Notes to Financial Statements
June 30, 2019
NOTE 1 – NATURE OF BUSINESS
Star
Alliance International Corp. (“the Company”, “we”, “us”) was originally incorporated with the
name Asteriko Corp. in the State of Nevada on April 17, 2014 under the laws of the state of Nevada, for the purpose of acquiring
and developing gold mining as well as certain other mining properties worldwide.
NOTE 2 – SIGNIFICANT AND CRITICAL
ACCOUNTING POLICIES AND PRACTICES
Basis of Presentation
The accompanying financial statements of
the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and the rules of the Securities and Exchange Commission (“SEC”).
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the
years ended June 30, 2019 or 2018.
Stock-based Compensation
The Company records stock-based compensation
in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation.” FASB ASC Topic 718 requires
companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the
expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to employees and non-employees. The Company accounts for
stock-based compensation in accordance with the provision of ASC 505-50, Equity Based Payments to Non-Employees, which requires
that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation
is subject to periodic adjustment as the underlying equity instruments vest.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency
and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy
which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
Level 1 - Quoted market prices available
in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices
for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that
are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves,
etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market
corroborated inputs).
Level 3 - Unobservable inputs that reflect
our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The Company’s financial instruments
are consisted principally of accrued expenses and short term debt. The carrying amounts of such financial instruments in the accompanying
balance sheets approximate their fair values due to their relatively short-term nature.
Income Tax Provision
The Company follow ASC 740-10-30, which
requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in
which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements
of Income in the period that includes the enactment date.
On December 22, 2017, the Tax Cuts and
Jobs Act (TCJA) was signed into law by the President of the United States. TCJA is a tax reform act that among other things, reduced
corporate tax rates to 21 percent effective January 1, 2018. FASB ASC 740, Income Taxes, requires deferred tax assets and liabilities
to be adjusted for the effect of a change in tax laws or rates in the year of enactment, which is the year in which the, change
was signed into law. Accordingly, the Company adjusted its deferred tax assets and liabilities at June 30, 2019, using the new
corporate tax rate of 21 percent. See Note 7.
The Company adopted ASC 740-10-25 (“ASC
740-10-25”) with regard to uncertainty income taxes. ASC 740-10-25 addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, we
may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement. ASC 740-10-25 also provides guidance on derecognition, classification, interest and
penalties on income taxes, and accounting in interim periods and requires increased disclosures. We had no material adjustments
to our liabilities for unrecognized income tax benefits according to the provisions of ASC 740-10-25.
Net income (loss) per common share
Net loss per common share is computed pursuant
to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per common share is computed by dividing net
loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share
is computed by dividing net loss by the weighted average number of shares of common stock and potentially dilutive outstanding
shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through
contingent share arrangements, stock options and warrants. There were no potentially dilutive common shares outstanding for the
years ended June 30, 2019 and June 30, 2018.
Recently Issued Accounting Pronouncements
In January 2017, the FASB issued ASU
2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies
the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of
assets or businesses. This new guidance will be effective for annual reporting periods beginning after December 15, 2017,
including interim periods within those periods. The adoption of this ASU has had no material impact on the Company’s
financial statements and disclosures.
In January 2017, the FASB issued ASU 2017-04,
Intangibles—Goodwill and Other (Topic 350). This ASU simplifies the subsequent measurement of goodwill by eliminating
the second step of the goodwill impairment test, which required computing the implied fair value of goodwill. Under the amendments
in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that
reporting unit. This new guidance will be effective January 1, 2020. The Company is currently in the process of evaluating the
potential effect that the adoption of this standard will have on its financial position and results of operations.
In May 2017, the FASB issued ASU 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies an entity’s
ability to modify the terms or conditions of a share-based payment award presented. An entity should account for the effects of
a modification unless all the following are met: the fair value of the modified award has not changed from the fair value on the
date of issuance; the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately
before the original award is modified; and, the classification of the modified award as an equity instrument or a liability instrument
is the same as the classification of the original award immediately before the original award is modified. This new guidance will
be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The
adoption of this ASU has had no material impact on the Company’s financial statements and disclosures.
In July 2017, the FASB issued ASU 2017-11,
Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part
I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for
Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests
with a Scope Exception. This ASU clarifies the recognition, measurement, and effect on earnings per share of certain freestanding
equity-classified financial instruments that include down round features affect entities that present earnings per share in accordance
with the guidance in Topic 260, Earnings Per Share. When determining whether certain financial instruments should be classified
as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the
instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified
instruments. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim
periods within those periods. The Company adopted this ASU and it did not have a material impact on the Company’s financial
statements.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). The ASU requires that a lessee recognize the assets and liabilities that arise from operating leases.
A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a
right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or
less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and
lease liabilities. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including
interim periods within those annual reporting periods, and early adoption is permitted. In transition, lessees and lessors are
required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The Company adopted this ASU and it did not have a material impact on the Company’s results of operations.
In May 2014, the Financial Accounting Standards
Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, to establish ASC Topic 606, (ASC 606). ASU 2014-09
supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition and most industry-specific guidance throughout
the Industry Topics of the Codification. The core principle of the guidance is that an entity should recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The guidance includes a five-step framework that requires an entity
to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize
revenue when the entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature,
amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted this
ASU and it did not have a material impact on the Company’s results of operations.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might
have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business. As shown in the accompanying financial statements,
the Company has an accumulated deficit of $775,454 and negative working capital of $133,715 as of June 30, 2019. For the year ended
June 30, 2019 the Company had a net loss of $141,882. Due to these conditions, it raises substantial doubt about the Company’s
ability to continue as a going concern.
The Company is attempting to commence operations
and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations.
While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability
to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern
is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional
funds. 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 may result should the Company be unable to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
On May 14, 2018, pursuant to an agreement
by and between Richard Carey, the Company’s new President and Chairman of the Board, and Kido, Mr. Richard Carey acquired
22,000,000 shares of common stock of the Company owned by Kido, representing 62.15% ownership of the Company which constitutes
control. Mr. Richard Carey accepted the positions of President and Chairman of the Board on the same day.
In June 2018, Richard Carey, the Company’s
Chairman, advanced the Company $300 to open a bank account. During the year ended June 30, 2019, Mr. Carey advanced the Company
an additional $72,085, of which $34,005 was repaid. On June 12, 2019, Mr. Carey converted $48,000 of the amount due to him into
48,000,000 shares of common stock. The stock was fair valued at $0.002 per share by an independent valuation firm resulting in
a loss on conversion of $48,000. As of June 30, 2019 and 2018, the balance due to Mr. Carey is $3,980 and $300, respectively. The
advances are unsecured, non-interest bearing and due on demand.
Mr. Carey is using his personal office
space at no cost to the Company.
NOTE 5 – COMMON STOCK
On June 30, 2018, the Company granted 50,000
shares of common stock for services rendered as of June 30, 2018. The shares were valued at $0.50 for total non-cash compensation
expense of $25,000. As of June 30, 2018 the shares had not yet been issued by the transfer agent.
During the year ended June 30, 2019, the
Company sold 2,400,000 shares of common stock for total cash proceeds of $7,000. As of June 30, 2019, the shares have not yet been
issued by the transfer agent and therefore have been credited to common stock to be issued.
Refer to Note 4 for shares issued to a
related party.
NOTE 6 – NOTE PAYABLE
As of June 30, 2019 and 2018, the Company
owed Kok Chee Lee, the former CEO and Director of the Company, $42,651 and $42,651, respectively for operating expenses he paid
on behalf of the Company during the year ended June 30, 2018. The borrowing is unsecured, non-interest-bearing and due on demand.
On June 1, 2018, the Company executed a
promissory note in the amount of $32,000 with the former Secretary of the Board for $30,128 of accrued expenses for services previously
provided and an additional $1,872 for services rendered. The note is unsecured, bears interest at 5% per annum and matures on December
1, 2018. As of June 30, 2019 and 2018, there is $1,732 and $132, respectively, of accrued interest on the note. The note is past
due and in default.
On
October 15, 2018, the Company executed a promissory note for $20,000, for amounts previously accrued and payable to the Company’s
former attorney. The note bears interest at 8% and is due on October 15, 2019. As of June 30, 2019, there is $1,131 of accrued
interest due on the note.
NOTE 7 – INCOME TAX
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry
forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax
Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date
of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.
Net deferred tax assets consist of the
following components as of June 30:
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2019
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2018
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Deferred Tax Assets:
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|
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|
|
|
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NOL Carryover
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$
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152,765
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|
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$
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127,772
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Less valuation allowance
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(152,765
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)
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(127,772
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)
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Net deferred tax assets
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$
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–
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$
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–
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The income tax provision differs from the
amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the
period ended June 30, due to the following:
At June 30, 2019, the Company had net operating
loss carry forwards of approximately $634,000 that maybe offset against future taxable income. No tax benefit has been
reported in the June 30, 2019 or 2018 financial statements since the potential tax benefit is offset by a valuation allowance of
the same amount.
On December 22, 2017, the U.S. government
enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act
establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate income tax rate
to 21% effective January 1, 2018.
Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual
limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
ASC Topic 740 provides guidance on the
accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to
determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits
of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount
to recognize in the financial statements.
The Company includes interest and penalties
arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of June 30,
2019, the Company had no accrued interest or penalties related to uncertain tax positions.
With few exceptions, the Company is no
longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2013.
NOTE 8 – SUBSEQUENT EVENTS
1. Acquisition of Troy Mining Claims
On August 13, 2019, The Company closed
an Asset Purchase Agreement (the “APA”) with Troy Mining Corporation (“Troy”). Under the APA, we acquired
78 gold mining claims consisting of approximately 4,800 acres, located east/southeast of El Portal, California, in Mariposa County,
together with all of Troy’s rights to related equipment and buildings currently located on the mining claims. In exchange
for the mining claims and related assets, we:
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·
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Agreed to issue 1,900,000 shares of a new class of preferred stock designated Series B Preferred Stock; and
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·
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Agreed to make total cash payments in the amount of $500,000 under a Promissory Note (the “Purchase Note”)
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Under the Purchase Note, we paid $50,000
at the time of the closing, and are required to pay an additional $50,000 within sixty days of the closing, and $25,000 every other
month thereafter, with the entire remaining amount due no later than March 31, 2020. In the event of default under the Purchase
Note, all assets acquired under the APA will be forfeited back to Troy.
The 1,900,000 shares of Series B Preferred
Stock designated and issued as part of the purchase price will be convertible into common stock on a 2:1 basis beginning 60 days
from their date of issuance and will cast two votes per share on all matters submitted to a vote of our shareholders. If converted,
all shares of Series B Preferred Stock must be converted in one tranche. Within 60 days of the closing, we are required under the
APA to file a registration statement registering the re-sale of the shares of common stock issuable upon conversion of the Series
B Preferred Stock.
On October 9, 2019, the parties have agreed
to extend the date for filing the registration statement relating to the preferred shares of STAL to be issued to the Troy shareholders
and that would in turn extend the date that the shares would become free trading. This extension will be for 150 days for filing
the registration statement and obtaining approval for the shares to become free trading. All the remaining terms included in the
contract will remain the same.
2. In order to pay the initial $50,000
required under the APA and the Purchase Note, the Company obtained funding under a Convertible Promissory Note in the amount of
$50,000 issued to a private investor. The Convertible Promissory Note accrues interest at an annual rate of 10% and is due and
payable in full in 60 days. The Convertible Promissory Note is convertible to shares of our common stock at a price of $0.05 per
share.
3. In July 2019, the Company issued 6,000,000
shares of common stock to various members of the Board. All but 250,000 common shares were issued in lieu of Directors Fees.
4. On August 1, 2019, employment agreements
for Richard Carey, John Baird and Anthony Anish were signed providing for annual salaries of $120,000 per annum for Richard Carey
and $60,000 for John Baird and Anthony Anish.
5. In October 2019, the approximately
7 mile road from the main highway to our mining claims has been cleared and is now passable.
6. On October 7, 2019, a new $250,000
Convertible Promissory Note with initial funding of $50,000 was issued to a private investor. The Convertible Promissory Note accrues
interest at an annual rate of 10% and is due and payable in full in 60 days. The Convertible Promissory Note is convertible to
shares of our common stock at a price of $0.05 per share.
7. On October 9, 2019, a contract extension
was agreed between Star Alliance International Corp. and Troy Mining Corporation The agreement gives the Company 150 days to file
an S-1 registration statement and obtain approval for the shares that are to be issued to the Troy shareholders to become free trading.