XESP 10-Q
Electronic Servitor Publication Network, Inc. (XESP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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).
Yes ¨
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).
Yes ¨
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 ¨ No
Securities registered pursuant to Section 12(b) of the Act: None
As of June 1, 2026, 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 | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4. | Controls and Procedures | 20 |
| PART II | ||
| Item 1. | Legal Proceedings | 21 |
| Item 1A. | Risk Factors | 21 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| Item 3. | Defaults Upon Senior Securities | 21 |
| Item 4. | Mining Safety Disclosures | 21 |
| Item 5. | Other Information | 21 |
| Item 6. | Exhibits | 21 |
| Signatures | 22 |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| 3 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
CONDENSED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaids | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accruals | $ | $ | ||||||
| Loans payable | ||||||||
| Note 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 shares 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 condensed financial statements.
| 4 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| 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 | $ | ( | ) | $ | ( | ) | $ | ( |
) | $ | ( |
) | ||||
| Loss per share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
CONDENSED STATEMENT OF CHANGES OF STOCKHOLDERS’ DEFICIT
For the Three and Six Months Ended June 30, 2024 and 2023
(Unaudited)
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock option expense | – | – | ||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock option expense | – | – | ||||||||||||||||||||||||||
| Shares issued for services | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock option expense | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock option expense | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are
an integral part of these unaudited condensed financial statements.
| 6 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Stock based compensation | ||||||||
| Common stock issued for services | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Prepaids | ( | ) | ||||||
| Accounts payable and accruals | ||||||||
| 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 | ||||||||
| Repayment of loans - related party | ( | ) | ( | ) | ||||
| Net cash (used) 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 | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 7 |
ELECTRONIC SERVITOR PUBLICATION NETWORK, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2024
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. The Company’s common stock trades on the OTCQB Venture Market under the stock ticker symbol “XESP.” The Company’s corporate office is located at 107 Chestnut St., Suite 100, Stillwater, MN 55082-5542. The URL of the Company’s website is https://www.electronicservitor.com.
The Company is a digital engagement company providing growth for B2B companies through its digital activation and engagement solutions for multiple verticals. The Company’s managed service product is powered by a sophisticated tech stack — the Digital Engagement Engine. The Company’s technology provides intelligent interaction management, dynamic content provisioning, and a logic-driven workflow that creates relevant digital experiences that accelerate an audience from awareness to action — driving growth for client companies.
On December 22, 2023, the Company entered into the following transactions:
| 1) | An Asset Purchase Agreement (the “Asset Purchase Agreement”) with Phitech Management, LLC, a limited liability company organized under the laws of Minnesota (“Phitech”); and | |
| 2) | An Agreement and Plan of Merger (the “Merger Agreement”) with Pointward Inc., a corporation organized under the laws of Delaware (“Pointward”). |
Pursuant to the terms of the
Asset Purchase Agreement, the Company has agreed to pay an aggregate purchase price of $
Pursuant to the terms of the Merger Agreement, the Company shall be the surviving corporation and all the outstanding capital stock of Pointward was converted into shares of the Company’s common stock. Accordingly, the Company issued shares of the Company’s common stock to the former holders of Pointward and the former stockholders of Pointward (not including any ownership of the Company’s capital stock held by such persons prior to the Merger) hold approximately 72% of the outstanding shares of the Company’s capital stock.
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 period ended June 30, 2024 and not necessarily indicative of the results to be expected for the full year ending December 31, 2024. 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, 2023.
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
The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in its 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
Under ASC 260 “Earnings Per Share,” the Company presents basic and diluted earnings (loss) per share (“EPS”) amounts on the face of the statements of operations. Basic EPS is computed by dividing income (loss) available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. As of June 30, 2024, there are potentially dilutive shares from warrants and potentially dilutive shares from vested options. As of June 30, 2023, there are potentially dilutive shares from warrants and potentially dilutive shares from vested options. Additionally, diluted amounts are not presented when the effect of the computations is anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.
| 9 |
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:
| · | Identification of a contract with a customer; | |
| · | Identification of the performance obligations in the contract; | |
| · | Determination of the transaction price; | |
| · | Allocation of the transaction price to the performance obligations in the contract; and | |
| · | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
Stock-based Compensation
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted this ASU on January 1, 2019.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America under U.S. GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3: | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
The carrying amount of the Company’s financial
assets and liabilities, such as cash, accounts payable, accrued expenses and loans payable approximate their fair value because of the
short maturity of those instruments. The Company had
| 10 |
Income Taxes
Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards. The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term.
Tax benefits are recognized
only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured
as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized
tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and
measurement standards. As of June 30, 2024 and December 31, 2023,
Operating Segments
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”), or decision maker group, in deciding how to allocate resources to an individual segment and in assessing performance. Our CODM is composed of the Chief Executive Officer. The Company has operating segment generating revenue as of June 30, 2024.
Recently issued accounting pronouncements
The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may apply to the Company, the Company has not identified any new standards that it believes merit further discussion or change to adopted policies, and the Company expects that none will have a significant impact on its financial statements.
NOTE 3 – GOING CONCERN
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 has begun to recognize limited revenue and has an accumulated deficit of $
| 11 |
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 to a third party for $
On October 18, 2022, the Company
issued a note payable for $
On January 6, 2023, the Company
issued a note payable for $
On March 13, 2023, the Company
issued a note payable for $
On May 11, 2023, the Company
issued a note payable to a third party for $
On May 15, 2023, the Company
issued a note payable for $
On September 1, 2023, the Company
issued a note payable to a third party for $
On September 6, 2023, the Company
issued a note payable for $
On September 15, 2023, the Company
issued a note payable for $
| 12 |
NOTE 5 – RELATED PARTY TRANSACTIONS
Forty 7 Select Holdings LLC
(“Forty 7”) has advanced the Company funds, to pay for general operating expenses. Forty 7 is controlled by Greg Shockey,
an existing shareholder of the Company. As of June 30, 2024 and December 31, 2023, the balance due to Forty 7 is $
On January 10, 2023, the Company
issued a note payable for $
Refer to Note 7 for options to purchase shares of common stock issued to related parties.
On December 22, 2023, the Company entered into the following transactions:
| 1) | An Asset Purchase Agreement (the “Asset Purchase Agreement”) with Phitech Management, LLC, a limited liability company organized under the laws of Minnesota (“Phitech”); and | |
| 2) | An Agreement and Plan of Merger (the “Merger Agreement”) with Pointward Inc., a corporation organized under the laws of Delaware (“Pointward”). |
Asset Purchase Agreement
Pursuant to the terms of the
Asset Purchase Agreement dated December 22, 2023, the Company has agreed to pay an aggregate purchase price of $
Agreement and Plan of Merger
Following consummation of the Asset Purchase Agreement on December 22, 2023, the Company entered into a Merger Agreement with Pointward. Pursuant to the terms of the Merger Agreement, the Company shall be the surviving corporation and all the outstanding capital stock of Pointward was converted into shares of the Company’s common stock. Accordingly, the Company issued shares of the Company’s common stock to the former holders of Pointward and the former stockholders of Pointward (not including any ownership of the Company’s capital stock held by such persons prior to the Merger) hold approximately 72% of the outstanding shares of the Company’s capital stock.
As former stockholders of Pointward, Peter Hager, Eric Swann, Greg Shockey, and Thomas Spruce received shares of the Company’s capital stock. Peter Hager is the Company’s Chief Executive Officer. Eric Swann and Greg Shockey are consultants of the Company. Thomas Spruce is the Company’s Chief Operations Officer and director.
Peter Hager, our CEO, controls both Phitech and Pointward and as a result the transaction with Pointward has been accounted for as a common control merger. As a result, the assets and liabilities assumed were recorded on the Company’s financial statements at their respective carry-over basis. Under ASC 805, “Business Combinations,” the Company recorded the common control merger as of the earliest date presented in these unaudited condensed financial statements, or December 31, 2023.
| 13 |
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. Series A Preferred Stock, voting together as a class, have the right to vote 60% of the Company’s voting shares on any and all shareholder matters (the “Majority Voting Rights”). Additionally, the Company shall not adopt any amendments to the Company’s Bylaws, Articles of Incorporation, as amended, make any changes to the Certificate of Designations establishing the Series A Preferred Stock, or effect any reclassification of the Series A Preferred Stock, without the affirmative vote of at least a majority of the outstanding shares of Series A Preferred Stock. However, the Company may, by any means authorized by law and without any vote of the holders of shares of Series A Preferred Stock, make technical, corrective, administrative or similar changes to such Certificate of Designations that do not, individually or in the aggregate, adversely affect the rights or preferences of the holders of shares of Series A Preferred Stock. Other than the Majority Voting Rights, the Series A Preferred Stock does not have any other dividend, liquidation, conversion, or redemption rights, whatsoever.
NOTE 7 – OPTIONS
Greg Shockey
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 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vested over a period of one year and expire 10 years from the date of grant.
On February 1, 2023, the Company
entered into an Advisor Agreement with Greg Shockey, which supersedes his previous Advisor Agreement with the Company, whereby, in exchange
for business development and strategy consulting, investor relations, and facilitating meetings with targeted investors, as well as other
services, the Company agreed to issue Greg Shockey options to purchase restricted shares of common stock at signing and an additional
On October 12, 2023, the Company entered into a revised Stock Option Grant and Stock Option Agreement with Greg Shockey (the “Shockey Grant and Agreement”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Shockey Grant and Agreement supersedes his previous stock option grant and stock option agreement dated April 12, 2023. Pursuant to the terms of the Shockey Grant and Agreement, the Company agreed to issue Greg Shockey options to purchase shares of the Company’s common stock, with 1,140,000 of the shares vesting on October 12, 2023 and one-ninth (1/9th) of the remaining shares vesting on the first day of each fiscal quarter thereafter, subject to Greg Shockey continuing to be a service provider through each such date.
Danijella Dragas
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 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. On March 23, 2023, the Advisory Agreement was cancelled, thereby terminating Danijella Dragas and forfeiting 60,000 unvested options.
Thomas Spruce
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 two years and automatically renews for an additional 6-month term 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 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.
| 14 |
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 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.
On February 1, 2023, Thomas
Spruce was appointed as the Company’s Secretary and Chief Operations Officer. Per the terms of the employment agreement, Mr. Spruce
was granted options to purchase restricted shares of the Company’s common stock, at the commencement of his initial term
of services, for an exercise price $
On October 12, 2023, the Company entered into a new Employment Agreement and Stock Option Grant and Agreement with Thomas Spruce, Chief Operations Officer and sole Director (the “Spruce Employment Agreement and Grant”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Spruce Employment Agreement and Grant supersedes his previous employment agreement and stock option grant and agreement, each dated February 1, 2023. Thomas Spruce’s new employment agreement provides a 36-month term of employment from October 12, 2023, under the same compensation terms as the previous Agreement, except that the number of Stock Options granted increased from 500,000 per year to 1,200,000 per year in line with Mr. Spruce’s responsibilities in moving the Company from start-up to being fully operational. Pursuant to the terms of the Spruce Employment Agreement and Grant, the Company agreed to issue Thomas Spruce options to purchase shares of the Company’s common stock, with 1,550,000 of the shares vesting on October 12, 2023 and one-eleventh (1/11th) of the remaining shares vesting on the first day of each fiscal quarter thereafter, subject to Thomas Spruce continuing to be a service provider through each such date.
Jim Kellogg
On November 16, 2022, the Company entered into an Employment Agreement with Jim Kellogg, which granted Mr. Kellogg options to purchase restricted shares of the Company’s common stock at a strike price of $0.10 per share. The options vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
On October 12, 2023, the Company entered into a new Employment Agreement and Stock Option Grant and Agreement with Jim Kellogg, Chief Financial Officer (the “Kellogg Employment Agreement and Grant”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Kellogg Employment Agreement and Grant supersedes his previous Employment Agreement and Stock Option Grant and Agreement dated November 16, 2022. The new Employment Agreement provides a 36-month term of employment from October 12, 2023, under the same compensation terms as the previous Agreement, except that the number of Stock Options granted increased from 300,000 per year to per year. Pursuant to the terms of the Kellogg Employment Agreement and Grant, the Company agreed to issue Jim Kellogg options to purchase shares of the Company’s common stock, with 300,000 of the shares vesting on October 12, 2023 and one-twelfth (1/12th) of the remaining shares vesting on the first day of each fiscal quarter beginning on January 1, 2024, subject to Jim Kellogg continuing to be a service provider through each such date.
Peter Hager
On February 1, 2023, Peter Hager
was appointed as the Company’s President and Chief Executive Officer. Per the terms of the employment agreement, Mr. Hager
was granted options to purchase restricted shares of the Company’s common stock, at the commencement of his initial term
of services, for an exercise price $
| 15 |
On October 12, 2023, the Company entered into a revised Stock Option Grant and Agreement with Peter Hager, President and Chief Executive Officer (the “Hager Grant and Agreement”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Hager Grant and Agreement supersedes his previous Stock Option Grant and Agreement dated February 1, 2023. Pursuant to the terms of the Hager Grant and Agreement, the Company agreed to issue Peter Hager options to purchase shares of the Company’s common stock, with 1,900,000 of the shares vesting on October 12, 2023 and one-ninth (1/9th) of the remaining shares vesting on the first day of each fiscal quarter thereafter, subject to Peter Hager continuing to be a service provider through each such date.
The February 1, 2023 Options were issued with the following inputs:
| Options | ||||
| Share price | $ | |||
| Exercise Price | $ | |||
| Term | years | |||
| Volatility | % | |||
| Risk Free Interest Rate | % | |||
| Dividend rate | ||||
Effective September 28, 2023, the Company entered into an Advisory Agreement with Jonathan Sweetser, a third-party service provider. Under this Advisory Agreement, the Company issued options to purchase restricted shares of the Company’s common stock upon signing and 1,200,000 shares per year over the next three years. The options were issued at a strike price of $0.07 per share. The options vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
Effective September 28, 2023, the Company entered into an Advisory Agreement with Heather Rawls, a third-party service provider. Under this Advisory Agreement, the Company issued options to purchase restricted shares of the Company’s common stock at a strike price of $0.07 per share. The options vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
Options were issued with the following inputs:
| Options | ||||
| Share price | $ | |||
| Exercise Price | $ | |||
| Term | years | |||
| Volatility | % | |||
| Risk Free Interest Rate | % | |||
| Dividend rate | ||||
During the quarter ended September 30, 2023, the Company accounted for 300,000 options that were effective on November 16, 2022. The option has a strike price of $0.10 per share. The options vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
Options were issued with the following inputs:
| Options | ||||
| Share price | $ | |||
| Exercise Price | $ | |||
| Term | years | |||
| Volatility | % | |||
| Risk Free Interest Rate | % | |||
| Dividend rate | ||||
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A summary of the status of the Company’s outstanding stock options and changes during the year is presented below:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2022 | $ | $ | – | |||||||||||||
| Granted | $ | $ | – | |||||||||||||
| Cancelled | ( | ) | $ | – | – | $ | – | |||||||||
| Exercised | $ | – | – | $ | – | |||||||||||
| Outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | – | $ | – | ||||||||||||
| Cancelled | $ | – | – | $ | – | |||||||||||
| Exercised | $ | – | – | $ | – | |||||||||||
| Outstanding at June 30, 2024 | $ | – | $ | |||||||||||||
| Exercisable at June 30, 2024 | $ | $ | ||||||||||||||
| Range of Exercise Prices |
Number Outstanding 6/30/2024 |
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, 2022 | $ | $ | – | |||||||||||||
| Granted | $ | – | $ | – | ||||||||||||
| Expired | – | $ | – | – | $ | – | ||||||||||
| Exercised | – | $ | – | – | $ | – | ||||||||||
| Exercisable at December 31, 2023 | $ | $ | ||||||||||||||
| Granted | $ | – | $ | – | ||||||||||||
| Expired | – | $ | – | – | $ | – | ||||||||||
| Exercised | – | $ | – | – | $ | – | ||||||||||
| Exercisable at June 30, 2024 | $ | $ | ||||||||||||||
NOTE 9 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the unaudited condensed financial statements were issued and has determined that there are no material subsequent events to disclose in these unaudited condensed financial statements.
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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. was 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. The Company is a digital engagement company providing growth for B2B companies through its digital activation and engagement solutions for multiple verticals. The Company’s managed service product is powered by a sophisticated tech stack — the Digital Engagement Engine. The Company’s technology provides intelligent interaction management, dynamic content provisioning, and a logic-driven workflow that creates relevant digital experiences that accelerate an audience from awareness to action — driving growth for client companies.
The Company’s corporate offices are located at 107 Chestnut Street East, Ste. 100, Stillwater, MN 55082-5524. The Company’s website is www.electronicservitor.com. The Company’s telephone number is (833) 991-0800.
The Company’s common stock trades on the OTCQB Venture Market under the stock ticker symbol XESP.
The Company anticipates that it would need approximately $1,500,000 over the next 12 months to continue as a going concern, satisfy its capital commitments and continue its operations in accordance with its current business plan. In addition to revenues generated from sales, the Chief Executive Officer and several shareholders may fund the Company’s operations, if needed, during the next 12 months or until the Company can generate an ongoing source of capital sufficient to independently continue its operations.
For the period ended December 31, 2023, the Company’s independent auditors issued a report raising substantial doubt about the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon financial support from its principal stockholders, its ability to obtain necessary equity financing, or its ability to sell its services to generate consistent profitability.
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Results of Operation for the Three Months Ended June 30, 2024 and 2023
For the three months ended June 30, 2024, the Company had revenues of nil. In comparison, for the three months ended June 30, 2023, the Company had revenues of $22,500.
Operating expenses were $172,319 for the three months ended June 30, 2024, consisting of $27,172 of general and administrative expense, $5,300 of professional fees, and $ 139,847 of non-cash stock-based compensation expense for the issuance of warrants. In comparison, for the three months ended June 30, 2023, operating expenses were $119,624, consisting of $32,729 of general and administrative expense, $14,500 of professional fees, and $72,395 of non-cash stock-based compensation expense for the issuance of warrants.
For the three months ended June 30, 2024, the Company posted a net loss of $178,570, compared to a net loss of $100,856 for three months ended June 30, 2023.
Results of Operation for the Six Months Ended June 30, 2024 and 2023
For the six months ended June 30, 2024, the Company had revenues of $50,000. In comparison, for the six months ended June 30, 2023, the Company had revenues of $22,500.
Operating expenses were $389,136 for the six months ended June 30, 2024, consisting of $58,142 of general and administrative expense, $51,300 of professional fees, and $279,694 of non-cash stock-based compensation expense for the issuance of warrants. In comparison, for the six months ended June 30, 2023, operating expenses were $384,025, consisting of $42,954 of general and administrative expense, $49,521 of professional fees, and $291,550 of non-cash stock-based compensation expense for the issuance of warrants.
For the six months ended June 30, 2024, the Company posted a net loss of $351,638, compared to a net loss of $368,185 for six months ended June 30, 2023.
During the six months ended June 30, 2024, the Company used $19,942 of cash in operating activities and used $8,000 in cash in financing activities. The Company did not use or generate any cash in investing activities.
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 $50,000 during the six months ended June 30, 2024 and had a net loss of $351,638 for the six months ended June 30, 2024. The Company has an accumulated deficit of $7,546,321 as of June 30, 2024. The Company requires capital for its contemplated operational and marketing activities. Obtaining 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 $19,942 of cash from operations for the six months ended June 30, 2024. Net cash used in financing activities for the six months ended June 30, 2024 was $8,000.
As of June 30, 2024, the Company had $489 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 June 30, 2024.
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 June 30, 2024, 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
As previously disclosed, on November 4, 2021, a lawsuit captioned CAMRON ELIZABETH v. MARK PALUMBO et al., Case No. CVPS2106116 was filed in the Superior Court of California, County of Riverside against the Company and certain of the former company’s (CannAssist International Corp.) executive officers (collectively, the “Defendants”). On April 30, 2024, a Final Statement of Decision was issued pursuant to which the Defendants were found liable. The Company still believes that the lawsuit is without merit and intends to appeal the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this appeal.
On May 30, 2024, the Company filed suit against BF Borgers CPA PC and its owner (“BF Borgers”) in a class action lawsuit captioned Electronic Servitor Publication Network, Inc. v. BF Borgers CPA PC. et al. (the “Class Action Lawsuit”). In August 2025, the Company and BF Borgers agreed to a settlement and the Class Action Lawsuit was subsequently dismissed.
Other than as disclosed above, we know of no other material, existing or pending legal proceedings against the Company, nor is it involved as a plaintiff in any material proceeding or pending litigation during the six months period ending June 30, 2024. Other than as disclosed above, we know of no other proceedings in which our directors, officers or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest during the six months period ending June 30, 2024.
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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINING SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During
the quarter ended June 30, 2024, no director or officer of the
Company
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 | 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 |
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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: June 1, 2026 |
By: /s/ Peter Hager Peter Hager Chief Executive Officer |
By: /s/ Thomas Spruce Thomas Spruce Chief Financial Officer |
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