Notes
to Financial Statements
1.
NATURE OF BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION
TGI
Solar Power Group, Inc. (“TGI” or the “Company”) is a publicly held corporation formed under the laws
of the State of Delaware as Liberty Leasing Co. Inc. in 1967. The Company changed its name to LIBCO Corporation on June 29, 1973,
RDIS Corporation on Jan 11, 1993 and TenthGate International, Inc. On February 20, 2007, before adopting its current name, TGI
Solar Power Group, Inc. in June 2008. The Company’s fiscal year end is July 31st.
The
Company’s strategy is to acquire innovative and patented technologies, components, processes, designs a method with commercial
value that will give the Company a competitive market advantage and generate shareholder value. In addition, the Company plans
to align itself through acquisition and joint ventures with partners whereby the Company can provide project management consulting
and develop custom tools software.
The
Company has also entered into several non-binding memorandums of understanding to explore and pursue the possibility of entering
into joint ventures to establish a manufacturing facility to produce electric batteries to power electric vehicles and/or homes
in conjunction with solar and wind power. These memorandums of understandings are also exploring the possibility of providing
comprehensive policies to future car owns, extended warranties, roadside assistance and battery replacement.
2.
GOING CONCERN
The
accompanying unaudited condensed financial statements have been prepared on the basis the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company
has a history of operating losses and the Company continues to rely on financing and the issuance of Preferred and Common shares
to raise capital. The Company’s significant losses from operations and the Company’s dependence on equity and debt
financing raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed financial
statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets,
or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going
concern.
3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of
Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments for
the six months ended January 31, 2018 are not necessarily indicative of the results that may be expected for the year ending July
31, 2018. The unaudited condensed financial statements should be read in conjunction with the consolidated financial statements
and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2017 as filed on January
31, 2018.
Use
of Estimates
The
preparation of unaudited condensed financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
unaudited condensed financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Equity
Level Investment
The
Company recorded an equity investment at its cost. The investment was valued for impairment at the report date. The investment
was considered impaired as the carrying amount exceeded its fair value. The full amount of the investment is included as an impairment
charge on equity level investment in the accompanying unaudited condensed statements of operations.
Income
Taxes
Estimates
of taxable income of the legal entity and jurisdiction are used in the tax rate calculation. Management uses judgment in
estimating what the Company’s income tax will be for the year. Since judgment is involved, there is a risk that the tax rate may
increase or decrease in any period. In determining income/(loss) for financial statement purposes, management must make certain
estimates and judgments. These estimates and judgments occur in the calculation of certain tax liabilities and in the determination
of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement
recognition of revenue and expense. FASB issued authoritative guidance concerning accounting for income taxes also requires that
the deferred tax assets be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that
all or some portion of the recorded deferred tax assets will not be realized in future periods. In evaluating the Company’s ability
to recover the Company’s deferred tax assets, management considers all available positive and negative evidence including the
Company’s past operating results, the existence of management is using to manage the underlying businesses.
Through
January 31, 2018, the Company has recorded a valuation allowance against the Company’s deferred tax assets arising from net operating
losses due to uncertainty of their realization as a result of the Company’s earnings history, the number of years the Company’s
net operating losses and tax credits can be carried forward, the existence of taxable temporary differences and near-term earnings
expectations. The amount of the valuation allowance could decrease if facts and circumstances change that materially increase
taxable income prior to the expiration of the loss carry forwards. Any reduction in the valuation allowance would result in an
income tax benefit in the period such determination is made by the Company.
Due
to the Company experiencing several events that qualify as a change in control since its inception, The Company may be limited
by section 382 of the Internal Revenue Code as to the amount of net operating losses that may be used in future years.
On
December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act” (“US Tax Reform”). The US
Tax Reform provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. Certain provisions of
the US Tax Reform will be effective during the Company’s fiscal year ending July 31, 2018 with all provisions of the US
Tax Reform effective as of the beginning of the Company’s fiscal year ending July 30, 2019. As the US Tax Reform was
enacted after the Company’s year end of July 31, 2017, it had no impact on the Company’s fiscal 2017 financial results.
The US Tax Reform contains provisions with separate effective dates but is generally effective for taxable years beginning after
December 31, 2017.
Beginning
on January 1, 2018, the US Tax Reform lowers the US corporate income tax rate to 21% from that date and beyond. The Company
estimates that the revaluation of its US deferred tax assets and liabilities to the 21% corporate tax rate will have no net effect
on its deferred tax assets and liabilities as the Company has a full valuation allowance as of January 31, 2018.
Although
the Company believes it has accounted for the parts of the US Tax Reform that will have the most significant impact on its financials,
the ultimate impact of the US Tax Reform on the company’s reported results in 2018 may differ from the estimates provided
herein, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued,
and other actions the Company may take as a result of the US Tax Reform different from that presently contemplated.
NET
(LOSS) EARNINGS PER SHARE
Basic
earnings per share are calculated on the basis of the weighted-average number of common shares outstanding during the year. Basic
earnings per share are computed by dividing income available to common stockholders by the weighted- average common shares outstanding
during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities
or other contracts to issue common stock were exercised and converted to common stock.
Dilutive
common share equivalents consist of shares issuable upon conversion of convertible debt, and Preferred Stock.
As
of January 31, 2018, and July 31, 2017 there were 10,000,000 outstanding shares of Preferred Series A Stock which convert to 30,000,000
common shares, 2,000,000 outstanding shares of Preferred Series B Stock which convert to 200,000,000 common shares and 275,000
outstanding shares of Preferred Series C Stock which convert to 17,055,321,260 common shares.
4.
EQUITY LEVEL INVESTMENT & NOTE PAYABLE
On
November 6, The Company and Data Boss International Corp. (“Boss”), a Company specializing in engineering, IT consulting
and internet security product development entered into a stock purchase agreement where the Company purchased 25% of the outstanding
common shares of Boss, $0.001 par value in the share capital for $100,000.
The
Company entered into a Note Payable (“Note”) with Boss in the amount of $100,000 to finance this transaction. The
Note is subject to interest at six percent per annum. The Note matures on November 6, 2018 at which point all outstanding principal
and accrued interest will be due.
On
November 6, 2017 the Company and Boss entered into an Stock Option Agreement (“Option”) where the Company was granted
an option to purchase the remaining 75% of all outstanding common shares for the purchase price of $350,000. The Option may be
exercised from November 6, 2017 until November 6, 2018. Subsequently, the Option can be exercised at a purchase price of $400,000
from through April 15,2019. The Option terminates on April 15, 2019.
The
Company recorded their investment at cost. The investment was reviewed for impairment at the report date. The investment was considered
impaired as the carrying amount exceeded its fair value. The full amount of the investment is included as an impairment charge
on equity level investment in the accompanying unaudited condensed statements of operations.
5.
NOTE PAYABLE – RELATED PARTY
The
Company received advances totaling $14,300 from a holder of our Preferred C shares in year ended July 31, 2017 to cover the expenses
of the Company. The Company received additional advances of $21,100 during the six months ended January 31, 2018 from this shareholder
and an additional $25,500 after quarter end. These advances were subsequently converted to a Note Payable. The Note is subject
to interest at 8 percent per annum, except in the case of a default whereby interest would accrue at 18 percent per annum. The
Note matures on December 31, 2018 at which point unpaid principal amount and accrued interest will be due. The Note is secured
by substantially all the assets of the Company.
6.
RELATED PARTY TRANSACTION
During
the six months ended January 31, 2018 and 2017, the Company incurred $4,000 and $22,933 and paid $4,000 and $67,933 to its officer
for consulting services. As of January 31, 2018 and July 31, 2017, the Company had accrued consulting fees to its officer of $45,000.
7.
CAPITAL STRUCTURE
Common
:
At
January 31, 2018 and July 31, 2017, the Company had 2,400,000,000 shares authorized and 1,705,036,105 shares of $.001 par value
common stock issued and outstanding.
Common
shares are voting and dividends are paid at the discretion of the Board of Directors.
Series
A Preferred Stock
At
January 31, 2018 and July 31, 2017, the Company had 10,000,000 shares of Series A Preferred Stock, $.001 par value, authorized,
issued and outstanding. The Series A Preferred Stock has a liquidation preference over the common stock and any other class or
series of capital stock whose terms expressly provide that the holders of the Series A Preferred Stock should receive preferential
payment. Holders of the Series A Preferred Stock are entitled to vote on all matters submitted to shareholders of the Company
and are entitled to 10 votes for each share of the Series A Preferred Stock owned.
Each
share of Series A Preferred Stock is convertible, at the option of the holder, into three shares of the Company’s common stock.
However, holders cannot convert any share of Series A Preferred Stock into shares of common stock until (a) the Series A Preferred
Stock has been held for a minimum of 24-months; (b) the Common Stock is trade for at least $0.50 per share (c) the Company has
a positive Net Worth; and (c) the Company is traded on the Pink Sheets, or higher exchange.
Holders
of the Series A Preferred Stock are entitled to receive dividends as declared at the discretion of the Board of Directors. These
dividends are based on the number of shares of Common Stock into which each share of Series A Preferred Stock is convertible.
Series
B Preferred Stock
At
January 31, 2018 and July 31, 2017, the Company had 2,000,000 shares of Series B Preferred Stock, $.001 par value, authorized,
issued and outstanding. Holders of the Series B Preferred Stock Series B are entitled to vote on all matters submitted to shareholders
of the Company and are entitled to 1,000 votes for each share of the Series B Preferred Stock owned.
Each
share of the Series B Preferred Stock is convertible, at the option of the holder, into one hundred shares of the Company’s common
stock. However, holders cannot convert any share of Series B Preferred Stock into shares of common stock until (a) the Series
B Preferred Stock has been held for a minimum of 12 months; (b) the Common Stock is traded at least $0.01 per share (c) the Company
is traded on the Pink Sheets, or higher exchange.
Holders
of the Series B Preferred Stock are entitled to receive dividends as declared at the discretion of the Board of Directors. These
dividends are based on the number of shares of Common Stock into which each share of Series B Preferred Stock is convertible.
Series
C Preferred Stock
On
June 22, 2016, the Company authorized 275,000 shares of $1 Par Value Series C Convertible Preferred Stock. On June 26, 2016,
the Company sold 137,500 shares of its Series C Convertible Preferred Stock each to Ensure HR, LLC, a New Jersey limited liability
company, and Meros HR, LLC, a New Jersey limited liability company for $275,000. The proceeds were reduced by $19,460 of legal
expenses related to the sale. These 275,000 shares of Series C Preferred Stock are authorized issued and outstanding as of July
31, 2016.
The
Series Preferred C Stock has a liquidation of twice its stated value and converts into shares of Common Stock at the initial conversion
price of $.000016124 per share, subject to adjustment for stock splits, reclassification and distributions. The Series C Preferred
Stock votes on an as-converted basis multiplied by 1.9. The conversion price is initially $.000016124 per share, subject to adjustment
for dilutive issuances, so that upon conversion the holders of the Series C Preferred Stock would hold shares of Common Stock
constituting 90 % of the fully diluted Common Stock upon conversion.
Accordingly,
the sale of the Series C Stock resulted in a change of control of the Company. The Series C Preferred Stock cannot be converted
until the Company files an amendment increasing the authorized number of shares of Common Stock and/or effecting a reverse stock
split of the Common Stock so that the Company has a sufficient number of authorized and unissued shares of Common Stock to
permit the conversion of all outstanding shares of Series C Preferred Stock.
Holders
of the Series C Preferred Stock are entitled to receive dividends as declared at the discretion of the Board of Directors. These
dividends are based on the number of shares of Common Stock into which each share of Series C Preferred Stock is convertible.
