UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
Commission File Number:
(Exact name of registrant as specified in its charter)
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incorporation or organization) |
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(Address of principal executive offices and Zip Code)
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Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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.
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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| 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).
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
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KeyStar Corp.
Form 10-Q
Table of Contents
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our financial statements included in this Form 10-Q are as follows:
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the Securities Exchange Commission (“SEC”) instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2021 are not necessarily indicative of the results that can be expected for the full year.
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KEYSTAR CORP.
BALANCE SHEETS
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ASSETS |
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Current assets: |
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Cash |
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Inventory, net |
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Prepaid expenses |
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Total current assets |
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Other assets: |
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Security deposit |
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Total other assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable and accrued expenses |
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Accounts payable and accrued expenses - related party |
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Notes payable - related party |
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Convertible debt - related party |
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Total current liabilities |
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Total liabilities |
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Commitments and contingencies - See Note 6 |
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Stockholders' equity (deficit): |
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Preferred stock, series A, $ authorized as of September 30, 2021 and June 30, 2021 |
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Common stock, $ authorized as of September 30, 2021 and June 30, 2021 |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity (deficit) |
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Total liabilities and stockholders' equity (deficit) |
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The accompanying notes are an integral part of these unaudited financial statements.
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KEYSTAR CORP.
STATEMENTS OF OPERATIONS
(unaudited)
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Revenue |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Selling expenses |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Gain on refund |
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Interest expense - related party |
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Total other expense |
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Net loss |
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Net loss per common share - basic and diluted |
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Weighted average number of common shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these unaudited financial statements.
5
KEYSTAR CORP.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(unaudited)
| Preferred Shares $0.0001 Par Value |
| Common Shares $0.0001 Par Value |
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Balance, June 30, 2021 |
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Net loss for the period |
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Balance, September 30, 2021 |
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| Preferred Shares $0.0001 Par Value |
| Common Shares $0.0001 Par Value |
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Shares |
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Balance, June 30, 2020 |
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Cash received in satisfaction for stock subscriptions receivable |
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Net loss for the period |
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Balance, September 30, 2020 |
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The accompanying notes are an integral part of these unaudited financial statements.
6
KEYSTAR CORP.
STATEMENT OF CASH FLOWS
(unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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Adjustments to reconcile to net loss to net cash used in operating activities: |
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Net cash used in operating activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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CASH AT BEGINNING OF PERIOD |
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CASH AT END OF PERIOD |
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SUPPLEMENTAL INFORMATION: |
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Interest paid |
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Income taxes paid |
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The accompanying notes are an integral part of these unaudited financial statements.
7
KEYSTAR CORP.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 1 - ORGANIZATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended June 30, 2021, filed on September 28, 2021. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
Operating results for the three-month period ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending June 30, 2022. The condensed balance sheet at September 30, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.
Organization
The Company was incorporated on April 16, 2020 under the laws of the State of Nevada, as KeyStar Corp.
Nature of Operations
The Company sells KN95 facemasks, disposable facemasks and disinfectant wipes through an online store in the United States of America.
The Company is planning to offer convention services, which connect US buyers to Chinese manufacturers. Due to the COVID-19 pandemic, the traditional conventions have been postponed in the United States of America. As such, the Company is trying to bridge the gap and introduce the online conventions to potential buyers. The company had intended, as a result of the pandemic, to focus on virtual convention services. However, as a result of lifted travel restrictions, we have adjusted our convention services from coordinating virtual convention to focus on on-site services. We have launched KeyStarCorp.com to offer booth rental service and are working on securing projects. We plan to continue widen our resources and expand into other aspects of convention and event services.
Year End
The Company’s year-end is June 30.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Going Concern
The Company's financial statements are prepared using the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America, and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the
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normal course of business. The Company has an accumulated deficit of $
The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The Company is funding its initial operations by issuing notes and continuing to have related party pay for company expenses. We cannot be certain that capital will be provided when it is required.
Cash and Equivalents
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents. Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposits and all highly liquid debt instruments with original maturities of three months or less.
Inventory
Inventory is carried at the lower of cost and estimated net realizable value, with cost being determined using the first-in, first-out (FIFO) method. The Company establishes reserves for estimated excess and obsolete inventory equal to the difference between the cost of inventory and estimated net realizable value of the inventory based on estimated reserve percentage, which considers historical usage, known trends, inventory age and market conditions. When the Company disposes excess and obsolete inventories, the related disposals are charged against the inventory reserve. See Note 2 for additional information.
Lease Commitments
The Company has no lease commitments. The Company leases a storage facility with terms of month to month for its products.
Fair Value of Financial Instruments
The Company recognized the fair value of financial instruments in accordance with FASB ASC 820, Fair Value Measurements and Disclosures, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices for identical assets and liabilities in active markets;
Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Cash reported on the balance sheet is estimated by management to approximate fair market value due to their short-term nature.
The Company has had no transfers between levels of its assets or liabilities as of September 30, 2021.
Revenue Recognition
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The Company recognizes revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which consists of five steps to evaluating contracts with customers for revenue recognition: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.
Revenue recognition occurs at the time we satisfy a performance obligation to our customers, when control transfers to customers upon shipment, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance. We only record revenue when collectability is probable.
The Company provides quality merchandise through our online store in the United States of America. Due to COVID-19 pandemic, the Company is focusing on providing disposable face masks and KN-95 face masks at affordable price. The customers order and pay the products through our online store, when the Company confirms the order and payment, the Company delivers the product through common carriers, at which point the Company recognizes the revenue, as this is when our performance obligation is satisfied. The Company records actual sales returns when the customers return the products. The transaction price has not been affected by returns based on the Company not having significant returns.
As the date of filing, the Company has not recognized any convention services revenue.
For the three months ended September 30, 2021 and 2020, the Company recognized $
Income Taxes
The Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company’s balance sheet in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company’s valuation allowance in a period are recorded through the income tax provision on the statements of operations.
ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.
Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.
Earnings per Share
Basic earnings per share (“EPS”) are determined by dividing the net earnings by the weighted-average number of shares of common shares outstanding during the period. Diluted EPS is determined by dividing net earnings by the weighted average number of common shares used in the basic EPS calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding under the treasury stock method. As of September 30, 2021, there were
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Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a potential impact on the Company’s results of operations, financial position or cash flow.
NOTE 2 - INVENTORY
As of September 30, 2021 and June 30, 2021, the value of inventory was $
Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory on estimated reserve percentage, which consider historical usage, known trends, inventory age and market conditions. As of September 30, 2021 and June 30, 2021, Inventory reserve was $
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Disinfectant Wipes | $ |
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Inventory, net | $ |
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NOTE 3 - NOTES PAYABLE - RELATED PARTY
On April 27, 2020, the Company executed a promissory note with a related party for $
On December 30, 2020, the Company executed a promissory note with a related party for cash proceeds of $
NOTE 4 - CONVERTIBLE DEBT - RELATED PARTY
On April 20, 2020, the Company executed a convertible promissory note with a related party for $
NOTE 5 - STOCKHOLDERS’ EQUITY (DEFICIT)
The Company is authorized to issue
Preferred Stock
During the three months ended September 30, 2021, there were no issuances of preferred stock.
Common Stock
During the three months ended September 30, 2021, there were no issuances of common stock.
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NOTE 6 - COMMITMENTS AND CONTINGENCIES
As of September 30, 2021, the Company did not have any known commitments or contingencies.
Legal matter contingencies
The Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, “Contingencies” when warranted. Once established, such provisions are adjusted when there is more information available about an event occurs requiring a change.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the three months ended September 30, 2021, the Company officer paid $
As of September 30, 2021, the balance of accounts payable and accrued expenses due to a related party was $
The Company has a note payable and convertible note payable with a related party, see Notes 3 and 4 for further discussion.
NOTE 8 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2021 to the date these financial statements were issued, and there were no other material subsequent events to disclose in these financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
Keystar Corp. is a start-up company that was formed on April 16, 2020. Our business has two major segments: e-commerce and convention services.
First, we offer quality merchandise through our online store on both the retail and wholesale level in the United States. Currently, due to the global Covid pandemic, the focus has been on providing much needed 3-ply and KN95 masks at affordable rates. Through our extensive network of manufacturers and suppliers in China, we also had plans to offer a variety of products to our customers, including electronics and accessories, home and kitchen, apparel and accessories, seasonal products, and any in-demand merchandise.
Second, Keystar Corp. planned to offer convention services, which would connect US buyers to Chinese manufacturers. Due to the Covid pandemic, however, the traditional in person conventions have been paused or postponed worldwide. We had hoped that we could coordinate virtual convention services to bridge the gap and introduce these online conventions to potential buyers, and then resume services for traditional convention once shutdowns have eased. Despite our efforts to get this side of the business moving, we have not been successful at coordinating these events. The company had intended, as a result of the pandemic, to focus on virtual convention services. However, as a result of lifted travel restrictions, we have adjusted our convention services from coordinating virtual convention to focus on on-site services. We have launched KeyStarCorp.com to offer booth rental service and are working on securing projects. We plan to continue widen our resources and expand into other aspects of convention and event services.
Being a start-up company, we have limited revenues and have limited operating history. To the present, we have engaged in formation activities, raised initial capital, positioning our company to commence operations, completing our online ecommerce website, and obtaining an audit of our financials to raise money through a registered offering of shares.
Despite our best efforts, we have not achieved the level of success desired with our e-commerce side of the business or the convention side of the business.
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On the e-commerce side, our PPE sales have not been significant enough to achieve a steady level of increased revenues and profitability. In addition, the global pandemic has impacted international trade in both goods and services. The disturbance in supply chain, logistic and labor market have drove the cost of goods and freight to surge abnormally, accompany with unpredictable shortage on supply and delay in logistic. On the other hand, along with the recovering of the international trade, the costs are expecting to drop, thus, lowered retail price and crushed profit margin on existing inventories that were purchased at higher costs. For these reasons, we have not been expanding product category or inventories base, and will reconsider when the trade normalcy is restored or opportunity presents.
On the convention side, the white house lifted COVID-19 travel restrictions for fully vaccinated international visitors, starting Nov 8, 2021. With this change, we have adjusted our convention services from coordinating virtual convention to focus on on-site services. We have launched KeyStarCorp.com to offers booth rental service and are working on securing projects. We plan to continue widen our resources and expand into other aspects of convention and event services.
However, we cannot guarantee the success of this plan. Even if we can execute our plan successfully, due to the nature of convention and event planning, it might take months before we begin to see significant outcomes, in terms of revenue. As a result of our current predicament, we may have to seek out other business opportunities that provide a better return to our investors.
We are online based company with no demand of physical storefront location. The website for our retail ecommerce operations is https://www.keystarshop.com/. The information on our website is not made a part of this Quarterly Report. We have a mailbox service @ 9620 Las Vegas Blvd S., E4-98, Las Vegas, NV 89123. Our phone number: 702-800-2511.
Results of Operations for the Three Months Ended September 30, 2021 and 2020
We generated $7,172 and $12,244 in revenues for the three months ended September 30, 2021 and 2020, respectively. Our gross profit (loss) after payment for cost of goods and inventory reserve was $1,203 and $(8,811) for the three months ended September 30, 2021 and 2020, respectively. Our gross profit was small for the period ended September 30, 2021 and negative for the period ended September 30, 2020 discussed above as a result of the high cost of PPE products and courier pricing, as well as inventory reserve per U.S. GAAP guidance, due to our promoting products at significantly discounted prices. Pricing for masks and courier services has since improved, and we have ended our aggressive promotions. We hope that our gross revenues will increase with time but there is no assurance that we will be able to absorb our cost of goods and sell our products at price points that will create margins to keep us in business.
We hope to generate more revenues and with better margins for the balance of the 2022 fiscal year as we implement our business plan. However, we have not achieved the level of revenue needed to keep us a going concern. We plan to seek out other business opportunities.
We incurred operating expenses of $32,990 and $8,052 for the three months ended September 30, 2021 and 2020, respectively. Our operating expenses for both periods consisted of general and administrative expenses and selling expenses.
We expect to incur more operating expenses for the balance of the year as a result of implementing our business plan and costs and fees associated with becoming a reporting company with the SEC.
We had a net loss of $23,677 and $17,997 for the three months ended September 30, 2021 and 2020, respectively.
Liquidity and Capital Resources
As of September 30, 2021, we had total current assets of $84,844 and total current liabilities of $112,798. We had a working capital deficit of $27,954 as of September 30, 2021.
Operating activities used $(6,838) for the three months ended September 30, 2021. Our negative operating cash flow is largely the result of a $4,345 increase in inventory, $10,030 increase in prepaid and $(2,329) change in accounts payable and accrued expenses, offset by our net loss for the period.
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Financing activities used $(993) in cash for the three months ended September 30, 2021. Our negative financing cash flow is the result of $993 in repayments of amounts due to related parties.
We were incorporated on April 16, 2020. Our operations, to date, have been devoted primarily to startup, development activities, preparing our ecommerce site, establishing vendors for our products, collecting inventory, selling products and other activities. Because of our limited operating history, it is difficult to predict our capital needs on a monthly, quarterly or annual basis. We will have no capital available to us if we are unable to raise money from our registered offering or find alternate forms of financing, which we do not have in place at this time.
There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Our plan specifies a minimum amount of $25,000 in additional operating capital to operate for the next twelve months. If we are unable to raise $25,000 from this offering, our business will be in jeopardy and we could be formed to suspend our operations or go out of business. As such, there can be no assurance that this offering will be successful. You may lose your entire investment.
Off Balance Sheet Arrangements
As of September 30, 2021, we had no off balance sheet arrangements.
Going Concern
As of September 30, 2021, the Company has a cumulative deficit of $82,908 and a working capital deficit of $27,954. The Company had a net loss of $23,677 for the three months ended September 30, 2021. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Because of these conditions, the Company will require additional working capital to develop business operations. Management’s plans are to raise additional working capital through the sale of debt and/or equity instruments as well as to generate revenues for other services. There are no assurances that the Company will be able to achieve the level of revenues adequate to generate sufficient cash flow from operations to support the Company’s working capital requirements. To the extent that funds generated are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not continue its operations.
The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
As of the filing date, the Coronavirus has caused significant volatility in global markets, including the market price of our inventory. The demand for our products and services has fluctuated and the ability of our customers to make payments for the products and services they purchased has been impacted.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
A smaller reporting company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2021. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief
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Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of September 30, 2021, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending June 30, 2022: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended September 30, 2021 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
ITEM 1A. RISK FACTORS
A smaller reporting company is not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales
On April 16, 2020 we issued 29,000,000 shares of our common stock and 2,000,000 shares of our Series A Convertible Preferred Stock to our officers and directors at $0.001 for $31,000 in total proceeds.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Use of Proceeds
On April 2, 2021, the SEC declared effective our Registration Statement on Form S-1 filed in connection with the offer and sale of 2,000,000 shares of our common stock at a purchase price of $.05 per share. The SEC assigned that registration statement file no. 333-252983.
The offering of the securities registered by that registration statement has commenced as of October 25, 2021 and is now completed. We have sold 800,000 shares for proceeds of $40,000. There has been no material change in the planned use of proceeds from the public offering as described in the Prospectus.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
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ITEM 6. EXHIBITS
Index to Exhibits.
Exhibit No. |
| Description |
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31.1** |
| Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2** |
| Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1** |
| Certification of Chief Executive 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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32.2** |
| Certification of Chief Executive Officer and Chief 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** |
| XBRL Instance Document |
** Provided herewith.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 15th day of November, 2021.
KeyStar Corp. | ||
(Registrant) | ||
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Signature | Title | Date |
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/s/ Steven Lane | Chief Executive Officer, Secretary, | November 15, 2021 |
Steven Lane | Principal Executive Officer and Director |
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/s/ Zixiao Chen | Chief Financial Officer, | November 15, 2021 |
Zixiao Chen | Treasurer, Principal Financial Officer and Principal Accounting Officer |
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