Electronic Servitor Publication Network, Inc 10-Q for FY2022 Q2
Electronic Servitor Publication Network, Inc. (XESP)
About this 10-Q
Electronic Servitor Publication Network, Inc filed this 10-Q on August 22, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).
Headline figures
Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $142.19K
- compared with a net loss of $6496 a year earlier
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ACT OF 1934
For the quarterly period ended
ACT OF 1934
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days).
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| x | Smaller Reporting Company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected
not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(1) of the Exchange Act.
Indicate by checkmark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨
Securities registered pursuant to Section 12(b) of the Act: None.
As of August 19, 2022, the Company had shares of its common stock, par value $.0001 per share, issued and outstanding
TABLE OF CONTENTS
| PART I | ||
| Item 1. | Condensed Unaudited Financial Statements | 2 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
| Item 4. | Controls and Procedures | 14 |
| PART II | ||
| Item 1. | Legal Proceedings | 15 |
| Item 1A. | Risk Factors | 15 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
| Item 3. | Defaults Upon Senior Securities | 16 |
| Item 4. | Mining Safety Disclosures | 16 |
| Item 5. | Other Information | 16 |
| Item 6. | Exhibits | 17 |
| Signatures | 17 |
| 1 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
INDEX TO FINANCIAL STATEMENTS
| Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 | 3 |
| Statements of Operations for the three and six months ended June 30, 2022 and 2021 (unaudited) | 4 |
| Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2022 and 2021 (unaudited) | 5 |
| Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited) | 6 |
| Notes to Condensed Financial Statements (Unaudited) | 7 |
| 2 |
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ELECTRONIC SERVITOR PUBLICATION NETWORK, INC. BALANCE SHEETS |
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accruals | $ | $ | ||||||
| Loans payable | ||||||||
| Due to a related party | ||||||||
| Total current liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ par value shares authorized; shares issued and outstanding | ||||||||
| Series A Preferred stock, $ par value shares authorized; shares issued and outstanding | ||||||||
| Common Stock, $ par value, shares authorized; and issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 3 |
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ELECTRONIC SERVITOR PUBLICATION NETWORK, INC. STATEMENTS OF OPERATIONS (UNAUDITED) |
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Professional fees | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ||||||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||||||||||
| Net loss from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share, basic and diluted, from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Loss per share, basic and diluted, from discontinued operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 4 |
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ELECTRONIC SERVITOR PUBLICATION NETWORK, INC. STATEMENTS OF CHANGES OF STOCKHOLDERS’ DEFICIT For the Three and Six Months Ended June 30, 2022 and 2021 (UNAUDITED) |
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Warrants issued | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock option expense | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | |||||||||||||||||||||||||||
| Common stock units sold for cash | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 5 |
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ELECTRONIC SERVITOR PUBLICATION NETWORK, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
|
| For the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts payable and accruals | ||||||||
| Operating activities from discontinued operations | ( | ) | ||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash flows from Investing activities: | ||||||||
| Cash flows from Financing activities: | ||||||||
| Proceeds from loans - related party | ||||||||
| Proceeds from loans payable | ||||||||
| Financing activities from discontinued operations | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Cash Paid For: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplement disclosure of cash flow information: | ||||||||
| Conversion of debt | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 6 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2022
NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY
Description of business
The Company was originally incorporated on May 17, 2017, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On May 23, 2018, the Certificate of Incorporation of the Company was amended to effect a change in the Company’s name from “Iris Grove Acquisition Corporation” to “CannAssist International Corporation”. On September 28, 2021, the Certificate of Incorporation of the Company was amended a second time to effect a change in the Company’s name from “CannAssist International Corporation” to the name “Electronic Servitor Publication Network, Inc.” The Company’s common stock trades on the OTCQB Venture Market under the stock ticker symbol “XESP,” previously from “CNSC,” effective January 26, 2022. The Company's corporate office is located at 400 1ST Ave N., Ste. 100, Minneapolis, MN 55401. The URL of the Company’s website is https://www.xespn.com.
The Company’s business focuses on amplifying reach and lift for content providers and creators through its development and use of a proprietary technology platform. The platform functionality provisions content and provides omnichannel publication and monetization opportunities, allowing the Company’s customers more time to focus on content creation. The Company targets markets and users in need of increasing global awareness and brand exposure.
On July 1, 2021, and effective on October 9, 2021, Mark Palumbo,
a former officer and director of the Company, and Forty 7 Select Holdings LLC, an entity controlled by Greg Shockey (who was an existing
shareholder of the Company), entered into an agreement pursuant to which Mark Palumbo transferred all of his shares of Series A
Preferred Stock (representing 100% of the Company’s issued and outstanding Series A Preferred Stock), of the Company to Forty 7
Select Holdings LLC in a private transaction. The Series A
On July 23, 2021, the Company entered into a Technology License
Agreement with Phitech Management, LLC, an entity controlled by Peter Hager (“Licensor”), to use, market, promote and distribute
certain technology relating to content provisioning including the related patent applications, trade-secrets and associated knowhow, including
methods, techniques, specifications, procedures, information, systems, knowledge and business processes required to practice and carry
on business in the field of data collection, security and management (the “Technology”). The initial term of the License is
10-years (the “Initial Term”) and shall automatically be renewed for successive 1-year terms (each, a “Renewal Term”)
unless the Company elects to terminate the License by giving 30 days’ written notice prior to commencement of a Renewal Term. In
exchange for the License of the Technology, the Company issues to the Licensor restricted shares of its common stock (which
is an amount equal to $
On July 23, 2021, the Company and Mark Palumbo entered into an agreement (the “Spin-Off Agreement”) whereby, at the Closing, the Company shall transfer 100% of the issued and outstanding membership units of Xceptor LLC, an entity that was a wholly-owned subsidiary of the Company, to Mark Palumbo (along with the assets and liabilities associated with the prior business) for nominal consideration as a condition of the Change-in-Control (the “Spin-Off”). Furthermore, at the Closing, that certain Technology License Agreement entered into by and between the Company and Mark Palumbo dated April 29, 2019 (the “Palumbo License Agreement”) shall be terminated and the Company shall assign all rights to the underlying Intellectual Property (as defined in the Palumbo License Agreement) to Mark Palumbo. On October 9, 2021, at the Closing of the Spin-Off Agreement, the Company transferred 100% of the issued and outstanding membership units of Xceptor LLC to Mark Palumbo (along with the assets and liabilities associated with the prior business) in exchange for nominal consideration, and the Palumbo License Agreement was terminated.
As a result of the transactions described above, the Company is strategically aligning its business to support its mission in becoming the premier content management and distribution platform for content providers in the global markets through the Company’s continued development and acquisitions of publication and monetization products, services, and technologies.
| 7 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the six month period ending June 30, 2022 and not necessarily indicative of the results to be expected for the full year ending December 31, 2022. These unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount (“FDIC”).
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 periods ended June 30, 2022 and December 31, 2021.
Recently issued accounting pronouncements
The Company has implemented all new applicable 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 unaudited financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has an accumulated deficit of $
NOTE 4 - NOTES PAYABLE
On May 19, 2022, the Company issued a note payable for $
On May 20, 2022, the Company issued a note payable for $
On June 10, 2022, the Company
issued a note payable for $
| 8 |
NOTE 5 – RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2022, Forty 7 Select Holdings
LLC (“Forty 7”) advanced the Company $
Refer to Note 7 for options to purchase shares of common stock issued to related parties.
NOTE 6 – PREFERRED STOCK
The Company has designated shares of Series A Preferred
Stock. The shares of Series A Preferred Stock have a par value of $ per share. The Series A Preferred Shares do not have a dividend
rate or liquidation preference and are not convertible into shares of common stock.
NOTE 7 – OPTIONS
In the first quarter of 2022, the Company entered into an Employment Agreement with Anthony Sanneh, a former officer and director of the Company, for a term of 2 years that automatically renews for additional 6-month terms unless terminated earlier. This agreement is terminable by each of the parties upon written notice. Under this Employment Agreement, the Company pays a base salary of $1.00 per year and issued options to purchase 500,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1.5 years contingent upon service and expire 10 years from the date of grant. On April 18, 2022, Mr. Sanneh voluntarily resigned all positions with the Company, without disagreement between the parties, thereby terminating this Employment Agreement and forfeiting 250,000 unvested options, effective May 15, 2022.
In the first quarter of 2022, the Company entered into an Employment Agreement with Thomas Spruce, an officer and director of the Company. This Employment Agreement has a term of 2 years and automatically renews for additional 6-month terms unless terminated earlier. This agreement is terminable by each of the parties upon written notice. Under this Employment Agreement, the Company pays a base salary of $1.00 per year and issued options to purchase 500,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of two years and expire 10 years from the date of grant. If the Employment Agreement is renewed, an additional 125,000 options to purchase restricted shares of the Company’s common stock shall be issued for each 6-month renewal term at a strike price equal to the fair market value of the Company’s common stock on the trading day prior to the grant of the options.
Effective April 12, 2022, the Company entered into an Advisory Agreement with Greg Shockey, an affiliate of the Company and service provider. Under this Advisory Agreement, the Company issued options to purchase 240,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
Effective April 12, 2022, the Company entered into an Advisory Agreement with Danijella Dragas, a third-party service provider. Under this Advisory Agreement, the Company issued options to purchase 240,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
Options issued with the following inputs:
| Options | ||||
| Share price | $ | |||
| Exercise Price | $ | |||
| Term | years | |||
| Volatility | – | % | ||
| Risk Free Interest Rate | – | % | ||
| Dividend rate | - |
| 9 |
On May 27, 2022, the Company entered into an Addendum to Employment Agreement with Thomas Spruce, which granted Mr. Spruce options to purchase an additional 250,000 restricted shares of the Company’s common stock at a strike price of $0.15 per share. The options vest immediately from the date of the grant and expire 10 years from the date of grant.
Options issued with the following inputs:
| Options | ||||
| Share price | $ | |||
| Exercise Price | $ | |||
| Term | years | |||
| Volatility | % | |||
| Risk Free Interest Rate | % | |||
| Dividend rate | - |
A summary of the status of the Company’s outstanding stock options and changes during the year is presented below:
Activity for the six months ended June 30, 2022, is as follows:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2021 | $ | — | — | $ | — | |||||||||||
| Granted | $ | $ | — | |||||||||||||
| Expired | ( | ) | $ | — | — | $ | — | |||||||||
| Exercised | — | $ | — | — | $ | — | ||||||||||
| Outstanding at June 30, 2022 | $ | $ | — | |||||||||||||
| Exercisable at June 30, 2022 | $ | $ | — | |||||||||||||
| Range of Exercise Prices |
Number Outstanding 6/30/2022 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price | |||
| $ – |
years | $ |
NOTE 8 – WARRANTS
A summary of the status of the Company’s outstanding stock warrants and changes during the year is presented below:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2020 | $ | $ | — | |||||||||||||
| Granted | $ | $ | — | |||||||||||||
| Expired | - | $ | - | - | $ | — | ||||||||||
| Exercised | - | $ | - | - | $ | — | ||||||||||
| Outstanding at December 31, 2021 | $ | $ | — | |||||||||||||
| Granted | — | $ | — | — | $ | — | ||||||||||
| Expired | — | $ | — | — | $ | — | ||||||||||
| Exercised | — | $ | — | — | $ | — | ||||||||||
| Outstanding at June 30, 2022 | $ | $ | — | |||||||||||||
| Exercisable at June 30, 2022 | $ | $ | — | |||||||||||||
| 10 |
| Range of Exercise Prices |
Number Outstanding 6/30/2022 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price | |||
| $ | $ |
NOTE 9 - DISCONTINUED OPERATIONS
In accordance with the provisions of ASC 205-20, we have not included the results of operations from discontinued operations in the results of continuing operations in the statements of operations. The results of operations from discontinued operations for the three and six months ended June 30, 2021, have been reflected as discontinued operations in the statements of operations, and consist of the following.
| For the three months ended June 30, 2021 | For the six months ended June 30, 2021 | |||||||
| Revenue - discontinued operations | $ | $ | ||||||
| Cost of revenue - discontinued operations | ||||||||
| Gross margin | ||||||||
| Expenses of discontinued operations: | ||||||||
| General and administrative | ||||||||
| Professional fees | ||||||||
| Interest expense | ||||||||
| Total expenses of discontinued operations | ||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
NOTE 10 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that there are no material subsequent events to disclose in these financial statements.
| 11 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following information should be read in conjunction with our financial statements and related notes thereto included in Part I, Item 1, above.
Forward Looking Statements
Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:
·our future strategic plans;
·our future operating results;
·our business prospects;
·our contractual arrangements and relationships with third parties;
·the dependence of our future success on the general economy;
·our possible future financings; and
·the adequacy of our cash resources and working capital.
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Executive Overview
The Company is a smaller reporting company that was originally incorporated on May 17, 2017, in the State of Delaware. On September 28, 2021, to better reflect the Company’s focus, the Company amended its Certificate of Incorporation to effect a change in name from “CannAssist International Corporation” to “The Electronic Servitor Publication Network, Inc.”
On October 9, 2021, the Company obtained a 10-year license from Phitech Management, LLC, automatically renewable after the initial 10-year-term for successive 1-year terms, to employ advanced technology that provides dynamic content provisioning and metadata management through its tech stack, as well as omnichannel publication, to achieve greater reach and lift for content providers. This technology allows providers to maintain better control of their content while creating a target-rich environment to attract sponsorship and advertisers in their respective industry.
The Company’s mission is to become the premier content management and distribution platform for multiple verticals through the development of publication and monetization products, services, and technologies as well as through future strategic acquisitions or mergers. The goal is to connect content providers and creators with their intended audiences and audiences that expand their reach. The platform functionality provisions content and provides omnichannel publication and monetization opportunities, allowing the Company’s customers more time to focus on content creation.
Starting in 2022, associated with the change of management and results from ongoing research and development of its technology, the Company’s target audience evolved going beyond any specific vertical or industry and is aimed at serving those in need of increasing global awareness and brand exposure at an exponential rate. The technology the Company deploys can range from existing mature industries with new technology and advancements to emerging industries representing today’s risk takers. The URL of the new website that will host the Company’s technology and services is https://www.xespn.com.
Over the next quarter, the Company will continue building its customer base and professional relationships, market and advertise, and acquire or license technological assets and intellectual property. Notwithstanding this, the Company’s independent auditors issued a report for the period covered raising substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate customers and sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. There is no guarantee that the Company’s activities will generate sufficient revenues to sustain its operations, or its ability to sell its services to generate consistent profitability. In order to effectuate the Company’s business plan and maintain operations, the Company will have to raise additional capital from equity financing and/or from its officers, directors, or principal stockholders, subject to terms obtainable and satisfactory to the Company. There is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous price. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 12 |
Results of Operations
For the three months ended June 30, 2022, the Company had revenues of $0. In comparison, for the three months ended June 30, 2021, all of revenue and cost of revenue have been included in the loss from discontinued operations (Refer to Note 9, above).
For the period covered by this report, operating expenses were $140,752. This includes $11,888 of general and administrative expenses, $24,000 of professional fees, and $104,864 of non-cash stock-based compensation for the issuance of warrants. In comparison, for the three- and six-month period ended June 30, 2021, all operating expenses have been included in the loss from discontinued operations (Refer to Note 9, above).
For the three- and six-month period covered by this report, the Company posted a net loss of $142,190 and $266,284, respectively, compared to a net loss of $6,496 and $79,254 from discontinued operations for the three- and six-month period ended June 30, 2021, respectively.
For the period covered by this report, the Company used $36,577 of cash in operating activities and generated $55,273 in cash from financing activities. In comparison, for the six-month period ended June 30, 2021, the Company used $175,601 of cash in operating activities and generated $17,588 in cash from financing activities. The Company did not use or generate any cash in investing activities for the end of the period covered by this report.
Liquidity and Capital Resources
The accompanying unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated revenues of $0 and had a net loss of $142,190 for the three months ended June 30, 2022. The Company has an accumulated deficit of $$6,181,516 as of June 30, 2022. The Company requires capital for its contemplated operational and marketing activities. The obtainment of additional financing, through an additional capital raise, the successful development of the Company’s contemplated plan of operations, and its transition to the attainment of continued profitable operations are necessary for the Company to continue operations.
The Company used $36,577 of cash from operations for the period ended June 30, 2022. Net cash provided by financing activities for the period ended June 30, 2022, was $55,273.
As of June 30, 2022, the Company had $18,696 in cash.
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 2 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
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Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Recent Accounting Pronouncements
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ineffective as of June 30, 2022 due to the material weaknesses previously identified as described below.
We previously identified material weaknesses in our internal control over financial reporting. Based on our assessment for the year ended December 31, 2021, management identified a material weakness in internal control over financial reporting related to the lack of thorough controls, segregation of duties, and timely and accurate reconciliation of accounts. The Company will continue the process of designing and implementing effective internal control measures to improve its internal controls over financial reporting and remediate the reported material weakness. The Company’s efforts shall include maintaining a clear delineation of duties, periodic and routine risk assessments, and monitoring of financial activities.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this quarterly report.
Changes in Internal Controls
Based on Management’s evaluation, there was no change in the Company’s internal control over financial reporting (as defined in Rule 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2022, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For the period covered by this report, there have been no material developments regarding the legal proceeding previously disclosed in the Company’s Form 10-K for the period ended December 31, 2021, filed April 12, 2022, and Form 10-Q for the period ended March 31, 2022, filed May 23, 2022, and identified as Camron Elizabeth v. Mark Palumbo, et al., Case No. CVPS2106116, Superior Court of California, County of Riverside. The Company denies Plaintiff’s allegations. Litigation is ongoing. No trial date has been set. The Company further notes that, due to an existing agreement that contains an indemnification clause, the Company’s former officer has agreed to pay for the Company’s attorney fees, costs, and expenses incurred as a result of the lawsuit and will indemnify the Company from any loss, judgment, award, or recovery by Plaintiff against the Company. There can be no assurances regarding the ultimate outcome of this lawsuit.
In addition to the above, the Company may, from time to time, be involved in various legal proceedings incidental to the conduct of our business. Historically, the outcome of all such legal proceedings has not, in the aggregate, had a material adverse effect on our business, financial condition, results of operations or liquidity.
ITEM 1A. RISK FACTORS.
Not applicable. We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
In the first quarter of 2022, the Company entered into an Employment Agreement with Anthony Sanneh, an officer of the Company. Under this Employment Agreement, the Company issued options to purchase 500,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1.5 years contingent upon service and have an expiry date of 10 years from the date of grant. The options were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act. On April 18, 2022, Mr. Sanneh resigned all positions with the Company, thereby terminating this Employment Agreement and forfeiting 250,000 unvested options, effective May 15, 2022, as previously disclosed in Form 8-K filed April 20, 2022, and Form 8-K filed May 19, 2022.
In the first quarter of 2022, the Company entered into an Employment Agreement with Thomas Spruce, an officer and director of the Company. Under this Employment Agreement, the Company issued options to purchase 500,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1.5 years contingent upon service and have an expiry date of 10 years from the date of grant. The options were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act. On May 27, 2022, the Company entered into an Addendum to Employment Agreement with Mr. Spruce granting him options to purchase an additional 250,000 restricted shares of the Company’s common stock at a strike price of $0.15 per share. The options vest immediately on the date of grant and expire 10 years from the date of grant.
In the second quarter of 2022, the Company entered into an Advisory Agreement with Greg Shockey, an affiliate of the Company and service provider. Under this Advisory Agreement, the Company issued options to purchase 240,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1 year contingent upon service and have an expiry date of 10 years from the date of grant. The options were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act.
In the second quarter of 2022, the Company entered into an Advisory Agreement with Danijella Dragas, a third-party service provider. Under this Advisory Agreement, the Company issued options to purchase 240,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of 1 year contingent upon service and have an expiry date of 10 years from the date of grant. The options were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINING SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
On May 27, 2022, the Company entered into an Addendum to its Employment Agreement with Thomas Spruce, an officer and director of the Company, granting Mr. Spruce options to purchase an additional 250,000 restricted shares of the Company’s common stock at a strike price of $0.15 per share. The options vest immediately upon the date of grant and expire 10 years from the date of grant.
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ITEM 6. EXHIBITS.
See the Exhibit Index to this report immediately below and before the signature page hereto, which Exhibit Index is incorporated by reference as if fully set forth herein.
EXHIBIT INDEX
Exhibit
| No. | Description | |
| 31.1 | Chief Executive Officer Section 302 Certification | |
| 31.2 | Chief Financial Officer Section 302 Certification | |
| 32.1 | Section 906 Certification | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document |
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.
| ELECTRONIC SERVITOR PUBLICATION NETWORK, INC. | |
| Dated: August 19, 2022 |
By: /s/ Thomas Spruce Thomas Spruce Chief Executive Officer |
|
By: /s/ Thomas Spruce Thomas Spruce Chief Financial Officer |
17
Exhibit 31.1
CHIEF EXECUTIVE OFFICER
I, Thomas Spruce, hereby certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q for the period ending June 30, 2022 of Electronic Servitor Publication Network 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 officers 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 officers 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 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.
| Dated: August 19, 2022 |
/s/ Thomas Spruce Thomas Spruce Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER
I, Thomas Spruce, hereby certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q for the period ending June 30, 2022 of Electronic Servitor Publication Network, 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 officers 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 officers 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 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.
| Dated: August 19, 2022 |
/s/ Thomas Spruce Thomas Spruce Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officers of Electronic Servitor Publication Network, Inc., a Delaware corporation (the "Company"), do hereby certify, to the best of their knowledge, that:
1. The Quarterly Report on Form 10-Q for the period ending June 30, 2022 (the "Report") of the Company complies in all material respects with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: August 19, 2022 |
/s/ Thomas Spruce Thomas Spruce Chief Executive Officer |
| Dated: August 19, 2022 |
/s/ Thomas Spruce Thomas Spruce Chief Financial Officer |