XESP 10-Q
Electronic Servitor Publication Network, Inc. (XESP)
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.) | |
| (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 ¨
As of November 11, 2022, the Company had shares of its common stock, par value $0.0001 per share, issued and outstanding.
TABLE OF CONTENTS
| PART I | ||
| Item 1. | Condensed Unaudited Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 16 |
| Item 4. | Controls and Procedures | 16 |
| PART II | ||
| Item 1. | Legal Proceedings | 17 |
| Item 1A. | Risk Factors | 17 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
| Item 3. | Defaults Upon Senior Securities | 17 |
| Item 4. | Mining Safety Disclosures | 17 |
| Item 5. | Other Information | 17 |
| Item 6. | Exhibits | 18 |
| Signatures | 19 |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
INDEX TO FINANCIAL STATEMENTS
| Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 | 4 |
| Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited) | 5 |
|
Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2022 and 2021 (unaudited) |
6 |
| Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited) | 7 |
| Notes to Condensed Financial Statements (unaudited) | 8 |
| 3 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
BALANCE SHEETS
| September 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.
| 4 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 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.
| 5 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
STATEMENTS OF CHANGES OF STOCKHOLDERS’ DEFICIT
For the Three and Nine Months Ended September 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, March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock option expense | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock option expense | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Retained | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Earnings | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common stock issued for services | — | |||||||||||||||||||||||||||
| Common stock issued for debt conversion | — | |||||||||||||||||||||||||||
| Common stock units sold for cash | — | |||||||||||||||||||||||||||
| Net income | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares cancelled – related party | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Contributed capital – related party | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 6 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 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 | ||||||||
| Loss from discontinued operations | ( | ) | ||||||
| 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.
| 7 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 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’s functionality provisions content and provides an omnichannel publishing tool for its users with talent identity protection and monetization tools in line with interaction and media creation services. 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.
| 8 |
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 nine month period ending September 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
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 $
| 9 |
NOTE 5 – RELATED PARTY TRANSACTIONS
During the nine months ended September 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 | ||||
| Volatility | – | % | ||
| Risk Free Interest Rate | – | % | ||
| Dividend rate |
| 10 |
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 | ||||
| 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 nine months ended September 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 September 30, 2022 | $ | $ | — | |||||||||||||
| Exercisable at September 30, 2022 | $ | $ | — | |||||||||||||
| Range of Exercise Prices |
Number Outstanding 9/30/2022 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price | |||
| $ |
$ |
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 | — | $ | — | —0 | $ | — | ||||||||||
| Expired | — | $ | — | — | $ | — | ||||||||||
| Exercised | — | $ | — | — | $ | — | ||||||||||
| Outstanding at September 30, 2022 | $ | $ | — | |||||||||||||
| Exercisable at September 30, 2022 | $ | $ | — | |||||||||||||
| Range of Exercise Prices |
Number Outstanding 9/30/2022 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price | |||
| $ |
$ |
| 11 |
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 nine months ended September 30, 2021, have been reflected as discontinued operations in the statements of operations, and consist of the following.
| For the three months ended September 30, 2021 | For the nine months ended September 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 other than the following.
On October 18, 2022, the Company issued a Promissory
Note to a third party for $
| 12 |
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
Electronic Servitor Publication Network, Inc. (formerly CannAssist International Corporation) (the "Company") was incorporated on May 17, 2017, under the laws of the State of Delaware. The Company’s corporate offices are located at 400 1st Ave N. Ste. 100, Minneapolis, MN 55401, its telephone phone number is (833) 991-0800 and the URL of its website is https://www.electronicservitor.com/.
As initially reported on the Company’s Current Form 8-K filed on July 28, 2021, CannAssist International Corp. (the “Company”) entered into a Technology License Agreement dated July 23, 2021 (the “License Agreement”) with Phitech Management, LLC, an entity now controlled by Peter Hager (“Licensor”), whereby the Licensor shall grant to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to Electronic Sports Gaming, related patent applications, related 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”) at Closing (as defined in the License Agreement, which is incorporated herein by reference). 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 shall issue to the Licensor 10,000,000 restricted shares of its common stock (which is an amount equal to $2,500,000 divided by $0.25, which was the closing market price of the Company’s common stock on the trading day prior to the effective date of the License Agreement).
On October 9, 2021, the Closing of the Technology License Agreement occurred whereby the Company received the License to the Technology (as defined in the Technology License Agreement described infra) and the Licensor shall be issued 10,000,000 restricted shares of the Company’s common stock, at a cost basis of $0.25 per share (which shall be issued at or around the time FINRA announces the change in the Company’s corporate name and trading symbol).
As initially reported on the Company’s Current Form 8-K filed on July 28, 2021, the Company and Mark Palumbo entered into a Spin-Off Agreement dated July 23, 2021 (the “Spin-Off Agreement”) whereby, at the Closing (as defined in the Spin-Off Agreement, which is incorporated by reference), 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 for nominal consideration as a condition of the Change-in-Control of the Company (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.
| 13 |
On October 9, 2021, the Closing of the Spin-Off Agreement occurred whereby 100% of the issued and outstanding membership units of Xceptor LLC was transferred to Mark Palumbo in exchange for nominal consideration and the Palumbo License Agreement was terminated.
Effective on October 9, 2021, as a result of the transactions described above, the business of the Company changed to focus on Electronic Sports Gaming technology and the development of related infrastructure, specifically the development and commercialization of a technology platform specifically designed for the Electronic Sports and Electronic Gaming markets. The platform will provide an omni-channel publishing tool, with talent identity protection and monetization tools provided in line with interaction and media creation services. Further publication and monetization products and services will be developed and acquired to support these efforts.
Prior to its change in business focus which occurred after the end of the period covered by this report, the Company produced and sold the cannabidiol ("CBD") product, “Cibidinol,” which was formulated based on a process developed by its former CEO Mark Palumbo. CBD is a non-psychoactive compound found in hemp. The Company’s initial research and development work, aimed at enhancing the bioavailability of desired molecular structures, resulted in the creation of a line of CBD products, most notably its CBD product, Cibidinol. Cibidinol was available in a line of consumable and topical products that the Company believes will make enhanced CBD products more available and accessible to consumers. The financial results reported in this periodic report reflect the business and operations of the Company’s prior business since the change in business focus occurred after the end of the period covered by this report.
The Company's independent auditors have issued a report raising substantial doubt about the Company's ability to continue as a going concern. At present, the Company has no operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for the combination of that target company with it.
Results of Operation for the Three Months Ended September 30, 2022 and 2021
Revenues
For the three months ended September 30, 2022, the Company had revenues of $0. In comparison, for the three months ended September 30, 2021, all of revenue and cost of revenue have been included in the loss from discontinued operations (Refer to Note 9, above).
General and administrative expenses
General and administrative expenses (“G&A”) were $1,304 for the three months ended September 30, 2022, compared to $0 for the three months ended September 30, 2021.
Professional fees
Professional fees were $12,000 for the three months ended September 30, 2022 compared to $0 for the three months ended September 30, 2021. Professional fees consist of audit, accounting, consulting, and legal fees.
Stock based compensation
During the three months ended September 30, 2022, we recognized $71,123 of non-cash stock-based compensation expense for options issued in a prior period, for which the expense is being recognized over the term of the agreements for which they were granted.
Other expense
For the three months ended September 30, 2022, we incurred $1,823 of interest expense compared to $0 for three months ended September 30, 2021.
All operating and other expenses for the three months ended September 30, 2021, have been included in the loss from discontinued operations (Refer to Note 9, above).
Net Income
For the three months ended September 30, 2022, we realized a net loss of $86,250 from continuing operations as compared to a net loss of $93,558 from discontinued operations for three months ended September 30, 2021.
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Results of Operation for the Nine Months Ended September 30, 2022 and 2021
Revenues
For the nine months ended September 30, 2022, the Company had revenues of $0. In comparison, for the nine months ended September 30, 2021, all of revenue and cost of revenue have been included in the loss from discontinued operations (Refer to Note 9, above).
General and administrative expenses
General and administrative expenses were $14,851 for the nine months ended September 30, 2022, compared to $0 for the nine months ended September 30, 2021.
Professional fees
Professional fees were $61,000 for the nine months ended September 30, 2022, compared to $0 for the nine months ended September 30, 2021. Professional fees consist of audit, accounting, consulting and legal fees.
Other expense
For the nine months ended September 30, 2022, we incurred $3,261 of interest expense compared to $0 for nine months ended September 30, 2021.
All operating and other expenses for the three months ended September 30, 2021, have been included in the loss from discontinued operations (Refer to Note 9, above).
Net Loss
For the nine months ended September 30, 2022, we realized a net loss of $352,534 from continuing operations as compared to net loss of $172,812 from discontinued operations for the nine months ended September 30, 2021.
Liquidity and Capital Resources
The accompanying 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 had a net loss of $(352,534) for the nine months ended September 30, 2022, and has an accumulated deficit of $6,267,766 as of September 30, 2022. The Company requires capital for its contemplated operational and marketing activities. The obtainment of additional financing, through an initial 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. There is no guarantee that the Company will be able to obtain the necessary financing or profitable operations. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
The Company used $46,704 of cash from operations for the nine months ended September 30, 2022. Net cash provided by financing activities for the nine months ended September 30, 2022 was $55,273.
As of September 30, 2022, the Company had $8,569 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
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended September 30, 2022.
The following aspects of the Company were noted as potential material weaknesses:
| · | timely and accurate reconciliation of accounts |
| · | lack of segregation of duties |
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.
Changes in Internal Controls
Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended September 30, 2022, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
ITEM 1A. RISK FACTORS
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
There are no sales of unregistered securities to report that have not been previously included in the Company’s past Quarterly Reports on Form 10-Q; However, the Company issued 10,000,000 restricted shares of its common stock, at a cost basis of [$0.25] per share, pursuant to a Technology License Agreement. The issuance of these shares shall be exempt from registration under Section 4(a)(2)
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINING SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
None
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ITEM 6. EXHIBITS
| 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 | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | ||
| Dated: November 14, 2022 |
By: /s/ Thomas Spruce Thomas Spruce Chief Executive Officer |
|
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By: /s/ Thomas Spruce Thomas Spruce Chief Financial Officer |
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