10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 2021
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________

SECTOR 10, Inc.

(Exact name of small business issuer as specified in its charter)

Delaware	000-24370	33-0565710
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

10900 NE 4th Street, Suite 2300

Bellevue, WA  98004

(Address of principal executive offices, including zip code)

Issuer’s telephone number, including area code (425) 331-9620

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o No x

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.  Yes x  No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	☒
		Emerging Growth Company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

As of December 31, 2021, the aggregate market value of the voting and non-voting common equity held by non-affiliates, computed based on the average bid and asked price of the common stock, was $131,913.

As of February 9, 2022 the issuer had 305,778 shares of common stock outstanding.

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TABLE OF CONTENTS

Sector 10, Inc.

Part I. Financial Information
Item 1.	Unaudited Consolidated Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets  as of December 31, 2021 and  March 31, 2021	3
	Unaudited Condensed Consolidated Statements of Operations for the three months and nine months ended December 31, 2021 and 2020 and for the period from inception, September 16, 2002 to December 31, 2021	4
	Unaudited Consolidated Statements of Cash Flows for the nine months ended December 31, 2021 and 2020 and for the period from inception, September 16, 2002, to December 31, 2021.	5
	Notes to the Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis or Plan of Operation	10
Item 3	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4.	Controls and Procedures	14
Part II. Other Information
Item 1.	Legal Proceedings	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	15
Item 4.	Submission of Matters to a Vote of Security Holders	15
Item 5.	Other Information	15
Item 6.	Exhibits	16
	Signatures	17

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Item 1. FINANCIAL STATEMENTS

NOTE: THE FINANCIAL STATEMENTS, RELATED NOTES AND THE OTHER INFORMATION INCLUDED IN THIS REPORT HAVE NOT BEEN REVIEWED BY THE COMPANY’S OUTSIDE ACCOUNTANT PRIOR TO THE FILING OF THIS REPORT.

Sector 10, Inc.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

		December 31,    2021		March 31, 2021
		(Unaudited)		(Unaudited)
ASSETS
Current assets:
Cash	$	-	$	-
Inventory, net		-		-
Total current assets		-		-
Fixed assets –cost		-		-
Less: accumulated depreciation		-		-
Net fixed assets		-		-
Total assets	$	-	$	-
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities	$	9,676,491	$	10,055,578
Note payable - short term		164,000		320,615
Total current liabilities		9,840,491		10,376,193
Long term liabilities:
Note payable		-		-
Total long term liabilities		-		-
Total liabilities		9,840,491		10,376,193
Shareholders' equity (deficit)
Preferred shares - $0.001 par value; 1,000,000 authorized, no shares issued or outstanding		-		-
Common shares - $0.001 par value; 199,000,000 authorized; 305,778 and 305,778 shares issued and outstanding, respectively		306		306
Additional paid-in-capital		6,148,229		6,148,229
Deficit accumulated during development stage		(15,989,026)		(16,524,728)
Total shareholders' equity (deficit)		(9,840,491)		(10,376,193)
Total liabilities and shareholders' equity (deficit)	$	-		-

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

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Sector 10, Inc.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended December 31, 2021 and 2020 and

for the Period From Inception, September 16, 2002 to December 31, 2021

		Three Months Ended				Nine Months Ended				Inception to
		December 31,  2021		December 31,  2020		December 31,  2021		December 31,  2020		December 31, 2021
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Sales	$	-	$	-	$	-	$	-	$	18,500
Cost of Sales		-		-		-		-		(18,032)
Gross Profit		-		-		-		-		468
Expenses:
General and administrative		7,204		11,575		26,886		49,252		14,485,736
Depreciation										24,106
Research and development										226,108
Total expenses		7,204		11,575		26,886		49,252		14,735,950
Income (loss) from operations		(7,204)		(11,575)		(26,886)		(49,252)		(14,735,482)
Interest expense		(3,280)		(7,278)		(13,838)		(39,948)		(3,314,707)
Other income (expense): Gain on extinguishment of debt		-		1,857,497		576,426		1,857,497		2,061,163
Net income (loss) before income taxes		(10,484)		1,838,644		535,702		1,768,297		(15,989,026)
Provision for income taxes		-		-		-		-		0
Net income (loss) after income taxes	$	(10,484)	$	1,838,644	$	535,702	$	1,768,297	$	(15,989,026)
Weighted Average Shares Outstanding - basic and diluted*		305,778		305,778		305,778		305,778
Basic and diluted income (loss) per share
Continuing Operations	$	(0.03)	$	6.01	$	1.75	$	5.78
Net Income (Loss)	$	(0.03)	$	6.01	$	1.75	$	5.78

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

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Sector 10, Inc.

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31, 2021 and 2020 and for the Period From Inception,     

September 16, 2002 to December 31, 2021

		Nine Months Ended				Inception to
		December 31, 2021		December 31, 2020		December 31, 2021
		(Unaudited)		(Unaudited)
Cash Flows from Operating Activities:
Net Income (Loss)	$	535,702	$	1,768,297	$	(15,989,026)
Adjustments to reconcile  net loss to net cash used in operating activities:
Stock for services		-		-		5,114,493
Depreciation		-		-		24,106
Net discount on convertible debt		-		-		206,324
Loss due to Impairment / Gain on restructuring		-		-		630,795
Changes in:
Inventory and other current assets		-		-		(4,869)
Accounts payable and accrued liabilities		(535,702)		(1,768,297)		9,550,579
Net cash used in operating activities		-		-		(467,598)
Cash Flows from Investing Activities:
Fixed asset  / Other asset purchases		-		-		(189,541)
Net cash used in investing activities		-		-		(189,541)
Cash Flows from Financing Activities:
Net Proceeds from general financing		-		-		737,500
Net Proceeds (payments) from shareholder / officers		-		-		(113,947)
Proceeds from issuance of common stock		-		-		33,586
Net cash provided by financing activities		-		-		657,139
Net increase (decrease) in cash		-		-		-
Beginning of period - continuing operations		-		-		-
End of period - continuing operations	$	-	$	-	$	-
Cash paid for interest	$	-	$	-	$	24,295
Cash paid for income taxes	$	-	$	-	$	-

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

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SECTOR 10, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements of Sector 10, Inc. (“Sector 10” or 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 Form 10-Q and required by Rule 10-01 of Regulation S-X. They do not include all of 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, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.

Impact of Recent Accounting Pronouncements

Sector 10 does not expect the adoption of any recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.

Note 2 – INVENTORY

There were no sales in the nine months ended December 31, 2021.  The inventory reflected on the books was $0 for the nine months ended December 31, 2021.  

Note 3 – NOTES PAYABLE

Johnson Financing

Total interest accrued is $0 of which $2,598 was accrued in the first three months ended June 30, 2021. In the period ended September 30, 2021, an additional review of the Dutro settlement impact was conducted.  In the review of the settlement impact, three loans were considered to be included within the terms of the settlement agreement including the Johnson loan.  The full amount of the loan balances plus all accrued interest was treated as a gain on the extinguishment of debt as a result of the Court’s decision. No interest was accrued in the current period.  No further interest shall be accrued in future periods.

Dutro Financing:

In October 2020, The Court dismissed the Dutro Litigation with no amounts due either party. As a result of the Court’s decision, the contingent interest along with the full outstanding loan balance was forgiven and no future interest is due.   No interest was accrued in the current period. No further interest shall be accrued in future periods.

Employee Agreement:

The financial statements reflect an accrual of interest on unpaid wages and other compensation in the amount of $2,357,414. No amount was accrued during the current fiscal year.   In September 2020, the Company decided to stop all accruals of salary and employee contract interest as of the end of the fiscal year ended March 31, 2020.  No future accruals will be made for either interest on unpaid wages or on accrued wages.

Other Notes

Individuals – short term

Total interest accrued as of December 31, 2021 was $114,630 of which $7,340 was accrued during the nine months ended December 31, 2021.

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Asher Enterprises, Inc.

Total interest accrued (without discount amortization) as of December 31, 2021 was $61,602 of which $3,900 was accrued during the nine months ended December 31, 2021 The current period interest is included as part of other interest.  

Summary of Interest and Notes Payable

Interest expense		December 31, 2021		March 31,   2021
Interest – Johnson		2,598		10,394
Interest – Dutro Group		-		18,112
Interest  - Employee Group		-		-
Interest – Other Notes		11,240		18,720
Total interest expense	$	13,838	$	47,226

Note Payable Balance		December 31, 2021		March 31, 2021
Edward Johnson – Johnson Financing	$		$	86,615
Various Individuals – Other Notes		99,000		169,000
Asher Enterprises, Inc. – Other Notes		65,000		65,000
Total Note Payable – short term	$	164,000	$	320,615
Total Note Payable – long term	$	-	$	-
Total Notes Payable	$	164,000	$	320,615

Debt Maturity Schedule

As of December 31, 2021, the annual maturities for notes payable are scheduled as follows:

Fiscal Year		Amount
March 31, 2022	$	164,000
March 31, 2023	$	-
Total	$	164,000

All interest is due under the terms of the various agreements.  However future interest payments will not be made until all pending litigation is resolved and a satisfactory revised payment arrangement is completed by all parties

Note 4 – EQUITY

During the Quarter ended: June 30, 2021

No equity transactions occurred in the period ended June 30, 2021

During the Quarter ended: September 30, 2021

No equity transactions occurred in the period ended September 30, 2021

During the Quarter ended: December 31, 2021

No equity transactions occurred in the period ended December 31, 2021

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Note 5 – GOING CONCERN

The Company generated minimal revenues prior to the current fiscal year.  No revenues were generated for the nine month period ended December 31, 2021. This level of revenues is not sufficient for the Company to meet its future obligations. This factor raises substantial doubt about the Company’s ability to continue as a going concern.

The Company recently settled the Dutro litigation and reviewing options for future business operations.   The litigation and a lack of net cash flow has hindered the operation of the Company and has set back the ability to raise capital and develop ongoing business in order to continue forward as a going concern. It is expected that limitation will continue to hinder the ability to continue as a going concern through the end of the fiscal year ended March 31, 2022 and  beyond.

Note 6 - INCOME TAX

Income taxes are accounted for using the asset and liability method. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards 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.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s financial statements for the six month period ended September 30, 2021 and 2020 do not include any provision for income taxes.   No income tax accrual has been recorded based on the expectation that the Company will be in a net loss position for the overall applicable fiscal year. Accordingly, deferred tax assets have been entirely offset by valuation allowances. The difference between the amounts of income tax benefit that would result from applying domestic federal statutory income tax rates to the net loss and the net deferred tax assets is related to certain nondeductible expenses, state income taxes, and the change in the valuation allowance.

The Financial Accounting Standards Board ("FASB") has issued ASC 740 for Accounting for Income Taxes that clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. ASC 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. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740.

The Company had no unrecognized tax benefit which would affect the effective tax rate if recognized.

The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 31, 2021 the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in the states of Delaware and any other jurisdiction where required. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.

8

Note 7 – OTHER INCOME

On October 21, 2020, Sector 10 and the Dutro/Reality defendants have settled an 11 year legal conflict over disputed technology migration. Each side is responsible for their own legal expenditures and owing each other nothing including all parties .  Based on this ruling, the Company recognized other income in the fiscal year ended March 31, 2021 due to the initial release of various debt and other liabilities associated with the settlement. In the period ended September 30, 2021, an additional review of the Dutro settlement impact was conducted and additional debts and liabilities were identified that should be released due to the terms of the settlement.  The total breakdown of the components of the Gain on the Extinguishment of Debt is as follows: .

Extinguishment of Debt
Extinguishment of Debt recognized in period ended 9/30/2021	$ 576,426
Extinguishment of Debt recognized in fiscal year ended 3/31/2021	2,115,532
Total  Extinguishment of Debt Recognized	$ 2,691,958

Note 8 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events per the requirements of ASC Topic 855 and has determined that the following events should be disclosed.  

1)Since the settlement of the litigation, the Company is reviewing various options to determine the future strategy of the Company operations.  No restructuring plan has been finalized as of the filing date of this report. 

2)The issues surrounding the prior litigation impacted the Company’s ability to obtain funding needed to operate the Company. 

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Item 2. Management’s Discussion And Analysis Or Plan Of Operation

This report contains forward-looking statements within the meaning of Section 29a of the Securities Act of 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from historical or anticipated results. You should not place undue reliance on such forward-looking statements, and, when considering such forward-looking statements, you should keep in mind the risk factors noted in this report, including the section of this report entitled “Risks Related to Our Business and Operations.” You should also keep in mind that all forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. The following discussion and analysis should be read in conjunction with the Company’s financial statements and notes thereto, which are included elsewhere in this report.

Overview

The Company markets the MRU and SRU products. The Company recently settled longstanding litigation with its former manufacturer.  Under the terms of the settlement, the Company maintained the rights to patented equipment.  The Company is currently evaluating various options for use of this equipment in future operations.  No plans have been finalized as of the date of this report.

Going Concern Qualification

Our notes to the financial statements disclose that the Company has generated no revenue or cash flow, has incurred net losses for the fiscal year and has a working capital deficiency. Due to the impact of the recently settled litigation and the current restructuring discussions, the Company operations are not likely to produce positive cash flow until at least the end of the fiscal year ended March 31, 2022 and beyond. These factors raise substantial doubt about our ability to continue as a going concern. Our going concern uncertainty may affect our ability to raise additional capital, and may also affect our relationships with suppliers and customers. Investors should carefully examine our financial statements and read the notes to the financial statements.

Results of Operations

Nine Months Ended December 31, 2021 as Compared to the Six Months Ended December 31, 2020

Revenues -

The Company had no revenues for the nine months ended December 31, 2021.

The Company had no revenues for the nine months ended December 31, 2021.

Other Income-

Other income for the nine months ended December 31, 2021 was $576,426 resulting from the Court decision and the terms of the agreed Dutro litigation settlement.  The total gain from the extinguishment of debt was composed of the forgiveness and related release of the following:  Professional Services & Consulting fees – $274,529;  NP – Ed Johnson - $86,615; NP – L Brown - $20,000; NP – Legal Fees - $50,000 and Accrued interest on NP - $145,282.

Other Income for the nine months ended December 31, 2020 was $1,857,497 resulting from the Court decision and the agreed Dutro litigation settlement.  The total gain was composed of Dutro Litigation forgiveness of $939,191 and forgiveness of other contingent legal fees of $918,306.  The Dutro litigation forgiveness of $939,191 consists of forgiveness of Dutro Company Loan - $250,000, Vicki Davis Loan - $168,000, William Dutro Loan - $65,000, Contingent fee – Reality Engineering - $ $50,000, Contingent Fee – Lee Allen - $18,000, Contingent Interest – Dutro Company - $209,073, Contingent Interest – Vicki Davis - $129,150 and Contingent Interest – William Dutro - $49,968.

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Operating Expenses -

The Company had no operating expenses for the nine months ended December 31, 2021.

The Company had no operating expenses for the nine months ended December 31, 2020.

General and Administrative Expenses -

General and administrative expenses were $26,886 for the nine months ended December 31, 2021 which was made up primarily of Insurance - $13,275, State Fees / Other Expenses – $ 8,645 and Registration/Filing Fees – $4,966..

General and administrative expenses were $49,252 for the nine months ended December 31, 2020 which was made up primarily of Professional fees – Legal & Accounting fees $20,000, Insurance - $12,187, litigation expenses/travel - $15,000, State fees – $1,545 and Filing fees  - $520.

Depreciation Expense –

Depreciation expense for the nine months ended December 31, 2021 was $0.

Depreciation expense for the nine months ended December 31, 2020 was $0.

Interest Expense –

Interest expense for the nine month period ended December 31, 2021 was $26,886.

Interest expense for the nine month period ended December 31, 2020 was $39,948.

Three Months Ended December 31, 2021 as Compared to the Three Months Ended December 31, 2020

Revenues -

The Company had no revenues for the three months ended December 31, 2021.

The Company had no revenues for the three months ended December 31, 2020.

Other Income-

The Company had no other income for the three months ended December 31, 2021.

Other Income for the three months ended December 31, 2020 was $1,857,497 resulting from the Court decision and the agreed Dutro litigation settlement.  The total gain was composed of Dutro Litigation forgiveness of $939,191 and forgiveness of other contingent legal fees of $918,306.  The Dutro litigation forgiveness of $939,191 consists of forgiveness of Dutro Company Loan - $250,000, Vicki Davis Loan - $168,000, William Dutro Loan - $65,000, Contingent fee – Reality Engineering - $50,000, Contingent Fee – Lee Allen - $18,000, Contingent Interest – Dutro Company - $209,073, Contingent Interest – Vicki Davis - $129,150 and Contingent Interest – William Dutro - $49,968.

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Operating Expenses -

The Company had no operating expenses for the three months ended December 31, 2021.

The Company had no operating expenses for the three months ended December 31, 2021.

General and Administrative Expenses -

General and administrative expenses were $7,204 for the three months ended December 31, 2021 which was made up primarily of Insurance - $4,296, Registration/Filing Fees – 1,658 and State Fees / Other Expenses – $1,250.

General and administrative expenses were $11,575 for the three months ended December 31, 2020 which was made up primarily of Insurance - $5,230, litigation expenses/travel - $5,000, State fees – $825 and Filing fees  - $520.

Depreciation Expense –

Depreciation expense for the three months ended December 31, 2021 was $0.

Depreciation expense for the three months ended December 31, 2020 was $0.

Interest Expense –

Interest expense for the three month period ended December 31, 2021 was 3,280.

Interest expense for the three month period ended December 31, 2020 was 7,278.

Liquidity and Capital Resources

As of December 31, 2021, Sector 10 had cash of $0.  This amount is not sufficient to meet the Company’s working capital requirements for the balance of the fiscal year ending March 31, 2022 or for any future period.

Total Assets -

The Company had no assets as of December 31, 2021.

Working capital -

As of this filing date, the Company recently settled its longstanding litigation and is currently in the process of restructuring its operations in order to raise capital and continue in its efforts to manufacture and distribute its products.  The restructuring is ongoing, and no plans have been finalized as of the date of this report.  Potential funding for operations is not expected until sometime in the fiscal year ended March 31, 2022 or beyond.

Total Liabilities -

Current liabilities as of December 31, 2021 were $9,840,491. The balance was composed of accounts payable and accrued liabilities of $9,676,491 and note payable to outside investors of $164,000.    

Long term liabilities as of December 31, 2020 were $0.

Total liabilities as of December 31, 2020 were $9,840,491.  

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Cash flows –

		Nine Months Ended		Nine Months Ended
		December 31,		December 31,
Sources and Uses of Cash		2021		2020
Net cash provided by / (used in)
Operating activities	$	-	$	-
Investing activities		-		-
Financing activities		-		-
Increase/(decrease) in cash and cash equivalents	$	-	$	-
Period ended December 31, 2021 and 2020
Cash and cash equivalents	$	-	$	-

Operating Activities -

Cash used in operations for the nine months ended December 31, 2021 was $0. Operating activities were affected by net income – $535,702 and change in accounts payable and accrued liabilities – ($535,702).

Cash used in operations for the nine months ended December 31, 2020 was $0. Operating activities were affected by net income – $1,768,297 and change in accounts payable and accrued liabilities – ($1,768.297).

Investing Activities –

Cash used from investing activities for the nine months ended for December 31, 2021 was $0.

Cash used from investing activities for the nine months ended for December 31, 2020 was $0.

Financing Activities -

Cash provided from financing activities for the nine months ended for December 31, 2021 was $0.   

Cash provided from financing activities for the nine months ended for December 31, 2020 was $0.   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Risks Related to the Company’s Business and Operations

Investing in the Common Stock involves a high degree of risk. You should carefully consider the risks described below, and all of the other information set forth in this report before deciding to invest in shares of the Company’s common stock. In addition to historical information, the information in this report contains forward-looking statements about the Company’s future business and performance. The Company’s actual operating results and financial performance may be different from what the Company’s management expects as of the date of this report. The risks described in this report represent the risks that the Company’s management has identified and determined to be material to the Company. Additional risks and uncertainties not currently known to the Company’s management, or that the Company’s management currently deems to be immaterial, may also materially harm the Company’s business operations and financial condition.

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Going Concern Qualification

Our notes to the financial statements disclose that the Company has generated no revenue or cash flow, has incurred net losses for the fiscal year and has a working capital deficiency. Due to the impact of the recently settled litigation and the current restructuring discussions, the Company operations are not likely to produce positive cash flow until at least the end of the fiscal year ended March 31, 2022 and beyond. These factors raise substantial doubt about our ability to continue as a going concern. Our going concern uncertainty may affect our ability to raise additional capital, and may also affect our relationships with suppliers and customers. Investors should carefully examine our financial statements and read the notes to the financial statements.

Other risk factors to be considered include the following:

·The Company has not generated revenues and has not executed any significant contracts for the sale of the Company’s products. 

·The Company uses outside sources to fulfill contract obligations and has limited control over the provider’s ability to meet the Company obligations. 

·The directors, executive officers and principal shareholders of the Company have effective control of the Company, preventing non-affiliate shareholders from significantly influencing the Company’s direction and future. 

·The Company relies on outsourced manufacturers for the production of all Sector 10 products.  The recently settled litigation and the current restructuring discussions results in indefinite delays in production capability and capacity.  

·The market for the Company’s stock is thin and subject to manipulation. 

·The market price for the Common Stock is volatile and may change dramatically at any time. 

·Our business may be affected by increased compensation and benefits costs. 

·The Company has not paid dividends and does not anticipate paying dividends in the future. 

·The Common Stock is a “low-priced stock” or “penny stock” and subject to regulation that limits or restricts the potential market for the stock. 

·Compliance with existing and new regulations of corporate governance and public disclosure may result in additional expenses. 

Item 4.  Controls and Procedures

(a)Based on the evaluation of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by paragraph (b) of Rules 13a-15 or 15d-15, the Company’s principal executive officer and principal financial officer concluded that as of December 31, 2021, the Company’s disclosure controls and procedures were effective. 

(b)There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

14

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is aware of the following situation regarding litigation, pending or threatened, to which it is a party.

On October 21, 2020, the Company settled an 11-year legal conflict over disputed technology migration that became known as PSIM. There is no further pending litigation.  

Initial adjustments  of $2,115,532 were made in the fiscal year ended March 31. 2021 to recognize  debt forgiveness resulting from the settlement.  The Company is still reviewing the impact of the settlement on the Company’s financial position. Additional adjustments of $576,426 were made in the current quarter to release liabilities and related accrued interest that were released due to the agreed terms of the settlement.  No further adjustments are expected at this time.

No other litigation is ongoing.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None 

Item 3. Defaults Upon Senior Securities

None 

Item 4.  Submission of Matters to a Vote of Security Holders

None 

Item 5.  Other Information

None 

15

Item 6. Exhibits

Exhibit
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS	XBRL Instance Document*
101 SCH	XBRL Schema Document*
101 CAL	XBRL Calculation Linkbase Document*
101 DEF	XBRL Definition Linkbase Document*
101 LAB	XBRL Labels Linkbase Document*
101 PRE	XBRL Presentation Linkbase Document*

*The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document 

16

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Sector 10, Inc.
February 10, 2022	By: /s/ Pericles DeAvila
Date	Pericles DeAvila, President
February 10, 2022	By: /s/ Laurence A. Madison
Date	Laurence A. Madison Chief Financial Officer

17

EX-31.1

EXHIBIT 31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Pericles DeAvila, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sector 10, Inc.; 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions): 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

February 10, 2022

By: /s/ Pericles DeAvila

Pericles DeAvila

Principal Executive Officer

1

EX-31.2

EXHIBIT 31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

I, Laurence A. Madison, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Sector 10, Inc.; 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions): 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

February 10, 2022

By: /s/ Laurence A. Madison

Laurence A. Madison

Chief Financial Officer

1

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

In connection with the Quarterly Report of Sector 10, Inc. on Form 10-Q for the quarterly period ended December 31, 2021, as filed with the Securities and Exchange Commission (the “Report”), Pericles DeAvila, Principal Executive Officer of the Company, does hereby certify, pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that to his knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. 

By:  /s/ Pericles DeAvila

Name: Pericles DeAvila

Principal Executive Officer

February 10, 2022

1

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

In connection with the Quarterly Report of Sector 10, Inc. on Form 10-Q for the quarterly period ended December 31, 2021, as filed with the Securities and Exchange Commission (the “Report”), Laurence A. Madison, Chief Financial Officer of the Company, does hereby certify, pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that to his knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. 

By: /s/ Laurence A. Madison

Name: Laurence A. Madison

Chief Financial Officer

February 10, 2022

1

XML

Document and Entity Information - shares	9 Months Ended
	Dec. 31, 2021	Feb. 09, 2022
Details
Registrant CIK	0000925661
Fiscal Year End	--03-31
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2021
Document Transition Report	false
Entity Registrant Name	SECTOR 10, Inc.
Entity Incorporation, State or Country Code	DE
Entity File Number	000-24370
Entity Tax Identification Number	33-0565710
Entity Address, Address Line One	10900 NE 4th Street
Entity Address, Address Line Two	Suite 2300
Entity Address, City or Town	Bellevue
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98004
City Area Code	425
Local Phone Number	331-9620
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		305,778
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2021	Mar. 31, 2021
Current Assets
Cash	$ 0	$ 0
Inventory, net	0	0
Total current assets	0	0
Fixed assets - cost	0	0
Less: accumulated depreciation	0	0
Net fixed assets	0	0
Total assets	0	0
Current liabilities:
Accounts payable and other accrued liabilities	9,676,491	10,055,578
Note payable - short term	164,000	320,615
Total current liabilities	9,840,491	10,376,193
Long term liabilities
Note payable - long term	0	0
Total long term liabilities	0	0
Total liabilities	9,840,491	10,376,193
Shareholders' equity (deficit)
Preferred shares	0	0
Common shares	306	306
Additional paid-in capital	6,148,229	6,148,229
Deficit accumulated during development stage	(15,989,026)	(16,524,728)
Total shareholders' equity (deficit)	(9,840,491)	(10,376,193)
Total liabilities and shareholders' equity (deficit)	$ 0	$ 0

XML

Unaudited Condensed Consolidated Balance Sheets - Parenthetical - $ / shares	Dec. 31, 2021	Mar. 31, 2021
Details
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Common Stock, Shares Authorized	199,000,000	199,000,000
Common Stock, Shares, Issued	305,778	305,778
Common Stock, Shares, Outstanding	305,778	305,778

XML

Unaudited Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended		232 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021
Details
Sales	$ 0	$ 0	$ 0	$ 0	$ 18,500
Cost of Sales	0	0	0	0	(18,032)
Gross Profit	0	0	0	0	468
Expenses
General and administrative	7,204	11,575	26,886	49,252	14,485,736
Depreciation			0	0	24,106
Research and development					226,108
Total expenses	7,204	11,575	26,886	49,252	14,735,950
Income (loss) from operations	(7,204)	(11,575)	(26,886)	(49,252)	(14,735,482)
Interest expense	(3,280)	(7,278)	(13,838)	(39,948)	(3,314,707)
Other income (expense)	0	1,857,497	576,426	1,857,497	2,061,163
Net income (loss) before income taxes	(10,484)	1,838,644	535,702	1,768,297	(15,989,026)
Provision for income taxes	0	0	0	0	0
Net income (loss) after income taxes	$ (10,484)	$ 1,838,644	$ 535,702	$ 1,768,297	$ (15,989,026)
Weighted Average Number of Shares Outstanding, Basic and Diluted	305,778	305,778	305,778	305,778
Basic and diluted income (loss) per share
Continuing Operations	$ (0.03)	$ 6.01	$ 1.75	$ 5.78
Net Income (Loss)	$ (0.03)	$ 6.01	$ 1.75	$ 5.78

XML

Consolidated Statements of Cash Flows - USD ($)	9 Months Ended		232 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021
Cash Flows from Operating Activities
Net Income (Loss)	$ 535,702	$ 1,768,297	$ (15,989,026)
Adjustments to reconcile net loss to net cash used in operating activities
Stock for services	0	0	5,114,493
Depreciation	0	0	24,106
Net discount on convertible debt	0	0	206,324
Loss due to Impairment / Gain on restructuring	0	0	630,795
Changes in
Inventory and other current assets	0	0	(4,869)
Accounts payable and accrued liabilities	(535,702)	(1,768,297)	9,550,579
Net cash used in operating activities	0	0	(467,598)
Cash Flows from Investing Activities
Fixed asset / Other asset purchases	0	0	(189,541)
Net cash used in investing activities	0	0	(189,541)
Cash Flows from Financing Activities
Net Proceeds from general financing	0	0	737,500
Net Proceeds (payments) from shareholder / officers	0	0	(113,947)
Proceeds from issuance of common stock	0	0	33,586
Net cash provided by financing activities	0	0	657,139
Net increase (decrease) in cash	0	0	0
Beginning of period - continuing operations	0	0	0
End of period - continuing operations	0	0	0
Cash paid for interest	0	0	24,295
Cash paid for income taxes	$ 0	$ 0	$ 0

XML

Note 1 - Basis of Presentation

9 Months Ended

Dec. 31, 2021

Notes

Note 1 - Basis of Presentation

Note 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements of Sector 10, Inc. (“Sector 10” or 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 Form 10-Q and required by Rule 10-01 of Regulation S-X. They do not include all of 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, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.

Impact of Recent Accounting Pronouncements

Sector 10 does not expect the adoption of any recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.

XML

Note 2 - Inventory

9 Months Ended

Dec. 31, 2021

Notes

Note 2 - Inventory

Note 2 – INVENTORY

There were no sales in the nine months ended December 31, 2021.  The inventory reflected on the books was $0 for the nine months ended December 31, 2021.  

XML

Note 3 - Notes Payable

9 Months Ended

Dec. 31, 2021

Notes

Note 3 - Notes Payable

Note 3 – NOTES PAYABLE

Johnson Financing

Total interest accrued is $0 of which $2,598 was accrued in the first three months ended June 30, 2021. In the period ended September 30, 2021, an additional review of the Dutro settlement impact was conducted.  In the review of the settlement impact, three loans were considered to be included within the terms of the settlement agreement including the Johnson loan.  The full amount of the loan balances plus all accrued interest was treated as a gain on the extinguishment of debt as a result of the Court’s decision. No interest was accrued in the current period.  No further interest shall be accrued in future periods.

Dutro Financing:

In October 2020, The Court dismissed the Dutro Litigation with no amounts due either party. As a result of the Court’s decision, the contingent interest along with the full outstanding loan balance was forgiven and no future interest is due.   No interest was accrued in the current period. No further interest shall be accrued in future periods.

Employee Agreement:

The financial statements reflect an accrual of interest on unpaid wages and other compensation in the amount of $2,357,414. No amount was accrued during the current fiscal year.   In September 2020, the Company decided to stop all accruals of salary and employee contract interest as of the end of the fiscal year ended March 31, 2020.  No future accruals will be made for either interest on unpaid wages or on accrued wages.

Other Notes

Individuals – short term

Total interest accrued as of December 31, 2021 was $114,630 of which $7,340 was accrued during the nine months ended December 31, 2021.

Asher Enterprises, Inc.

Total interest accrued (without discount amortization) as of December 31, 2021 was $61,602 of which $3,900 was accrued during the nine months ended December 31, 2021 The current period interest is included as part of other interest.  

Summary of Interest and Notes Payable

Interest expense		December 31, 2021		March 31,   2021
Interest – Johnson		2,598		10,394
Interest – Dutro Group		-		18,112
Interest  - Employee Group		-		-
Interest – Other Notes		11,240		18,720
Total interest expense	$	13,838	$	47,226

Note Payable Balance		December 31, 2021		March 31, 2021
Edward Johnson – Johnson Financing	$		$	86,615
Various Individuals – Other Notes		99,000		169,000
Asher Enterprises, Inc. – Other Notes		65,000		65,000
Total Note Payable – short term	$	164,000	$	320,615
Total Note Payable – long term	$	-	$	-
Total Notes Payable	$	164,000	$	320,615

Debt Maturity Schedule

As of December 31, 2021, the annual maturities for notes payable are scheduled as follows:

Fiscal Year		Amount
March 31, 2022	$	164,000
March 31, 2023	$	-
Total	$	164,000

All interest is due under the terms of the various agreements.  However future interest payments will not be made until all pending litigation is resolved and a satisfactory revised payment arrangement is completed by all parties

XML

Note 4 - Equity

9 Months Ended

Dec. 31, 2021

Notes

Note 4 - Equity

Note 4 – EQUITY

During the Quarter ended: June 30, 2021

No equity transactions occurred in the period ended June 30, 2021

During the Quarter ended: September 30, 2021

No equity transactions occurred in the period ended September 30, 2021

During the Quarter ended: December 31, 2021

No equity transactions occurred in the period ended December 31, 2021

XML

Note 5 - Going Concern

9 Months Ended

Dec. 31, 2021

Notes

Note 5 - Going Concern

Note 5 – GOING CONCERN

The Company generated minimal revenues prior to the current fiscal year.  No revenues were generated for the nine month period ended December 31, 2021. This level of revenues is not sufficient for the Company to meet its future obligations. This factor raises substantial doubt about the Company’s ability to continue as a going concern.

The Company recently settled the Dutro litigation and reviewing options for future business operations.   The litigation and a lack of net cash flow has hindered the operation of the Company and has set back the ability to raise capital and develop ongoing business in order to continue forward as a going concern. It is expected that limitation will continue to hinder the ability to continue as a going concern through the end of the fiscal year ended March 31, 2022 and  beyond.

XML

Note 6 - Income Tax

9 Months Ended

Dec. 31, 2021

Notes

Note 6 - Income Tax

Note 6 - INCOME TAX

Income taxes are accounted for using the asset and liability method. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards 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.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s financial statements for the six month period ended September 30, 2021 and 2020 do not include any provision for income taxes.   No income tax accrual has been recorded based on the expectation that the Company will be in a net loss position for the overall applicable fiscal year. Accordingly, deferred tax assets have been entirely offset by valuation allowances. The difference between the amounts of income tax benefit that would result from applying domestic federal statutory income tax rates to the net loss and the net deferred tax assets is related to certain nondeductible expenses, state income taxes, and the change in the valuation allowance.

The Financial Accounting Standards Board ("FASB") has issued ASC 740 for Accounting for Income Taxes that clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. ASC 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. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740.

The Company had no unrecognized tax benefit which would affect the effective tax rate if recognized.

The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 31, 2021 the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in the states of Delaware and any other jurisdiction where required. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.

XML

Note 7 - OTHER INCOME

9 Months Ended

Dec. 31, 2021

Notes

Note 7 - OTHER INCOME

Note 7 – OTHER INCOME

On October 21, 2020, Sector 10 and the Dutro/Reality defendants have settled an 11 year legal conflict over disputed technology migration. Each side is responsible for their own legal expenditures and owing each other nothing including all parties .  Based on this ruling, the Company recognized other income in the fiscal year ended March 31, 2021 due to the initial release of various debt and other liabilities associated with the settlement. In the period ended September 30, 2021, an additional review of the Dutro settlement impact was conducted and additional debts and liabilities were identified that should be released due to the terms of the settlement.  The total breakdown of the components of the Gain on the Extinguishment of Debt is as follows: .

Extinguishment of Debt
Extinguishment of Debt recognized in period ended 9/30/2021	$ 576,426
Extinguishment of Debt recognized in fiscal year ended 3/31/2021	2,115,532
Total  Extinguishment of Debt Recognized	$ 2,691,958

XML

Note 8 - Subsequent Events

9 Months Ended

Dec. 31, 2021

Notes

Note 8 - Subsequent Events

Note 8 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events per the requirements of ASC Topic 855 and has determined that the following events should be disclosed.  

1)Since the settlement of the litigation, the Company is reviewing various options to determine the future strategy of the Company operations.  No restructuring plan has been finalized as of the filing date of this report. 

2)The issues surrounding the prior litigation impacted the Company’s ability to obtain funding needed to operate the Company. 

XML

Note 6 - Income Tax: Income Tax, Policy (Policies)

9 Months Ended

Dec. 31, 2021

Policies

Income Tax, Policy

Income taxes are accounted for using the asset and liability method. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards 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.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company’s financial statements for the six month period ended September 30, 2021 and 2020 do not include any provision for income taxes.   No income tax accrual has been recorded based on the expectation that the Company will be in a net loss position for the overall applicable fiscal year. Accordingly, deferred tax assets have been entirely offset by valuation allowances. The difference between the amounts of income tax benefit that would result from applying domestic federal statutory income tax rates to the net loss and the net deferred tax assets is related to certain nondeductible expenses, state income taxes, and the change in the valuation allowance.

The Financial Accounting Standards Board ("FASB") has issued ASC 740 for Accounting for Income Taxes that clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. ASC 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. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740.

The Company had no unrecognized tax benefit which would affect the effective tax rate if recognized.

The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes. As of December 31, 2021 the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in the states of Delaware and any other jurisdiction where required. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.

XML

Note 3 - Notes Payable: Interest Expense Disclosure (Tables)

9 Months Ended

Dec. 31, 2021

Tables/Schedules

Interest Expense Disclosure

Summary of Interest and Notes Payable

Interest expense		December 31, 2021		March 31,   2021
Interest – Johnson		2,598		10,394
Interest – Dutro Group		-		18,112
Interest  - Employee Group		-		-
Interest – Other Notes		11,240		18,720
Total interest expense	$	13,838	$	47,226

XML

Note 3 - Notes Payable: Schedule Of Debt Table TextBlock (Tables)

9 Months Ended

Dec. 31, 2021

Tables/Schedules

Schedule Of Debt Table TextBlock

Note Payable Balance		December 31, 2021		March 31, 2021
Edward Johnson – Johnson Financing	$		$	86,615
Various Individuals – Other Notes		99,000		169,000
Asher Enterprises, Inc. – Other Notes		65,000		65,000
Total Note Payable – short term	$	164,000	$	320,615
Total Note Payable – long term	$	-	$	-
Total Notes Payable	$	164,000	$	320,615

XML

Note 3 - Notes Payable: Schedule of maturities of notes payable (Tables)

9 Months Ended

Dec. 31, 2021

Tables/Schedules

Schedule of maturities of notes payable

Fiscal Year		Amount
March 31, 2022	$	164,000
March 31, 2023	$	-
Total	$	164,000

XML

Note 7 - OTHER INCOME: Schedule of Other Nonoperating Income (Expense) (Tables)

9 Months Ended

Dec. 31, 2021

Tables/Schedules

Schedule of Other Nonoperating Income (Expense)

Extinguishment of Debt
Extinguishment of Debt recognized in period ended 9/30/2021	$ 576,426
Extinguishment of Debt recognized in fiscal year ended 3/31/2021	2,115,532
Total  Extinguishment of Debt Recognized	$ 2,691,958

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Note 2 - Inventory (Details) - USD ($)	Dec. 31, 2021	Mar. 31, 2021
Details
Inventory, net	$ 0	$ 0

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Note 3 - Notes Payable (Details)	9 Months Ended
	Dec. 31, 2021 USD ($)
Accrual of interest on unpaid wages and other compensation	$ 0
Johnson Financing
Interest Accrued	2,598
Individuals - Short Term
Interest Accrued	7,340
Asher Enterprises, Inc.
Interest Accrued	$ 3,900

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Note 3 - Notes Payable: Interest Expense Disclosure (Details) - USD ($)	9 Months Ended	12 Months Ended
	Dec. 31, 2021	Mar. 31, 2021
Interest Expense	$ 13,838	$ 47,226
Johnson Financing
Interest Expense	2,598	10,394
Dutro Group
Interest Expense	0	18,112
Employee Group
Interest Expense	0	0
Other
Interest Expense	$ 11,240	$ 18,720

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Note 3 - Notes Payable: Schedule Of Debt Table TextBlock (Details) - USD ($)	Dec. 31, 2021	Mar. 31, 2021
Note payable - short term	$ 164,000	$ 320,615
Note payable - long term	0	0
Notes Payable	164,000	320,615
Johnson Financing
Note payable - short term		86,615
Various Individuals
Note payable - short term	99,000	169,000
Asher Enterprises, Inc.
Note payable - short term	$ 65,000	$ 65,000

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Note 3 - Notes Payable: Schedule of maturities of notes payable (Details) - USD ($)	Dec. 31, 2021	Mar. 31, 2021
Details
Long-Term Debt, Maturity, Year Two	$ 164,000
Long Term Debt Maturities Repayments Of Principal In Year Three	0
Notes Payable	$ 164,000	$ 320,615

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Note 7 - OTHER INCOME: Schedule of Other Nonoperating Income (Expense) (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended	232 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020	Mar. 31, 2021	Dec. 31, 2021
Details
Other income (expense)	$ 0	$ 1,857,497	$ 576,426	$ 1,857,497	$ 2,115,532	$ 2,061,163
Extinguishment of Debt, Amount			$ 2,691,958