MINR Minerva Gold Inc (PK)

Notes to Consolidated Financial Statements

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements - In the three months ended June 30, 2018, the Financial Accounting Standards Board issued several new Accounting Standards Updates which the Company believes will have little or no applicability to the Company.

Subsequent Events - Management has evaluated any subsequent events occurring in the period from June 30, 2019 through the date the financial statements were issued, to determine if disclosure in this report is warranted (see Note 10).

(3)           Going Concern  

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not generated any revenues and has suffered recurring losses totaling $3,045,908 since inception. These factors, among others, indicate that there is substantial doubt about the Company’s ability to continue as a going concern. In order to obtain the necessary capital to sustain operations, Management’s plans include, among other things, the possibility of pursuing new equity sales and/or making additional debt borrowings. There can be no assurances, however, that the Company will be successful in obtaining such additional financing. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the outcome of this uncertainty.

(4)           Acquisition of Power Blockchain  

Effective February 1, 2018, the Company acquired 100% of the equity interests in Power Blockchain through an exchange agreement between the Company and the two owners of Power Blockchain. Pursuant to the exchange agreement, the sole consideration in this transaction was the issuance by the Company of unsecured convertible notes payable to the two owners of Power Blockchain in the amount of $2,200,000. Such notes payable were structured to: (i) mature five years from the date of issuance, (ii) accrue interest at the rate of 5% per annum, (iii) require repayment in four equal installments beginning on the second anniversary of issuance, and (iv) are convertible into the Company’s common stock at a conversion price of $0.13 per share, subject to certain limitations. The Company performed an analysis to determine whether there was a beneficial conversion feature and noted none.

The Company has accounted for the acquisition of Power Blockchain as a business combination, with the Company treated as the acquirer, in accordance with the provisions of ASC 805, Business Combinations. At the time of the transaction, Power Blockchain was a start-up venture with little or no identifiable assets or operations, therefore, the entire merger consideration in the amount of $2,200,000 was allocated to the category of Goodwill for accounting purposes.

Due to unforeseen economic and market conditions that arose as of March 31, 2018, Management determined to suspend the bitcoin mining operations until such time as the industry conditions improve. The Company believes that the results of the Company’s initial bitcoin mining operations through the Power Blockchain entity should be considered inconclusive to date, with no revenues being recorded during the year ended March 31, 2018, nor expected in the near future. And as a result of these conditions, and the uncertainty of any future cash flows, the Company determined during the year ended March 31, 2018 that it would be appropriate to recognize an impairment adjustment in the full amount of $2,200,000 in the year ended March 31, 2018, in order to reduce the carrying value of the Goodwill to zero as of March 31, 2018.

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Additionally, due to the expected loss of utility of its deployed assets, an impairment adjustment in the amount of $170,186 was recognized to reduce the carrying value of the property and equipment deployed in the bitcoin mining operations to zero as of March 31, 2018. It should be noted, however, that with the recent increase in the quoted market price of Bitcoin, the Company is presently in the process of performing a preliminary evaluation of the feasibility of resuming its Bitcoin mining operations.

(5)           Stockholders’ Equity  

On January 25, 2018, in conjunction with the acquisition of Power Blockchain, the Company purchased a total of 2,661,172 shares of its common stock from the former management group for a negotiated payment in the amount of $340,000, which has been accounted for as Treasury Stock.

On January 29, 2018, also in conjunction with the acquisition of Power Blockchain, the Company issued a total of 1,000,000 shares of common stock, at a purchase price of $0.001 per share, to two new officers who were engaged to affect the transition to the business of bitcoin mining. These stock grants were structured so that they are fully vested over a three year period and are subject to buyback by the Company if either officer should leave the Company before then. We have valued the stock grants at an incremental amount of $129,000, based on the negotiated price of the simultaneously purchased treasury stock noted above (see Note 4), and are amortizing that amount as stock compensation expense over a period of three years (of that amount, $10,750 was amortized in each of the three month periods ended June 30, 2019 and 2018).

Taking the above transactions into consideration, as well as the conversion of a $45,000 note payable into 155,172 shares of common stock in December 2017, the Company had a total of 1,204,000 shares of common stock issued and outstanding as of June 30, 2019.

There have been no issuances of stock options or warrants. However, in March 2018, the Board approved the establishment of a new 2018 Stock Option Plan with an authorization for the issuance of up to 1,000,000 shares of common stock.  The Plan is designed to provide for future discretionary grants of stock options, stock awards and stock unit awards to key employees and non-employee directors.

(6)           Notes Payable  

As of June 30, 2019 and March 31, 2019, the Company had the following long-term and short-term debt obligations:

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The Company performed an analysis of the convertible notes payable in the amount of $2,200,000 to determine whether there was a beneficial conversion feature and noted none.

Future maturities of notes payable as of June 30, 2019 are as follows:

At the time of the Power Blockchain acquisition, Power Blockchain had outstanding unsecured notes payable to the two owners in the amount of $570,000, which were overdue and in default. Shortly thereafter, the Company entered into negotiations with the note holders in an attempt to settle these obligations. As a result of those efforts, a settlement agreement was reached in March 2018 to convert the notes payable into the right for the two note holders (“the Plaintiffs”) in an attempt to settle these obligations. As a result of those efforts, a settlement agreement was reached in March 2018 to convert the notes payable into the right for the two note holders to receive periodic issuances of the Company’s common stock of up to approximately 3,000,000 shares each, that would be exempted from registration pursuant to Section 3(a)(10) of the Securities Act of 1933. The settlement agreement stipulated that the issuance of such shares shall occur in respective tranches such that the resulting number of shares owned by each holder would not exceed 4.9% of the Company’s then outstanding shares of common stock. Per the settlement agreement, the Plaintiffs’ right to make requests for periodic tranche issuances shall expire on September 17, 2019. Thereafter, the Company shall have no obligation to issue shares to either Plaintiff.  In the agreement the Plaintiffs acknowledged that they may be unable to sell, prior to the expiration of their right to make requests for periodic tranche issuances, a sufficient number of shares to recoup the debt and they expressly assumed that risk.  As at the date of settlement it was not known if any shares would be requested to be issued prior to the expiration date, and the Plaintiffs accepted risk, the Company could not estimate an amount of shares to be issued, and therefore no amount was recognized for the settlement.  To date, no such shares have been issued.

(7)           Related Party Transactions  

The Company has entered into several transactions with various related parties to: (i) purchase shares of Treasury Stock from the former management team, (ii) issue new shares of common stock to officers, and (iii) to provide short-term borrowings for various purposes, as described in Note 6.

The Company does not lease or rent any property. Office services are provided without charge by a director. Such costs are immaterial to the consolidated financial statements and, accordingly, have not been reflected therein. The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.

(8)           Operating Leases and Other Commitments  

The Company has no lease or other obligations.

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(9)           Litigation  

From time to time in the ordinary course of our business, the Company may be involved in legal proceedings, the outcomes of which may not be determinable. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable, primarily for the following reasons: (i) many of the relevant legal proceedings are in preliminary stages, and until such proceedings develop further, there is often uncertainty regarding the relevant facts and circumstances at issue and potential liability; and (ii) many of these proceedings involve matters of which the outcomes are inherently difficult to predict. We have insurance policies covering potential losses where such coverage is cost effective.

We are not at this time involved in any legal proceedings.

(10)           Subsequent Events  

In the month of July 2019, the Company made additional short-term borrowings from a related party in the total amount of $5,000 on the same terms as the borrowings made through June 30, 2019. There have been no other reportable subsequent events that have occurred since June 30, 2019.

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