023 Compared to Fiscal Year 2022

 

Results from Operations

 

Revenues

 

Revenues were $120,500 and $0 for the years ended March 31, 2023 and 2022, respectively. The increase in revenue resulted from the sale of electric vehicles.

 

Cost of Sales

 

Cost of sales was $92,732 and $0 for the years ended March 31, 2023 and 2022, respectively. The increase in cost of sales resulted from the costs of sale for the sale of electric vehicles.

 

-21- 
 

 

Selling, General and Administrative Expenses

 

Selling, general and administrative (“SG&A”) expenses were $574,847 and $772,893 for the years ended March 31, 2023 and 2022, respectively.  The decrease in expense of $198,046 in selling, general and administrative expenses was primarily due to the decrease in stock compensation expense in 2023.

 

Interest Income (Expense) and Other, Net

 

Interest income (expense) and other, net was ($476,601) and ($356,804) for the years ended March 31, 2023 and 2022, respectively.   The increase in interest expense for the year ended March 31, 2023 and 2022 was primarily due to the increase of principal of outstanding note payables.

 

Results of Operations by Segment

 

The following table sets forth the results of operations by segment:

 

   For the Year Ended
   March 31, 2023  March 31, 2022
Segment operating income          
Production of materials  $—     $—   
Sales of electric automobiles   120,500    —   
Total revenue  $120,500   $—   
           
    For the Year Ended
    March 31, 2023    March 31, 2022 
Segment cost of revenue          
Production of materials  $—     $—   
Sales of electric automobiles   92,732    —   
Total cost of sales  $92,732   $—   

 

Segment Production of Materials

 

Revenues and Cost of Revenue for the year ended March 31, 2023 and 2022, were zero.  

  

Segment Sales of Electric Automobiles

 

 Revenues for the years ended March 31, 2023 and 2022 were $120,500 and zero, respectively. The increase of $120,500 were due to the sale of electric vehicles in the year ended March 31, 2023.  Costs of revenue for the years ended March 31, 2023 and 2022 were $92,732 and zero, respectively. The increase of $92,732 were due to the cost of the electrical vehicles in the year ended March 31, 2023.

 

-22- 
 

 

Liquidity and Capital Resources

 

Net cash used in operating activities was $76,334 and $44,450 for the years ended March 31, 2023 and 2022, respectively. The increase in cash used for operations was mainly due to an increase in rent and interest expense.

 

Net cash used in investing activities was $0 and $0 for the years ended March 31, 2023 and 2022, respectively.

 

Net cash provided by financing activities was $84,500 and $0 for the years ended March 31, 2023 and 2022, respectively.  The increase in cash flows from financing activities was due to an increase in stock issued for cash in 2023 compared to 2022.

 

The Company suffered recurring losses from operations and has an accumulated deficit of $21,617,294 at March 31, 2023.  Currently, we have not generated consistent revenues as of March 31, 2023, had a cash balance of $50,802. The Company is seeking various forms of financing.   To the extent additional funding is not achieved this will delay our business plans. We believe we have sufficient cash resources for the next 6 months, in order to meet our business goals we will need to seek additional funding or enter into strategic partnerships.

 

Going Concern Uncertainties

 

As of the date of this annual report, there is doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our business operations and loan commitments.  Our future success and viability, therefore, are dependent upon our ability to generate capital financing.  The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders.

 

Capital Expenditures

 

We had $0 capital expenditures for the years ended March 31, 2023 and 2022, respectively.

 

Commitments and Contractual Obligations

 

Effective January 1, 2020, AuraSource, Inc. (the “Company”) entered into an Employment Agreement (the “Employment Agreement”) with Philip Liu, the Company’s CEO.  Under the Employment Agreement, Mr. Liu will receive a base salary of $240,000 per year and a guaranteed bonus of $40,000 per year.  Each quarter Mr. Liu shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Mr. Liu will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Liu will receive a car allowance of $500 per month and an office allowance of $500 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Eric Stoppenhagen, the Company’s CFO.  Under the Employment Agreement, Mr. Stoppenhagen will receive a base salary of $120,000 per year and a guaranteed bonus of $20,000 per year.  Each quarter Mr. Stoppenhagen shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Mr. Stoppenhagen will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Stoppenhagen will receive a car allowance of $250 per month and an office allowance of $250 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

We currently do not have any other material commitments and contractual obligations.

-23- 
 

 

 

Off-Balance Sheet Arrangements

 

As of March 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

 

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

 

Not Applicable.

-24- 
 

 

Item 8. Financial Statements and Supplementary Data

 

AURASOURCE, INC.

 

TABLE OF CONTENTS

 

 

    PAGE
Report Of Independent Registered Public Accounting Firm PCAOB ID. 5854     25  
Consolidated Financial Statements as of and for the Years Ended March 31, 2023 and 2022        
Consolidated Balance Sheets     26  
Consolidated Statements of Operations and Comprehensive Income     27  
Consolidated Statements of Stockholders' Equity (Deficit)     28  
Consolidated Statements of Cash Flows     29  
Notes to Consolidated Financial Statements     30-44  

 

-25- 
 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders

AuraSource, Inc.

 

Opinion on the Financial Statements

 
We have audited the accompanying consolidated balance sheets of AuraSource, Inc. (the "Company") as of March 31, 2023 and 2022, the related statements of operations and comprehensive loss, stockholders' deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, 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.

 

Going Concern Matter

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

 

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the board of directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. 

 

/s/ TAAD LLP

We have served as the Company's auditor since 2013

Diamond Bar, California

July 25, 2023

-26- 
 

 

 

AURASOURCE, INC.

CONSOLIDATED BALANCE SHEETS

 

   March 31,
   2023  2022
ASSETS      
CURRENT ASSETS          
Cash  $50,802   $3,437 
TOTAL CURRENT ASSETS   50,802    3,437 
Deposit   2,821    2,262 
Operating lease right-of-use assets, net   61,918    5,145 
TOTAL ASSETS  $115,541   $10,844 
           
           
LIABILITIES AND STOCKHOLDERS' (DEFICIT)          
CURRENT LIABILITIES          
Accounts payable  $105,602   $136,107 
Due to related parties   3,213,765    2,787,773 
Operating lease obligations, current   26,517    4,606 
Note payable and accrued interest   120,071    119,594 
Note payable and accrued interest – related party   3,034,679    2,750,548 
TOTAL CURRENT LIABILITIES   6,500,634    5,798,628 
 Operating lease obligations, long term   35,632    —   
           
TOTAL LIABILITIES   6,536,266    5,798,628 
           
Commitments and contingencies   —      —   
           
STOCKHOLDERS' DEFICIT          
Preferred stock, 10,000 shares authorized, no shares issued and outstanding, no rights or privileges designated   —      —   
Common stock, $0.001 par value, 150,000,000 shares authorized, 69,398,151 and 68,208,151 shares issued and outstanding at March 31, 2023 and 2022, respectively   69,398    68,208 
Additional paid in capital   15,074,749    14,724,399 
Accumulated other comprehensive income   52,422    13,223 
Accumulated deficit   (21,617,294)   (20,593,614)
Total stockholders’ deficit   (6,420,725)   (5,787,784)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $115,541   $10,844 

 

 The accompanying notes are an integral part of these consolidated financial statements.

-27- 
 

 

 

AURASOURCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

YEARS ENDED MARCH 31, 2023 AND 2022

 

   2023  2022
REVENUES          
Revenue  $120,500   $—   
Cost of Revenue   92,732    —   
GROSS PROFIT   27,768    —   
OPERATING EXPENSES          
General and administrative expenses   574,847    772,893 
Total operating expenses   574,847    772,893 
LOSS FROM OPERATIONS   (547,079)   (772,893)
           
Interest and other income (expense), net   (476,601)   (356,804 
NET LOSS   (1,023,680)   (1,129,697)
Other Comprehensive Loss          
Foreign currency translation gain (loss)   39,199    18,000 
Total Comprehensive Loss  $(984,481)  $(1,111,697)
           
NET LOSS PER SHARE OF COMMON STOCK—Basic and diluted  $(0.01)  $(0.02)
WEIGHTED AVERAGE SHARES OUTSTANDING—Basic and diluted   68,738,178    68,208,151 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

-28- 
 

 

 

AURASOURCE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

YEARS ENDED MARCH 31, 2023 AND 2022 

 

 

    Preferred Stock       Common Stock                     
    Shares    Amount    Shares    Amount    APIC    Accumulated Deficit    Other Comprehensive Income    Total 
Balance at March 31, 2021   —     $—      68,208,151   $68,208   $14,357,975   $(19,463,917)  $31,223   $(5,006,511)
Issuance of options   —      —      —      —      274,600    —      —      274,600 
Imputed interest   —      —      —      —      91,824    —      —      91,824 
Net loss   —      —      —      —      —      (1,129,697)   —      (1,129,697)
Foreign currency translation adjustment   —      —      —      —      —      —      (18,000)   (18,000)
Balance at March 31, 2022   —     $—      68,208,151   $68,208   $14,724,399   $(20,593,614)  $13,223   $(5,787,784)
                                         
                                         
    Preferred Stock        Common Stock                     
    Shares    Amount    Shares    Amount    APIC    Accumulated Deficit    Other Comprehensive Income    Total 
Balance at March 31, 2022   —     $—      68,208,151   $68,208   $14,724,399   $(20,593,614)  $13,223   $(5,787,784)
Issuance of common stock   —      —      1,190,000    1,190    83,310    —      —      84,500 
Issuance of options   —      —      —      —      83,800    —      —      83,800 
Imputed interest   —      —      —      —      183,240    —      —      183,240 
Net loss   —      —      —      —      —      (1,023,680)   —      (1,023,680)
Foreign currency translation adjustment   —      —      —      —      —      —      39,199    39,199 
Balance at March 31, 2023   —     $—      69,398,151   $69,398   $15,074,749   $(21,617,294)  $52,422   $(6,420,725)

 

The accompanying notes are an integral part of these consolidated financial statements.

-29- 
 

 

AURASOURCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2023 AND 2022

 

    2023   2022
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (1,023,680)     $ (1,129,697)
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock based compensation issued for services     83,800       274,600  
Imputed interest     183,240       91,824    
Changes in operating assets and liabilities                
Accounts payable and accrued expenses     (30,964)       18,133  
Accounts payable and accrued expenses – related parties     710,124       697,839  
Interest payable     376       4,135  
Lease     770       (1,284)
                 
Net cash used in operating activities     (76,334)       (44,450)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from issuance of common stock     84,500       —    
Net cash provided by financing activities     84,500       —    
                 
Effect of exchange rate fluctuation on cash     39,199       (18,000)
NET INCREASE IN CASH     47,365       (62,450)
CASH, Beginning of year     3,437       65,887  
CASH, End of year   $ 50,802     $ 3,437  
                 
    2023   2022  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                  
Cash paid during the year for:                  
Interest   $ 192     $ —    
Income taxes   $  —     $  —    

 

The accompanying notes are an integral part of these consolidated financial statements.

-30- 
 

 

 

AURASOURCE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Current Operations and Background — AuraSource, Inc. (“AuraSource” or “Company”) focuses on two areas AuraMetal and AuraMoto.

 

AuraMetalTM is focused on the development and production of environmentally friendly and cost-effective beneficiation process for complex ore, tailings and slimes materials as industrial application solutions. AuraSource’s core technology includes physical separation, hydrometallurgical and pyrometallurgy processes. We have developed seven patented technologies: 1) ultrafine grinding and 2) ultrafine separation. To date, we have not had any sustainable projects. As such, there can be no assurances that our efforts towards this line of business will succeed.

 

AuraMotoTM is focused on sourcing various vendors and customers in the automotive industry. We entered into the industry due to our various international sourcing contacts. We have been requested from various parties to source vendors and customers in the automotive industry. This business line is still in development. As this is a new enterprise for the Company, there can be no assurances that our efforts towards this line of business will succeed.

 

On April 1, 2022, we formed, NeoMetals LLC, an Arizona limited liability company, to focus on the development and production of the mineral-rich complex ore of the El Capitan mine, using an environmentally friendly and cost- effective beneficiation process. The Company owns 50% of this joint venture.

 

There can be no assurance we will be able to carry out our development plans for AuraMetals or AuraMoto. Our ability to pursue this strategy is subject to the availability of additional capital and further development of our technology.  We also need to finance the cost of effectively protecting our intellectual property rights in the United States (“US”) and abroad where we intend to market our technology and products.

 

Going Concern — The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of and for the period ended March 31, 2023, the Company has incurred operating losses and working capital deficit. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management’s Plan to Continue as a Going Concern

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of its products, and (3) short-term or long-term borrowings from banks, stockholders or other party(ies) when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. The Company plans to look for opportunities to merge with other companies in the graphite industry.

 

-31- 
 

 

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually to secure other sources of financing and attain profitable operations.

 

Basis of Presentation and Principles of Consolidation — The accompanying consolidated financial statements have been prepared in conformity with Accounting Principles Generally Accepted in the United States of America (“US GAAP”) and include the accounts of AuraSource, Inc. and its subsidiary, Qinzhou. All significant intercompany transactions and balances were eliminated in consolidation.

 

Use of Estimates — The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents — We consider cash equivalent with original maturities of 90 days or less to be cash equivalents.

 

Property and Equipment - Property and Equipment are stated at historical cost less accumulated depreciation and amortization. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation is provided on a straight-line basis over the assets' estimated useful lives. The useful lives of the assets are as follows: machinery and equipment 5 years, office equipment 5 to 7 years, vehicles 5 years, and leasehold improvements use the shorter of the estimated useful life or the remaining term of the agreements, generally ranging from 3 to 15 years. Additions and improvements are capitalized while routine repairs and maintenance are charged to expense as incurred. Upon sale or disposition, the historically recorded asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to other income / expense.

Leases- In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize the rights and obligations created by leases on the balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-11, Targeted Improvements, ASU No. 2018-10, Codification Improvements to Topic 842, and ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The new standard became effective April 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on April 1, 2019 using the modified retrospective transition approach as of the effective date of the initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits entities not to reassess under the new lease standard prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements.

-32- 
 

 

 

The most significant effects of the adoption of the new standard relate to the recognition of new ROU assets and lease labilities on our balance sheet for office operating leases and providing significant new disclosures about our leasing activities.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has also elected the short-term leases recognition exemption for all leases that qualify. This means that the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets and lease liabilities, for existing short-term leases of those assets in transition. The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for its leases. The new standard did not have a material impact.

We entered into a new lease on July 1, 2022. The new policy impacted us July 1, 2019.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of- In accordance with ASC 360, we evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable.  When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount.  Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.  We currently believe there is no impairment of our long-lived assets.  There can be no assurance, however, that market conditions will not change or demand for our products under development will continue.  Either of these could result in future impairment of long-lived assets.

Revenue Recognition - We recognize revenue in accordance with ASC No. 606, Revenue Recognition. The Company applied a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied. When we are paid in advance for products or services we classify these amounts as deferred revenue. Upon the receipt of these products at the destination port, we recognize revenue. For services, we amortized the price over the term of the agreement. 

Income Taxes — The Company accounts for income taxes in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740. Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at currently effective tax rates, of future deductible or taxable amounts attributable to events that have been recognized on a cumulative basis in the financial statements. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized.

 

Stock-Based Compensation — We periodically issue stock options and shares to employees and non-employees for services. We account for stock option grants issued and vesting to employees based on Financial Accounting Standards Board (FASB) ASC Topic 718, “Compensation – Stock Compensation”, whereas the award is measured at its fair value at the date of grant and is amortized ratably over the vesting period. We account for shares issued to non-employees in accordance with ASC Topic 505, “Equity”, whereas the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.

 

-33- 
 

 

 

Comprehensive Income - We have adopted ASC 220, Comprehensive Income, formerly known as SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting and presentation of comprehensive income (loss) and its components in a full set of general purpose financial statements. We have chosen to report comprehensive income (loss) in the statements of operations and comprehensive income.

 

Foreign Currency Translation. - Our consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Our foreign currency translation gain for the year ended March 31, 2023 was $39,199, compared to a translation gain of $18,000 for the year ended March 31, 2022.

 

Net Loss Per Share — The Company computes basic and diluted net loss per share by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period.  Common equivalent shares related to stock options and warrants were excluded from the computation of basic and diluted loss per share for the years ended March 31, 2023 and 2022 because their effect is anti-dilutive.

 

Concentration of Credit Risk — Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash.  The Company maintains its cash with high credit quality financial institutions; at times, such balances with any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits.  

 

Financial Instruments and Fair Value of Financial Instruments — Our financial instruments consist of cash, accounts payable and notes payable.  The carrying values of cash, accounts payable, and notes payable are representative of their fair values due to their short-term maturities. We measure the fair value (“FV”) of financial assets and liabilities on a recurring basis. FV is defined 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. FV measurements are to be considered from the perspective of a market participant that holds the asset or owes the liability. We also establish a FV hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring FV.

 

The standard describes three levels of inputs that may be used to measure FV:

 

Level 1:   Quoted prices in active markets for identical or similar assets and liabilities.
   
Level 2:   Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.
   
Level 3:  

Unobservable inputs that are supported by little or no market activity and that are significant to the FV of the assets or liabilities.

 

 

-34- 
 

 

The carrying value of cash, accounts receivable, accounts payable, and notes payable approximates their fair values due to their short-term maturities.  

 

Segment Reporting -

 

FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

 

The Company’s financial statements reflect that substantially all of its operations are conducted in two industry segments – (1) development and production of environmentally friendly and cost-effective beneficiation process for complex ore, tailings and slimes materials as industrial application solutions which accounts for approximately 0% of the Company’s revenues for the year ended March 31, 2023; and (2) sourcing various vendors and customers in the automotive industry, which accounted for approximately 100% of the Company’s total revenues for the years ended March 31, 2023.

 

-35- 
 

 

The following tables summarize segment information for the years ended March 31, 2023 and 2022: 

 

   2023  2022
REVENUES          
Revenue          
Production of materials  $—     $—   
Sales of electric automobiles   120,500    —   
Corporate & other   —      —   
    120,500    —   
           
Cost of Revenue          
Production of materials   —      —   
Sales of electric automobiles   92,732    —   
Corporate & other   —      —   
    92,732    —   
           
GROSS PROFIT          
Production of materials   —      —   
Sales of electric automobiles   27,768    —   
Corporate & other   —      —   
    27,768    —   
           
OPERATING EXPENSES          
Production of materials   —      —   
Sales of electric automobiles   —      —   
Corporate & other   574,847    772,893 
    574,847    772,893 
           
LOSS FROM OPERATIONS          
Production of materials   —      —   
Sales of electric automobiles   27,768    —   
Corporate & other   (574,847)   (772,893)
    (547,079)   (772,893)
           
Interest and other income (expense), net          
Production of materials   —      —   
Sales of electric automobiles   —      —   
Corporate & other   (476,079)   (356,804)
    (476,079)   (356,804)
           
NET LOSS          
Production of materials   —      —   
Sales of electric automobiles   27,768    —   
Corporate & other   (1,051,448)   (1,129,697)
    (1,023,680)   (1,129,697)

 

-36- 
 

 

Recently Adopted Accounting Pronouncements -

On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes— Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This new standard removes certain exceptions for recognizing deferred taxes of foreign investments, the incremental approach to performing intra period allocation, and calculating income taxes for year-to-date interim period losses when such losses exceed anticipated full year losses. The standard also adds guidance to reduce complexity in certain areas, including accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in goodwill tax basis, enacted tax law changes impact during interim periods, and allocation of taxes to members of a consolidated group which are not subject to tax. The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements. 

NOTE 2 – CONCENTRATION OF CREDIT RISK

We maintain our cash balances in financial institutions that from time to time exceed amounts insured by the FDIC (up to $250,000, per financial institution as of March 31, 2023). As of March 31, 2023 and 2022, our deposits did not exceeded insured amounts. We have not experienced any losses in such accounts and we believe we are not exposed to any significant credit risk on cash.

 

Currently, we maintain a bank account in China. This account is not insured, and we believe is exposed to credit risk on cash. The cash balance in China as of March 31, 2023 and 2022 is $6,998 and $958 respectively.

 

NOTE 3 – DUE TO RELATED PARTIES

 

As of March 31, 2023 and 2022, $3,213,765 and $2,787,773, respectively, is owed to the officers and directors. As of March 31, 2023, $455,934 is from the advancement of expenses and $2,757,831 is for past due compensation. The officers and directors of the Company agreed to accrue compensation for their services until such time the Company had sufficient funds to pay this liability. For the years ended March 31, 2023 and 2022, we recorded $183,240 and $91,824 of imputed interest related to these liabilities, respectively.

 

NOTE 4 – NOTE PAYABLE – RELATED PARTY

 

On April 26, 2016, we entered into a note payable with Philip Liu, our CEO, whereby he converted amounts owed of $1,565,169. On February 15, 2018, Mr. Liu converted $303,266 of the note into 4,332,374 shares of common stock which was considered the fair market value. $2,372,795 is owed under the note as of March 31, 2023. The note has an interest rate of 10% which is compounded quarterly and is due on March 31, 2019. The note is in default.

 

On April 26, 2016, we entered into a note payable with Eric Stoppenhagen, our CFO, whereby he converted amounts owed of $411,214. On February 15, 2018, Mr. Stoppenhagen converted $91,949 of the note into 1,313,556 shares of common stock which was considered the fair market value. $661,884 is owed under the note as of March 31, 2023. The note has an interest rate of 10% which is compounded quarterly and is due on March 31, 2019. The note is in default.

  

-37- 
 

 

NOTE 5 – NOTE PAYABLE

 

In December 2014, we entered into a note payable for $63,357 which bears an interest rate of 6% per year as a settlement for previously due amounts recorded in accounts payable. The Company paid $7,500 to reduce the amount of the note. The amount of principle and interest as of March 31, 2023 is $93,505. The principle and interest are due on September 15, 2016. The note payable is currently in default. 

 

On May 3, 2020, we entered into a loan borrowed $29,332 from Bank of America (“Lender”), pursuant to a Promissory Note issued by Company to Lender (the “PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Note bears interest at 1.00% per annum, payable monthly beginning December 3, 2020, and is due on May 3, 2022. The PPP Note may be repaid at any time without penalty. The PPP Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the PPP Note. We repaid $10,000 in August 2020. As of March 31, 2023, the principal and interest of the PPP Note is $12,376. The Company plans to pay off this loan balance in the next year.

 

On June 13, 2020, we entered into a note with the US Small Business Administration for a loan amount of $12,900 and an annual interest rate of 3.75% which is due in 30 years. As of March 31, 2023, the principal and interest of the note is $14,190. 

 

 NOTE 6 – STOCK ISSUANCE

 

During the quarter ended June 30, 2022, the Company issued 190,000 shares of common stock for $9,500.

 

During the quarter ended September 30, 2022, the Company issued 200,000 shares of common stock for $10,000.

 

During the quarter ended December 31, 2022, the Company issued 300,000 shares of common stock for $15,000.

 

During the quarter ended March 31, 2023, the Company issued 500,000 shares of common stock for $50,000.

 

As of March 31, 2023, there are 69,398,151 shares of common stock issued and outstanding.

-38- 
 

 

NOTE 7 - STOCK OPTIONS

On April 1, 2021, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements. On July 1, 2021, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements. On October 1, 2021, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements. On January 1, 2022, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements.  On April 1, 2022, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements.  On July 1, 2022, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements. All options have a term of ten years. On October 1, 2022, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements. On January 1, 2023, we granted 200,000 vested options to purchase shares of our common stock at $0.052 per share to certain our CEO and CFO per their employment agreements. All options have a term of ten years. 

 

We will record stock-based compensation expense over the requisite service period, which in our case approximates the vesting period of the options. During the year ended March 31, 2023 and 2022, the Company recorded $83,800 and $274,600, respectively, in compensation expense arising from the vesting of options, respectively. Though these expenses result in a deferred tax benefit, we have a full valuation allowance against the deferred tax benefit.

 

The Company adopted the detailed method provided in FASB ASC Topic 718, “Compensation – Stock Compensation,” for calculating the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the income tax effects of employee stock-based compensation awards that are outstanding.

 

The fair value of each stock option granted is estimated on the grant date using the Black-Scholes option pricing model (“BSOPM”). The BSOPM has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk-free interest rate is based upon market yields for United States Treasury debt securities at a 5-year constant maturity. Dividend rates are based on the Company’s dividend history. The stock volatility factor is based on the last five years of market prices prior to the grant date. The expected life of an option grant is based on management’s estimate. The fair value of each option grant, as calculated by the BSOPM, is recognized as compensation expense on a straight-line basis over the vesting period of each stock option award.

 

These assumptions were used to determine the FV of stock options granted:

       
Dividend yield     0.0%  
Volatility     330- 350%  
Average expected option life   5 years  
Risk-free interest rate     2.39% - 3.89%  

 

 

-39- 
 

 

The following table summarizes activity in the Company's stock option grants for the years ended March 31, 2023 and 2022:

 

      Number of Shares     Weighted Average Price Per Share     Weighted Average Contractual Term (in years)     Aggregate Intrinsic Value
Balance at March 31, 2021       6,120,000     $ 0.24       3.50     $  - 
Granted       800,000     $ 0.05       3.00     $              33,600
Expired       (40,000)     $  0.75       0.00     $   
Balance at March 31, 2022       6,880,000     $ 0.25       3.00     $  - 
Granted       800,000       0.05       4.50     $ 40,000
Expired        (40,000 )    $ 0.45             $ -
Balance at March 31, 2023       7,640,000     $ 0.23       3.34     $  - 

 

The following summarizes pricing and term information for options issued to employees and directors outstanding as of March 31, 2023:

   

    Options Outstanding   Options Exercisable
Range of Exercise Prices   Number Outstanding   Weighted Average Remaining Contractual   Weighted Average Exercise Price   Number Exercisable   Weighted Average Exercise Price
Life
                               
$0.50     40,000     1.00     $0.50     40,000     $0.50
$0.49     40,000     2.00     $0.49     40,000     $0.49
$0.25     4,800,000     3.62     $0.25     4,800,000     $0.25
$0.17     40,000     6.00     $0.17     40,000     $0.17
$0.15     40,000     3.00     $0.15     40,000     $0.15
$0.11     40,000     5.00     $0.11     40,000     $0.11
$0.08     40,000     4.00     $0.08     40,000     $0.08
$0.05     2,600,000     3.25     $0.05     2,600,000     $0.05
Balance     7,640,000     3.67     $0.23     7,640,000     $0.23  

  

-40- 
 

 

NOTE 8 - LOSS PER SHARE

 

The following table sets forth common stock equivalents (potential common stock) for the years ended March 31, 2023 and 2022 that are not included in the loss per share calculation above because their effect would be anti-dilutive for the periods indicated:

 

The following table sets forth common stock equivalents (potential common stock) for the years ended March 31, 2023 and 2022 that are not included in the loss per share calculation above because their effect would be anti-dilutive for the periods indicated:

 

    2023   2022
Weighted average common stock equivalents:                
Non-plan stock options     7,640,000       6,880,000  

 

NOTE 9 - INCOME TAX

 

The deferred tax asset as of March 31, 2023 and 2022 consisted of the following:

    2023   2022
Net operating loss carryforwards   $ 5,038,991     $ 4,800,371  
Less valuation allowance     (5,038,991 )     (4,800,371 )
    $ —       $ —    

 

Management provided a deferred tax asset valuation allowance equal to the potential benefit due to the Company’s loss. When the Company demonstrates the ability to generate taxable income, management will re-evaluate the allowance. The Company has not filed its federal and state tax returns for the years ending March 31, 2023 and 2022.

 

As of March 31, 2023, the Company has net operating federal and state loss carryforward of $21,617,294 which is available to offset future taxable income that expires by year 2034. The Company applied a 100% valuation reserve against the deferred tax benefit as the realization of the benefit is not certain. There are no uncertain tax positions.

 

Reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 21% for 2023 and 2022 is as follows:

 

    2023   2022
Income tax benefit at federal statutory rate     (21.00 )%     (21.00 )%
Foreign tax rate difference     1.49 %     1.49 %
State income tax benefit, net of effect on federal taxes     (3.80 )%     (3.80 )%
Increase in valuation allowance     23.31 %     23.31 %
Income tax expense     —         —    

 

-41- 
 

 

NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

Leases — We currently lease 2,507 square feet of office space at 2103 E. Cedar Street, Suites 6 Tempe, Arizona for $2,565 per month. The lease expires June 30, 2024 and $72,015 is due through the remainder of the lease. We believe that our facilities are adequate to meet our current and near-term needs.

 

      March 31, 2023
Lease Cost      
Operating lease cost (included in general and administration in the Company’s statement of operations)   $ 30,656
       
Other Information      
Cash paid for amounts included in the measurement of lease liabilities for the year ended March 31, 2023   $ 30,007
Remaining lease term – operating leases (in years)     2.17
Average discount rate – operating leases     10%
The supplemental balance sheet information related to leases for the periods are as follows:      
Operating leases      
Right-of-use assets   $ 61,918
Total operating lease assets   $ 61,918
       
Short-term operating lease liabilities   $ 26,517
Long-term operating lease liabilities   $ 35,632
Total operating lease liabilities   $  62,149
       
Maturities of the Company’s lease liabilities are as follows:      
       
Period ending March 31,   Operating 
Lease
2024     71,323
       
Total lease payments     72,015
       
Less: Imputed interest/present value discount     9,174
Present value of lease liabilities    $  62,149

 

 

Litigation — The Company is currently not a party to any material legal proceedings.

 

-42- 
 

 

Employment Agreements —

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Philip Liu, the Company’s CEO.  Under the Employment Agreement, Mr. Liu will receive a base salary of $240,000 per year and a guaranteed bonus of $40,000 per year.  Each quarter Mr. Liu shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Options expire 10 years from expiration. Mr. Liu will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Liu will receive a car allowance of $500 per month and an office allowance of $500 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Eric Stoppenhagen, the Company’s CFO.  Under the Employment Agreement, Mr. Stoppenhagen will receive a base salary of $120,000 per year and a guaranteed bonus of $20,000 per year.  Each quarter Mr. Stoppenhagen shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Options expire 10 years from expiration. Mr. Stoppenhagen will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Stoppenhagen will receive a car allowance of $250 per month and an office allowance of $250 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

NOTE 11 - JOINT VENTURE

 

In April 2022, we entered into a joint venture agreement where we own 50% of NeoMetals LLC, an Arizona limited liability company, to focus on the development and production of the mineral-rich complex ore of the El Capitan mine, using an environmentally friendly and cost- effective beneficiation process. On March 3, 2023, NeoMetals LLC entered into a promissory note for $1,800,000 with an accredited investor. This note was personally guaranteed by NeoMetals two managing directors, Douglas Sanders and Philip Liu. At the end of 12 months, the Company will pay back the note plus $270,000 in interest. The payable balance in the below table is due one year from issuance. The 50% ownership in the joint venture qualifies for the equity method of accounting. The equity method is applied when an entity has significant influence over the joint venture but does not have control. Philip Liu is co managing director which gives significant control. Each director has one vote and therefore split the voting power equally. Under this method, the joint venture is initially recorded at cost, and subsequently, Aurasource's share of the joint venture's income, expenses, and assets is recognized in its financial statements.

 

The Company did not include the assets and liabilities related to the joint venture in it’s balance sheet. The joint venture for the year ended March 31, 2023 are:

 

    March 31, 2023  
Assets          
Cash   $ 1,765,144      
Total Assets   $ 1,765,144      
           
Liabilities          
Note payable   $ 1,834,581    
Total Liabilities   $ 1,834,581    

 

The net loss of NeoMetals was $69,437 for the year ending March 31, 2023. The loss attributed to the Company was $34,719.

-43- 
 

 

 

 

According to ASC 323-10-35-19, an investor’s share of losses of an investee may equal or exceed the carrying amount of an investment accounted for by the equity method plus advances made by the investor. An equity method investor shall continue to report losses up to the investor’s investment carrying amount, including any additional financial support made or committed to by the investor. Additional financial support made or committed to by the investor may take the form of any of the following:

 

  1. Capital contributions to the investee;
  2. Investments in additional common stock of the investee;
  3. Investments in preferred stock of the investee;
  4. Loans to the investee;
  5. Investments in debt securities (including mandatorily redeemable preferred stock) of the investee;
  6. Advances to the investee.

 

According to ASC 323-10-35-20, the investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.

 

According to ASC 323-10-35-21, an investor shall, however, provide for additional losses if the imminent return to profitable operations by an investee appears to be assured. For example, a material, nonrecurring loss of an isolated nature may reduce an investment below zero even though the underlying profitable operating pattern of an investee is unimpaired.

 

According to ASC 323-10-35-22, If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended.

 

The Company did not make or commit to financially support NeoMetals. The Company did not guarantee NeoMetals obligations. There were no imminent return to profitable operations for NeoMetals.

 

In accordance with ASC 323-10-35 numbers 19 through 22 we did not record the loss as our carrying amount of our investment is zero. To the extent, there is net income in future periods we will offset against this loss.

-44- 
 

 

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

 

Not applicable.

 

Item 9A.  Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures: We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures", as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC`s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of March 31, 2023, that our disclosure controls and procedures are not effective at a reasonable assurance level and are designed to provide reasonable assurance that the controls and procedures will meet their objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Management's Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.  The internal controls for the Company are provided by executive management's review and approval of all transactions.  Our ICFR also includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
   
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and
   
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

-45- 
 

 

Because of its inherent limitations, ICFR may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's ICFR as of March 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management's assessment included an evaluation of the design of our ICFR and testing of the operational effectiveness of these controls.  

Based on this assessment, management has concluded that as of March 31, 2023, our ICFR was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP.

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

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Item 9B.  Other Information.

 

None

-46- 
 

 

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance.

 

Directors and Executive Officers

 

The names and ages of the directors and executive officers of the Company as of March 31, 2023, and their positions with the Company, are as follows:

 

Name Age Position
     
Philip Liu 60 Chief Executive Officer, President and Chairman of the Board  
       
Eric Stoppenhagen 49 Chief Financial Officer, Treasurer and a Director  

 

Directors are elected for a period of one year and until their successors are duly elected.  Executive officers are elected by the BOD. There are no family relationships between our executive officers and directors.

 

Philip Liu was appointed Chief Executive Officer, President and Chairman of the Board in July 2008. Mr. Liu has served as a director of the Company since July 2008. Mr. Liu has 30 years of experience in international trade, business development, investment banking and financial services, as well as entrepreneurial ventures. He has worked both in China and in the United States and has led a number of entrepreneurial ventures, including two medical device distribution ventures, in China. Since founding the Company in 2005, Mr. Liu has served as the managing director of Timeway International Ltd, a Hong Kong company. Through Mr. Liu, Timeway International Ltd. has provided investment banking advisory services to clients such as BOT Capital, Okay Airways, Rothschild China, Sunray Group, iKang Group and Arrail Dental. Mr. Liu is also a director of MyOEM Inc., a private corporation which he co-founded in 2000. From 1994 to 2001, Mr. Liu was the Asia Business Venture Partner of the Phoenix, Arizona based investment-banking firm, Yee, Desmond, Schroeder & Allan Inc. From 1988 to 1989, Mr. Liu worked as a project manager with China Kanghua Development Corp., one of the Chinese State Council direct controlled investment firms located in Beijing, China.  While at China Kanghua Development Corp., Mr. Liu served on the negotiation team with multinational investment banking firms in a major industrial joint venture project. From 1987 to 1988, Mr. Liu worked as a project manager in China Ningbo Import & Export Corp. From 1984 to 1986, Mr. Liu worked as a research fellow at the Economic Research Institute of Wuhan Iron & Steel Group under the Ministry of Metallurgical Industry of China. Mr. Liu was born and raised in China. He graduated from Hubei Business School in 1984, after he visited the United States as an exchange student. Mr. Liu attended North Carolina State University and Campbell University (North Carolina) between 1990 and 1993. Mr. Liu obtained a MBA in corporate finance from Campbell University.  Mr. Liu is a resident of Phoenix, Arizona and is a U.S. Citizen.

 

-47- 
 

 

Eric Stoppenhagen was appointed Chief Financial Officer (“CFO”) and Treasurer in July 2008. He has served as a director of the Company since July 2008. Mr. Stoppenhagen through his consulting company, NYX Advisors, Inc., provides financial and management services to small to medium-sized companies that either are public or desire to become public. He provides CFO services to these companies, including transaction advice, preparation of security filings and advice regarding compliance with corporate governance requirements.  Mr. Stoppenhagen has more than 15 years of financial experience having served in an executive capacity for several public and private companies, including Vice President of Finance and subsequently Interim President of Trestle Holdings, Inc. from 2003 to 2009; Interim President of WoozyFly Inc. from 2009 to 2010; Interim President of Trist Holdings, Inc. from 2007 to 2010; CFO and Director of AuraSource, Inc. from 2008 to 2010; President of Catalyst Lighting Group, Inc. in 2010; and, CFO of Jardinier Corp. from 2007 to 2008.  Mr. Stoppenhagen holds a Juris Doctorate and Masters of Business Administration both from George Washington University.  Additionally, he holds a Bachelor of Science in Finance and a Bachelor of Science in Accounting both from Indiana University.  

 

All directors hold office until the next annual meeting of the stockholders of the Company and until their successors have been duly elected and qualified. The Company’s Bylaws provide that the BOD will consist of no less than three members. Officers are elected by and serve at the discretion of the BOD. 

 

Board Experience

 

Our BOD has diverse and extensive knowledge and expertise in a broad range of industries that is of particular importance to us. This knowledge and experience includes operating, acquiring, financing development stage companies. In addition, our BOD has extensive and broad legal, auditing and accounting experience. Our BOD has numerous years of hands-on and executive experience drawn from a wide range of disciplines. Our current director was nominated to the BOD on the basis of the unique skills he brings to the board. We will select additional directors based upon the experience and unique skills they bring as well how these collectively enhance our BOD. On an individual basis:

 

Mr. Liu has 35 years of experience in international trade, business development, investment banking and financial services, as well as entrepreneurial ventures. He has worked both in China and in the United States and has led a number of entrepreneurial ventures, including two medical device distribution ventures, in China.

 

Mr. Stoppenhagen, has over 20 years of experience in managing publicly traded companies and brings insight into all aspects of our business due to both his current role with the company. His comprehensive experience and extensive knowledge and understanding of the healthcare and specifically digital pathology has been instrumental in the creation, development and launching of our company, as well as our current strategy.

 

Section 16(a) Beneficial Ownership Reporting Compliance.

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC.  Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file.  During the year ended March 31, 2023, our executive officers and directors have not complied with all Section 16(a) filing requirements.

-48- 
 

 

Code of Ethics

 

The Company has adopted a Code of Ethics that applies to its principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Company’s Code of Ethics may be obtained free of charge by contacting the Company at the address or telephone number listed on the cover page hereof.

 

Audit Committee and Audit Committee Financial Expert

 

Although we are not a “listed company” under SEC rules and are therefore not required to have an audit committee comprised of independent directors, we have formed an Audit Committee that is currently comprised of two members: Philip Liu, with Eric Stoppenhagen serving as Chairman of the committee. Our board of directors has determined that Mr. Stoppenhagen serves as the “audit committee financial expert” within the meaning of the rules and regulations of the SEC.

 

The Audit Committee pre-approves the performance of audit and non-audit services by the Company’s accountants and reviews the Company’s internal control systems, financial reporting procedures, the general scope of the Company’s annual audit, the fees charged by the independent accountants, and the fairness of any proposed transaction between any officer, director or other affiliate of the Company and the Company. With respect to the foregoing, the Audit Committee makes recommendations to the full BOD and performs such further functions as may be required or delegated to the Committee by the BOD.  The BOD has adopted a written charter for the Audit Committee. A copy of the Company’s Audit Committee Charter may be obtained free of charge by contacting the Company at the address or telephone number listed on the cover page hereof.

 

Director Independence

 

Our BOD currently consists of two members: Philip Liu and Eric Stoppenhagen.

 

We do not have a separately designated compensation or nominating committee of our BOD and the functions customarily delegated to these committees are performed by our full BOD.  We are not a “listed company” under SEC rules and are therefore not required to have separate committees comprised of independent directors.  We have determined that no member is “independent” as that term is defined in Section 5605 of the NASDAQ Listing Rules as required by the NASDAQ Stock Market.

-49- 
 

 

Item 11.  Executive Compensation

 

The following table and related footnotes show the compensation paid during the fiscal years ended March 31, 2023 and 2022 and to the Company's executive officers.

 

SUMMARY COMPENSATION TABLE

                 
Name and Principal Position     Year       Salary ($)       Bonus ($)       Stock Awards ($)       Option Awards ($)       All Other Compensation ($)       Total ($)  
                                                         
Philip Liu (1)     2022       —       —         —       137,300 (2)      —         137,300  
Chief Executive Officer     2023       —       —         —       41,900  (2)     —         41,900  
                                                         
Eric Stoppenhagen (1)     2022       —       —         —        137,300  (2)     —        137,300  
Chief Financial Officer     2023       —       —         —       41,900  (2)     —        41,900  
                                                         

__________________________

(1)   Mr. Liu and Mr. Stoppenhagen accrued their compensation.
(2)  

On April 1, 2021, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.052 for serving as executive officers. On July 1, 2021, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.052 for serving as executive officers. On October 1, 2021, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.052 for serving as executive officers. On January 1, 2022, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.052 for serving as executive officers. The options will expire in 10 years after issuance.

 

On April 1, 2022, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.25 for serving as executive officers. On July 1, 2022, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.25 for serving as executive officers. On October 1, 2022, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.25 for serving as executive officers. On January 1, 2023, Mr. Liu and Mr. Stoppenhagen were granted 100,000 options at an exercise price of $0.052 for serving as executive officers. The options will expire in 10 years after issuance.

   

 

-50- 
 

 

 

Narrative Disclosure to Summary Compensation Table

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Philip Liu, the Company’s CEO.  Under the Employment Agreement, Mr. Liu will receive a base salary of $240,000 per year and a guaranteed bonus of $40,000 per year.  Each quarter Mr. Liu shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Mr. Liu will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Liu will receive a car allowance of $500 per month and an office allowance of $500 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Eric Stoppenhagen, the Company’s CFO.  Under the Employment Agreement, Mr. Stoppenhagen will receive a base salary of $120,000 per year and a guaranteed bonus of $20,000 per year.  Each quarter Mr. Stoppenhagen shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Mr. Stoppenhagen will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Stoppenhagen will receive a car allowance of $250 per month and an office allowance of $250 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

 In our fiscal year ending March 31, 2023, the Company did not retain outside consultants to provide advice in relation to executive compensation.

 

Outstanding Equity Awards at Fiscal Year-End March 31, 2023

The following table provides information with respect to stock option and restricted stock awards held by each of our executive officers as of March 31, 2023. 

    Option Awards
Name   Grant Date   Number of
Securities Underlying
Unexercised Options		  

Option Exercise

 Price ($)

   Option Expiration Date
                 
 Philip Liu   1/1/2014     100,000       0       0.25     12/31/2023
Eric Stoppenhagen   1/1/2014     100,000       0       0.25     12/31/2023
                                 
Philip Liu   4/1/2014     20,000       0       0.50     3/31/2024
Eric Stoppenhagen   4/1/2014     20,000       0       0.50     3/31/2024
Philip Liu   4/1/2014     100,000       0       0.25     3/31/2024
Eric Stoppenhagen   4/1/2014     100,000       0       0.25     3/31/2024
                                 
Philip Liu   7/1/2014     100,000       0       0.25     6/30/2024
Eric Stoppenhagen   7/1/2014     100,000       0       0.25     6/30/2024
                                           

 

-51- 
 

 

 

                                 
Philip Liu   10/1/2014     100,000       0       0.25     9/30/2024
Eric Stoppenhagen   10/1/2014     100,000       0       0.25     9/30/2024
                                 
Philip Liu   1/1/2015     100,000       0       0.25     12/31/2024
Eric Stoppenhagen   1/1/2015     100,000       0       0.25     12/31/2024
                                 
Philip Liu   4/1/2015     20,000       0       0.49     3/31/2025
Eric Stoppenhagen   4/1/2015     20,000       0       0.49     3/31/2025
Philip Liu   4/1/2015     100,000       0       0.25     3/31/2025
Eric Stoppenhagen   4/1/2015     100,000       0       0.25     3/31/2025
                                 
Philip Liu   7/1/2015     100,000       0       0.25     6/30/2025
Eric Stoppenhagen   7/1/2015     100,000       0       0.25     6/30/2025
                                 
Philip Liu   10/1/2015     100,000       0       0.25     9/30/2025
Eric Stoppenhagen   10/1/2015     100,000       0       0.25     9/30/2025
                                 
Philip Liu   1/1/2016     100,000       0       0.25     12/31/2025
Eric Stoppenhagen   1/1/2016     100,000       0       0.25     12/31/2025
                                 
Philip Liu   4/1/2016     20,000       0       0.15     3/31/2026
Eric Stoppenhagen   4/1/2016     20,000       0       0.15     3/31/2026
Philip Liu   4/1/2016     100,000       0       0.25     3/31/2026
Eric Stoppenhagen   4/1/2016     100,000       0       0.25     3/31/2026
                                 
Philip Liu   7/1/2016     100,000       0       0.25     6/30/2026
Eric Stoppenhagen   7/1/2016     100,000       0       0.25     6/30/2026
                                 
Philip Liu   10/1/2016     100,000       0       0.25     9/30/2026
Eric Stoppenhagen   10/1/2016        100,000     0       0.25     9/30/2026
                                 
Philip Liu 1/1/2017       100,000       0       0.25     12/31/2026
Eric Stoppenhagen 1/1/2017       100,000       0       0.25     12/31/2026
                                 
Philip Liu 4/1/2017       20,000       0       0.15     3/31/2027
Eric Stoppenhagen 4/1/2017       20,000       0       0.15     3/31/2027
Philip Liu 4/1/2017       100,000       0       0.25     3/31/2027
Eric Stoppenhagen 4/1/2017       100,000       0       0.25     3/31/2027
                                                       

 

-52- 
 

 

 

                                 
Philip Liu   7/1/2017     100,000       0       0.25     6/30/2027
Eric Stoppenhagen   7/1/2017     100,000       0       0.25     6/30/2027
                                 
Philip Liu   10/1/2017     100,000       0       0.25     9/30/2027
Eric Stoppenhagen   10/1/2017     100,000       0       0.25     9/30/2027
                                 
Philip Liu   1/1/2018     100,000       0       0.25     12/31/2027
Eric Stoppenhagen   1/1/2018     100,000       0       0.25     12/31/2027
                                 
Philip Liu   4/1/2018     20,000       0       0.15     3/31/2028
Eric Stoppenhagen   4/1/2018     20,000       0       0.15     3/31/2028
Philip Liu   4/1/2018     100,000       0       0.25     3/31/2028
Eric Stoppenhagen   4/1/2018     100,000       0       0.25     3/31/2028
                                 
Philip Liu   7/1/2018     100,000       0       0.25     6/30/2028
Eric Stoppenhagen   7/1/2018     100,000       0       0.25     6/30/2028
                                 
Philip Liu   10/1/2018     100,000       0       0.25     9/30/2028
Eric Stoppenhagen   10/1/2018     100,000       0       0.25     9/30/2028
                                 
Philip Liu   1/1/2019     100,000       0       0.25     12/31/2028
Eric Stoppenhagen   1/1/2019     100,000       0       0.25     12/31/2028
                                 
Philip Liu   4/1/2019     20,000       0       0.17     3/31/2029
Eric Stoppenhagen   4/1/2019     20,000       0       0.17     3/31/2029
                                 
Philip Liu   4/1/2019     100,000       0       0.25     3/31/2029
Eric Stoppenhagen   4/1/2019     100,000       0       0.25     3/31/2029
                                 
Philip Liu   7/1/2019     100,000       0       0.25     6/30/2029
Eric Stoppenhagen   7/1/2019     100,000       0       0.25     6/30/2029
                                 
Philip Liu   10/1/2019     100,000       0       0.25     9/30/2029

  

Eric Stoppenhagen   10/1/2019     100,000       0       0.25     9/30/2029
                                 
Philip Liu   1/1/2020     100,000       0       0.052     12/31/2029
Eric Stoppenhagen   1/1/2020     100,000       0       0.052     12/31/2029
Philip Liu   4/1/2020     100,000       0       0.25     3/31/2030
Eric Stoppenhagen   4/1/2020     100,000       0       0.25     3/31/2030
                                       

 

-53- 
 

 

 

                                 
Philip Liu   7/1/2020     100,000       0       0.25     6/30/2030
Eric Stoppenhagen   7/1/2020     100,000       0       0.25     6/30/2030
                                 
Philip Liu   10/1/2020     100,000       0       0.25     9/30/2030

 

Eric Stoppenhagen   10/1/2020     100,000       0       0.25     9/30/2030
                                 
Philip Liu   1/1/2021     100,000       0       0.052     12/31/2030
Eric Stoppenhagen   1/1/2021     100,000       0       0.052     12/31/2030

  

Philip Liu   4/1/2021     100,000       0       0.052     3/31/2031
Eric Stoppenhagen   4/1/2021     100,000       0       0.052     3/31/2031
                                 
Philip Liu   7/1/2021     20,000       0       0.052     6/30/2031
Eric Stoppenhagen   7/1/2021     20,000       0       0.052     6/30/2031
                                 
Philip Liu   10/1/2021     100,000       0       0.052     9/30/2031
Eric Stoppenhagen   10/1/2021     100,000       0       0.052     9/30/2031
                                 
Philip Liu   1/1/2022     100,000       0       0.052     12/31/2031
Eric Stoppenhagen   1/1/2022     100,000       0       0.052     12/31/2031
                                 
Philip Liu   4/1/2022     100,000       0       0.052     3/31/2032
Eric Stoppenhagen   4/1/2022     100,000       0       0.052     3/31/2032
                                 
Philip Liu   7/1/2022     20,000       0       0.052     6/30/2032
Eric Stoppenhagen   7/1/2022     20,000       0       0.052     6/30/2032
                                 
Philip Liu   10/1/2022     100,000       0       0.052     9/30/2032
Eric Stoppenhagen   10/1/2022     100,000       0       0.052     9/30/2032
                                 
Philip Liu   1/1/2023     100,000       0       0.052     12/31/2032
Eric Stoppenhagen   1/1/2023     100,000       0       0.052     12/31/2032

 

 

 (1) In the year ending March 31, 2022, Mr. Liu and Mr. Stoppenhagen were granted 400,000 options each for their services as officers of the Company. In the year ending March 31, 2023, Mr. Liu and Mr. Stoppenhagen were granted 400,000 options each for their services as officers of the Company.

-54- 
 

 

Options Exercised and Year-End Option Values

 

The following table sets forth certain information regarding the value of unexercised options held by the named executive officer and directors as of March 31, 2023.

 

Name  

Number of Securities

Underlying Options

and Warrants Granted

    

Percent of Total

Options and Warrants

Granted in Fiscal Year

    

Exercise or Base

Price($/Share)

  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     20,000       100 %     0.50  
Eric Stoppenhagen     20,000       100 %     0.50  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     20,000       100 %     0.49  
Eric Stoppenhagen     20,000       100 %     0.49  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
  Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     20,000       100 %     0.15  
Eric Stoppenhagen     20,000       100 %     0.15  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
                                                 
 Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     20,000       100 %     0.075  
Eric Stoppenhagen     20,000       100 %     0.075  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
                                                                     
-55- 
 

 

 

Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     20,000       100 %     0.11  
Eric Stoppenhagen     20,000       100 %     0.11  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     20,000       100 %     0.17  
Eric Stoppenhagen     20,000       100 %     0.17  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
                                 
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.25  
Eric Stoppenhagen     100,000       100 %     0.25  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
                                 
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
Philip Liu     100,000       100 %     0.052  
Eric Stoppenhagen     100,000       100 %     0.052  
                                                                 

 

-56- 
 

 

Aggregated Option and Warrant Exercises in the Last Fiscal Year and Fiscal Year-End Option and Warrant Values

 

The following table and related footnotes set forth option exercises in 2023 and year-end option values for the Company's Executive Officers.

 

Name  

Shares Acquired

on Exercise (#)

     Value Realized ($)    

Number of

Securities Underlying

Unexercised Options

and Warrants

at March 31, 2023

    

Value of Unexercised

In-the-Money Options

and Warrants

at March 31, 2023

  
Philip Liu     0       N/A       3,820,000       0  
Eric Stoppenhagen     0       N/A       3,820,000       0  

 

Compensation of Directors

 

The following table details the total compensation paid to the company’s non-employee directors in our fiscal year ending March 31, 2023:

 

None

 

  (1) Our BOD approved a compensation plan for the BOD. Under such plan, current members of the Company’s BOD (including our employee directors) earn $500 for every meeting attended in person and $250 for every meeting attended telephonically.

  

-57- 
 

 

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

 

The following table sets forth certain information regarding beneficial ownership of our common stock as of July 21, 2023 by (i) each person who “beneficially” owns more than 5% of all outstanding shares of our common stock, (ii) each director and the executive officer identified above, and (iii) all directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.  Shares of our common stock subject to options and warrants from the Company that are currently exercisable or exercisable within 60 days are deemed to be outstanding and to be beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

The information presented in this table is based on 69,398,151 shares of our common stock outstanding on July 21, 2023.  Unless otherwise indicated, the address of each of the executive officers and directors and 5% or more shareholders named below is c/o 2103 E. Cedar Street, Suites 6 Tempe, Arizona 85281.

 

Name of Beneficial Owner   Amount and Nature of Beneficial Ownership   Percentage Ownership of Common Stock (1)
Global Energy Source Inc       11,511,850       14.86%
John W. Lambert       9,636,132       12.44%
Philip Liu (2)       15,126,677       19.52%
Eric Stoppenhagen(2)       6,668,400       8.61%
All officers and directors                
as a group (two persons)       21,795,077       28.13%
        42,943,059       55.43%

 

 

-1 The percent of common stock owned is calculated using the sum of (A) the number of shares of common stock owned and (B) the number of warrants and options of the Beneficial Owner that are exercisable within 60 days, as the numerator, and the sum of (Y) the total number of shares of common stock outstanding (69,398,151) and the number of warrants and options of the Beneficial Owner that are exercisable within 60 days, as the denominator.
-2 Officer and director of the Company.

 

-58- 
 

 

Equity Compensation Plan Information

 

The following table sets forth certain information regarding the Company’s equity compensation plans as of March 31, 2023:

 

 

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 0 0 0
Equity compensation plans not approved by security holders 7,640,000 $ 0.23 0
Total 7,640,000 $ 0.23 0

  

Changes in Control Arrangements

 

There existed no change in control arrangements at March 31, 2023.

 

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

  

Other than the employment arrangements described above in “Executive Compensation”, since April 1, 2012, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:

 

  - in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for our last two completed fiscal years; and

 

  - in which any director, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Philip Liu, the Company’s CEO.  Under the Employment Agreement, Mr. Liu will receive a base salary of $240,000 per year and a guaranteed bonus of $40,000 per year.  Each quarter Mr. Liu shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Mr. Liu will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Liu will receive a car allowance of $500 per month and an office allowance of $500 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

-59- 
 

 

Effective January 1, 2020, the Company entered into an Employment Agreement (the “Employment Agreement”) with Eric Stoppenhagen, the Company’s CFO.  Under the Employment Agreement, Mr. Stoppenhagen will receive a base salary of $120,000 per year and a guaranteed bonus of $20,000 per year.  Each quarter Mr. Stoppenhagen shall receive 100,000 options to purchase the Company’s common at an exercise price of $0.052 per share. Mr. Stoppenhagen will be eligible for an incentive bonus based on his performance.  Additionally, Mr. Stoppenhagen will receive a car allowance of $250 per month and an office allowance of $250 per month.  The term of the contract is from January 1, 2020 to December 31, 2025.

 

Item 14.  Principal Accountant Fees and Services

 

Independent Public Accountants

 

On April 4, 2014, we engaged TAAD, LLP (“TAAD”) our new independent registered public accounting firm. The appointment of TAAD was approved by our Board of Directors. During the fiscal years ended March 31, 2023 and 2022, we did not consult with TAAD on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company's financial statements, and TAAD did not provide either a written report or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

 

Audit Fees

 

The aggregate fees billed by TAAD for the audit of the Company’s consolidated financial statements in the years ended March 31, 2023 and 2022, the reviews of the quarterly reports on Form 10-Q for the same fiscal years and statutory and regulatory filings was $19,777 and $19,059 and for the years ended March 31, 2023 and 2022, respectively.

 

Audit-Related Fees

 

There were no fees billed by TAAD for audit-related services for the years ended March 31, 2023 and 2022.

 

Tax Fees

 

The aggregate fees billed by TAAD for tax-related services for the years ended March 31, 2023 and 2022 were zero.

 

 

All Other Fees

 

There were no fees billed by TAAD for other services not described above for the years ended March 31, 2023 and 2022.

-60- 
 

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors

 

The BOD’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the BOD regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The BOD may also pre-approve particular services on a case-by-case basis. No services were approved by the BOD in accordance with Item 2-01(c)(7)(i)(C) of Regulation S-X.

 

The BOD has determined that the rendering of the services other than audit services by GKM is compatible with maintaining the principal accountant’s independence.

 

1. Audit services include audit work performed in the preparation of consolidated financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

 

2. Audit-Related services are for assurance and related services that are reasonably related to the audit or review of our consolidated financial statements.

 

3. Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the consolidated financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

 

4. Other Fees are those associated with products or services not captured in the other categories.

 

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PART IV

 

Item 15.  Exhibits, Financial Statement Schedules

 

  (a) Documents filed as part of this report

 

  1. Financial Statements.

 

See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.

 

  2. Financial Statement Schedules.

 

All financial statement schedules are omitted because the information is inapplicable or presented in the Notes to Financial Statements.

 

  3. Exhibits.  See Item 15(b) below.

 

  (b) Exhibits. We have filed, or incorporated into this Form 10-K by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K.

 

  (c) Financial Statement Schedule.  See Item 15(a) above.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AuraSource, Inc.  
             
Date: July 25, 2023     By:

/s/   PHILIP LIU

-----------------------------------------------------------

Name: Philip Liu

Title: Chief Executive Officer

 (Principal Executive Officer)

 

    
Date: July 25, 2023     By:

/s/   ERIC STOPPENHAGEN

-----------------------------------------------------------

Name: Eric Stoppenhagen

Title: Chief Financial Officer

 (Principal Financial and Accounting Officer)

    

 

POWER OF ATTORNEY

  

The undersigned directors and officers of AuraSource, Inc. do hereby constitute and appoint Eric Stoppenhagen with full power of substitution and resubstitution, as their true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officer and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent, may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended and any rules, regulations and requirements of the SEC Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto, and we do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.

 

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    

 

/s/   PHILIP LIU

------------------------------------

 Philip Liu

  

 

Chief Executive Officer

(Principal Executive Officer)

  

 

July 25, 2023

  

 

/s/   ERIC STOPPENHAGEN

------------------------------------

 Eric Stoppenhagen

  

 

Chief Financial Officer

(Principal Financial and Accounting Officer)

  

 

July 25, 2023

  

 

/s/   PHILIP LIU

------------------------------------

 Philip Liu

  

 

Chairman

  

 

July 25, 2023

  

 

/s/ ERIC STOPPENHAGEN

-------------------------------------

Eric Stoppenhagen

  

 

Director

  

 

July 25, 2023

  

 

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  Index to Exhibits:
 Exhibit Number   Description of Exhibit  
       
*3.1   Articles of Incorporation effective as of November 6, 1998  (incorporated herein by reference to Exhibit 3.1 of the Company’s Form 10SB12G filed December 21, 1999)  
*3.2   Certificate of Amendment of Articles of Incorporation effective as of August 18, 2008 (incorporated herein by reference to Exhibit 3.1 of Company's Form 10-Q dated September 30, 2008)  
*3.3   By-laws of the Company (incorporated herein by reference to Exhibit 3.2 of the Company’s Form 10SB12G filed December 21, 1999)  
*10.1   Compensation Plan for Members of the Board of Directors (incorporated herein by reference to Exhibit 10.1 of Company's Form 8-K dated September 12, 2008)    
*10.2   Charter of the Audit Committee of the Board of Directors (incorporated herein by reference to Exhibit 10.1 of Company's Form 10-Q dated September 30, 2008)    
*10.3   Employment Agreement between AuraSource, Inc. and Philip Liu dated August 1, 2009 (incorporated herein by reference to Exhibit 99.1 of Company's Form 8-K dated September 1, 2009)    
*10.4   Mineral Reserve Agreement between Gulf Coast Holdings, LLC and AuraSource, Inc. dated February 15, 2012 (incorporated herein by reference to Exhibit 10.1 of Company's Form 8-K dated February 15, 2012)    
*10.5   Agreement to Purchase Minerals between Gulf Coast Mining, LLC and AuraSource, Inc. dated February 15, 2012 (incorporated herein by reference to Exhibit 10.2 of Company's Form 8-K dated February 15, 2012)    
*10.6   Exclusive License Agreement between Gulf Coast Holdings, LLC and AuraSource, Inc. dated February 15, 2012 (incorporated herein by reference to Exhibit 10.3 of Company's Form 8-K dated February 15, 2012)    
*10.7   Employment Agreement between AuraSource, Inc. and Philip Liu dated January 1, 2014 (incorporated herein by reference to Exhibit 99.1 of Company's Form 8-K dated January 3, 2014)    
*10.7   Employment Agreement between AuraSource, Inc. and Eric Stoppenhagen dated January 1, 2014 (incorporated herein by reference to Exhibit 99.2 of Company's Form 8-K dated January 3, 2014)    
*14.1   Code of Business Ethics and Conduct (incorporated herein by reference to Exhibit 14.1 of Company's Form 10-Q dated September 30, 2008)    
24.1   Power of Attorney.  Included on signature page.    
31.1   Certification of the Company's Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
31.2   Certification of the Company's Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
32.1   Certification of the Company's Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.    

 

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101.INS †   XBRL Instance    
101.SCH †   XBRL Taxonomy Extension Schema    
101.CAL †   XBRL Taxonomy Extension Calculation    
101.DEF †   XBRL Taxonomy Extension Definition    
101.LAB †   XBRL Taxonomy Extension Labels    
101.PRE †   XBRL Taxonomy Extension Presentation    
         

*      Previously filed.

 

† XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.