UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K (Mark One) [X]10-K/A(Amendment No. 1)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year
endedended: December 31,2017 [ ]2019or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________________
Commission
file number 000-55809 IRIS GROVE ACQUISITION CORPORATION (ExactFile No. 000-55740CANNASSIST INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 82-1873116 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9454 Wilshire Boulevard, Suite 612 Los Angeles, California 90212 (Address
Delaware | 82-1873116 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1548 Loch Ness Dr.
Fallbrook, CA 92028
(Address of principal executive offices) (zip code)
Registrant's
Issuer’s telephone number, including area code: 310-888-1870
number: 760-990-3091
Securities registeredRegistered pursuant to Section 12(b) of the Act: None
Securities registeredRegistered pursuant to Section 12(g) of the Exchange Act: Common Stock, $.0001 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
[ ] Act.
Yes [ X ]¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ]
Yes [ X ]¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sectionsection 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. [ X ]
Yes [ ]x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ X ]
Yes [ ]x No Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.
[ X ] Yes [ ] No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large“large accelerated filer", "accelerated filer", "non-accelerated filer",filer,” “accelerated filer,” “smaller reporting company,” and "smaller
reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ]
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
If an emerging growth company, [ X ]
(doindicate by check mark if the registrant has elected not check if smaller reporting company)
to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ X ]
Yes [ ]¨ No State the aggregate market valuex
As of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as ofJune 30, 2019, the last business day of the registrant'sregistrant’s most recently completed second fiscal quarter.
$ 0
Indicatequarter, there was no established public trading market for the number of shares outstanding of eachcommon stock of the registrant's
classesregistrant and therefore, an aggregate market value of the registrant’s common stock is not determinable.
At April 8, 2020, there were 18,435,000 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”) originally filed on April 8, 2020 (the “Original Filing”) by CannAssist International Corp., a Delaware corporation (“CannAssist,” the “Company,” “we,” or “us”). We are filing this Amendment to revise our disclosures set forth in “ITEM 9A. Controls and Procedures” to restate management’s conclusion that the Company’s disclosure controls and procedures and its internal control over financial reporting were not effective at December 31, 2019 and to discuss remediation plans in place to address the material weaknesses, including how long the Company estimates it will take to complete the plans.
Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the latest practicable date.
Class Outstandingdate of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at March 20, 2018
Common Stock, par value $0.0001 20,000,000
Documents incorporateda date subsequent to the filing of the Original Filing.
TABLE OF CONTENTS
PART I | |
ITEM 1. BUSINESS | 4 |
ITEM 1A. RISK FACTORS | 17 |
ITEM 1B. UNRESOLVED STAFF COMMENTS | 17 |
ITEM 2. PROPERTIES | 17 |
ITEM 3. LEGAL PROCEEDINGS | 17 |
ITEM 4. MINE SAFETY DISCLOSURES | 17 |
PART II | |
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 17 |
ITEM 6. SELECTED FINANCIAL DATA | 19 |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 19 |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 28 |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 29 |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 29 |
ITEM 9A. CONTROLS AND PROCEDURES | 29 |
ITEM 9B. OTHER INFORMATION | 31 |
PART III | |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 31 |
ITEM 11. EXECUTIVE COMPENSATION | 36 |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 39 |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE | 40 |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES | 43 |
PART IV | |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES | 44 |
Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” “the Company,” “our company” and “CannAssist” refer to CannAssist International Corp. and its wholly owned subsidiary, Xceptor LLC, Inc. All amounts in this report are in U.S. Dollars, unless otherwise indicated.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements.” The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements are based on our management’s expectations and assumptions about future events as of the date of this Annual Report on Form 10-K, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by reference: Form 10-12G/A filed
September 5, 2017
the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance. We undertake no obligation to update, and we do not have a policy of updating or revising, these forward-looking statements.
PART I
Item
ITEM 1. BusinessBUSINESS.
THE BUSINESS
Corporate History and General Information
CannAssist International Corp. was originally named Iris Grove Acquisition Corporation ("Iris Grove" or the "Company")
wasGrove ") and 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 has been in the developmental stage since inception
and its operations to date have been limited to issuing shares to
its original shareholders. The Company was formed to provide
In July 2017, Iris Grove Acquisition Corporation filed a method for a foreign or domestic private company to become a
reporting company with a class of securities registered under
the Securities Exchange Act of 1934.
The Company registered its common stock on a Form 10
registration statement filed pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act") and Rule 12(g) thereof. The
Company files with the Securities and Exchange Commission periodicon Form 10-12g pursuant to Securities Exchange Act of 1934 and current reports under Rule 13(a)became a public reporting company. In June 2018, the Company effected a change in control of Iris Grove Acquisition Corporation. As part of that change in control, the then officers and directors of Iris Grove resigned and the Company redeemed 20,000,000 shares of the Exchange Act, including
quarterly reports on Form 10-Qthen 20,000,000 shares of common stock outstanding. Mark Palumbo was appointed the sole officer and annual reports Form 10-K.director of the Company and the Company issued an aggregate of 3,000,000 shares of common stock to Mr. Palumbo. In addition, the Company changed its name to CannAssist International Corp.
The Company's corporate offices are located at 1548 Loch Ness Dr., Fallbrook, CA 92028. The Company's email address is info@xceptorllc.com, and its website is xceptorcbd.com. The Company’s telephone number is 760-990-3091.
Business Combination with Xceptor LLC
On July 12, 2018, CannAssist International Corp., a Delaware corporation (the “Company”), entered into a share exchange acquisition agreement (the “Acquisition Agreement”) with Xceptor LLC, a private company organized under the laws of Wyoming (“Xceptor”). Under the Acquisition Agreement, the Company issued to the members of Xceptor a total amount of 3,000,000 shares of its common stock, valued at $0.0001 per share, in exchange for all of the issued and outstanding membership interests of Xceptor. Mr. Mark Palumbo, who is the officer, director and majority shareholder of the Company, was an officer and member of Xceptor LLC prior to the Acquisition. As a result of December 31, 2017,the Acquisition, Xceptor became a wholly owned subsidiary of the Company and the Company had not generated revenuestaken over its operations and had no income or cash flows from operations since inception. At
December 31, 2017,business plan. Prior to the Acquisition, the Company had sustained net lossno ongoing business or operations. Just prior to the business combination on July 12, 2018, Mark Palumbo, the Company’s sole officer and director currently and just prior to the business combination, was the owner of $4,31260% of the outstanding membership interests of Xceptor LLC and an accumulated deficitalso was the owner of $4,312.
3,000,000 shares of the common stock of the Company, which constituted a majority of the issued and outstanding shares at that time. Since the Company and Xceptor were entities under common control prior to the Acquisition, the transaction is accounted for as a restructuring transaction.
Background
The Company'sCompany has only recently emerged from its status as a development-stage company, and it has limited operating history and is expected to experience losses in the near term. The Company’s independent auditors have issued a report raising substantial doubt about the Company'sCompany’s ability to continue as a going concern. At present,
Business Overview
CannAssist produces and sells products developed using its cannabidiol ("CBD") product, “Cibidinol,” which is formulated based on a process developed by its founder Mark Palumbo. CBD is a non-psychoactive compound found in hemp. CannAssist’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, including its proprietary pain cream, using its CBD product, Cibidinol, as an ingredient. Cibidinol will be used in a line of consumable and topical products that the Company believes will make enhanced CBD products more available and accessible to consumers.
The Products and Process
CannAssist currently produces a line of topical products and intends to expand its product lines to produce a number of consumable and topical products in various delivery forms including capsules, sublingual drops, films, troches, lotions, creams, sprays, powders and suppositories, which will use its product, Cibidinol, as an ingredient. CannAssist's product offerings are based on formulation and manufacturing processes that are intended to enhance the bioavailability of CBD. Enhanced bioavailability is important as CBD and related compounds are oil-based and thus are not easily absorbed into the body. CannAssist's process is intended to allow for quicker absorption and reduced dosage requirements.
CannAssist intends to provide a line of CBD infused products that are produced with the Company's process of enhancing bioavailability. It is CannAssist's intent to create and maintain a robust product line. CannAssist’s research and development will also focus on studying adjunctive materials to use with the CBD product including (but not limited to) vitamins, anti-oxidants, sleep aids, and other ingredients. The Company’s CBD product Cibidinol is made from “hemp,” which is defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”
Plan of Operation and Presence in the Market
CannAssist manufactures and distributes its products at facilities located in Carrollton, Texas, located at 2210 Hutton Drive, Carrollton, Texas 75006. The Company has no operationsshifted its focus from research and development to the continuationcommercialization of its products. The Company currently offers a topical lotion containing Cibidinol and plans to launch more products in the near future (which are currently under development). We sell our products directly online through our established website found at xceptorcbd.com. We currently have four active sales contractor distributors with plans to add two more sales representatives by the end of next year.
Over the next twelve months, CannAssist plans to solidify its market presence and position by enhancing current and developing new strategic relationships. Products will be sold through distributors and wholesalers and through a significant online market presence. CannAssist will also evaluate the generation of additional revenue streams through the licensing of its manufacturing processes to strategic partners. Specifically, in 2020, the Company as a going concern is dependent upon
financial support fromplans to expand its stockholders,product line by adding scents and flavors and concentration levels to its ability to obtain
necessary equity financing to continue operations and/or to
successfully locateexisting products, establish strategic partnerships with farms and negotiateother suppliers and engage in clinical studies in connection with a business entity for the
combination of that target company with the Company.
Management of the Company will pay all expenses incurred by
the Company until such time as the Company has effected a change
in control. Management does not expect any repayment for such paid
expenses.
its products.
There is no assurance that the Company’s activities will generate sufficient revenues to sustain its operations without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company. Accordingly, given the Company’s limited cash and cash equivalents on hand, the Company will ever be profitable.unable to implement its business plans and proposed operations unless it obtains additional financing or otherwise is able to generate revenues and profits. The Company may raise additional capital through sales of debt or equity, obtain loan financing or develop and consummate other alternative financial plans. In addition, 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.
The Company anticipates that it would need approximately $4,500,000 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, which will be used to fund expenses related to operations, office supplies, travel, salaries and other incidental expenses. Management believes that this capital would allow the Company to meet its operating cash requirements, cover overhead cost and general liabilities of the Company, and allow the Company to achieve overall sustainable profitability by facilitating the Company’s business.
Pricing
We price our products using a formula that accounts for all Costs of Goods Sold (“COGS”) a sales margin as applied to these costs from 7.5 - 8.5 times COGS.
The Market – CBD Products
According to the Brightfield Group (“Brightfield”), the hemp-derived CBD market will reach sales of $22 billion by 2022, as compared to $591 million in 2018.According to Brightfield, main drivers of growth would be:
· | Increased investment. |
· | The popularity of hemp CBD versus pharmaceutical products as wellness trends continue. |
· | The evolution of distribution channels. |
· | The expansion of the offering – driven by more product types and constant innovation. |
According to Brightfield, 55% of CBD users purchase their CBD products at storefront dispensaries, 31% through local delivery services, and 17% online. Most of the remainder of CBD products are sourced from friends, dealers and cooperatives (8-9% each). Among CBD users, 80% use CBD products at least once a week, and about 41% use them every day. Approximately 4% of CBD consumers are occasional users, turning to CBD products less than once a month. Over half of CBD users have bought 1-2 CBD products over the last two weeks, and roughly 17% have bought 3 or more over the same time period. CBD users tend to enjoy having low or micro-doses of CBD (10 mg or less), once or twice per day.
According to Brightfield, the demographic age of CBD users are as follows: the largest group (nearly one third) between ages 35 and 49, and the 26-34 and 50-64 age, ranges each making up 20-25% of the market. Among CBD users, hemp-derived CBD users lean slightly older, more likely to fall into the 50-64 age range, and less likely to fall into the 26-34 age range. In general, significantly more CBD users are female (55%) than male (44%), with that figure being driven up by hemp-derived CBD users, 59% of whom were female. CBD users reflect the general population in terms of income, but within their ranks, slightly more hemp-derived CBD users fall into the lower-income groups (employed but making less than $40K). CBD users are generally well-educated - only 1.3% have not (yet) received their high school diplomas, whereas 15.4% have a graduate or post-grad degree completed. Nearly half of CBD users have a Bachelor’s Degree or beyond. CBD users are the most likely to be married – with 43% having spouses. At least 37% are married among all respondents, and this is the most common status. Just over 30% of CBD users are single.
Customer Profile
Among companies that we believe will purchase products from CannAssist, Management will target customers with the following demographic profile when implementing its marketing campaigns:
· | Operates as a distributor or manufacturer of consumable goods |
· | Is a brand firm that is looking to enter the CBD products market |
· | Generates revenues in excess of $10 million per year |
· | Will spend $100,000 to $1.5 million per year via purchase orders. |
Also, consumers will have direct online access to CannAssist’s products. CannAssist will target consumers who frequently use social media, make general and healthcare purchases through online marketplaces, and perform web searches for healthcare and lifestyle information.
Marketing and Sales Strategy
Management intends on using a number of sales and marketing strategies to ensure market share and sales volume.
CannAssist intends to market its products by building a large word-of-mouth referral network once the business establishes a strong brand name and by maintaining extensive relationships with third party cosmetics and consumables manufacturers and distributors.
CannAssist intends to develop an independent sales network that will operate on a commission basis. At this time, Management is developing a commission schedule that will provide agents with a range of commissions depending on the volume and type of business secured. Management expects to have three to four independent sales agents.
CannAssist’s Management Team, and its sales agents will frequently attend trade shows and industry forums to formalize and secure incremental and new revenue sources.
CannAssist is developing preferred pricing models for distributors, manufacturers, and partners to drive volume in desired product segments and to ensure consistent and predictable sales sources.
Competition
The current market place currently consists of collectives, dispensaries, licensed pain management clinics, and related entities that are licensed to sell CBD based products. There are also a number of online vendors that provide diverse inventories of CBD infused products. Most states explicitly allow for the sale of CBD products that have been produced from industrial hemp with limited quantities of psychoactive ingredients. As such, larger corporations that are able to strictly adhere to these manufacturing standards are entering the market with consumable and topical products that feature CBD as one of the primary ingredients.
We believe that one of the main competitive advantages that CannAssist will have over its competition is that the business is able to increase the bioavailability of CBD through what we believe to be a unique manufacturing process. We believe that this will remain as one of the strongest advantages that CannAssist will have throughout the life of the business. Furthermore, we believe that this technology additionally advances a more consumer accessible costing.
Suppliers, Distributors and Other Strategic Partners
We purchase materials to formulate our CBD products from GenCanna Global USA, Inc. and Isodiol International Inc.
The Company will lease production and R&D space from Cosmetic Innovations (CI) and CI will provide some outsourced production services. The Company has nonot yet entered into a formal agreement with CI, but plans to do so in the near future.
Employees
CannAssist has 2 employees.
Property
All manufacturing and distribution operations will occur at CannAssist's facilities in Carrollton, Texas. The presidentfacility's address is:
2210 Hutton Drive
Carrollton, Texas 75006
CannAssist's corporate facilities are located at:
1548 Loch Ness Dr.
Fallbrook, CA 92028
Intellectual Property
On April 29, 2019, CannAssist International Corp. (the “Company”) entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its common stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also an officer and director of the Company.
Notwithstanding the foregoing, the Company does not currently hold any other intellectual property or trade secret protection on any other aspects of its business. The Company currently plans on attempting to obtain patents, copyright, trademarks and/or service marks on its products; provided, there can be no assurance that the Company can obtain effective protection against unauthorized duplication or the introduction of substantially similar products.
Effect of Existing or Probable Governmental Regulation
The Company’s CBD products are subject to various state and federal laws regarding the production and sales of hemp-based products. Section 12619 of the Agriculture Improvement Act of 2018 (“2018 Farm Bill”) removed “hemp,” as defined in the Agricultural Marketing Act of 1946 (the “1946 Agricultural Act”), from the classification of “marijuana,” which is generally prohibited as a Schedule I drug under the Controlled Substances Act of 1970 (“CSA”). Under the 1946 Agricultural Act (as amended by the 2018 Farm Bill), the term “hemp” means “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” As a result of the passage of the 2018 Farm Bill, and since the Company believes that its CBD products contain parts of the cannabis plant with a delta-9 tetrahydrocannabinol (“THC”) concentration of not more than 0.3 percent on a dry weight basis, the Company believes that its CBD products are not governed by the CSA and, ergo, would not be subject to prosecution thereunder because the Company believes that its CBD products contain “hemp” within the meaning of the 1946 Agricultural Act (as amended by the 2018 Farm Bill) and do not contain any “marijuana” as prohibited under the CSA (as amended by the 2018 Farm Bill); provided, however, there is a lack of legal protection for hemp-based products that contain more than 0.3 percent THC and there is a risk that the Company would be subject to prosecution under the CSA in the event that its CBD products are found to contain more than 0.3 percent THC.
Furthermore, the 1946 Agricultural Act (as amended by the 2018 Farm Bill) provides additional regulations regarding the production of hemp-based products and there is the risk that the Company’s CBD products may be found to be in violation of these regulations. Specifically, the 1946 Agricultural Act (as amended by the 2018 Farm Bill) contains provisions relating to the shared state-federal jurisdiction over hemp cultivation and production, whereby states and Indian tribes have been delegated the broad authority to regulate and limit the production and sale of hemp and hemp products within their borders. Under the 1946 Agricultural Act (as amended by the 2018 Farm Bill), a plan under which a State or Indian tribe monitors and regulates the production of hemp shall only be required to include “(i) a practice to maintain relevant information regarding land on which hemp is produced in the State or territory of the Indian tribe, including a legal description of the land, for a period of not less than 3 calendar years; (ii) a procedure for testing, using post-decarboxylation or other similarly reliable methods, delta-9 tetrahydrocannabinol concentration levels of hemp produced in the State or territory of the Indian tribe; (iii) a procedure for the effective disposal of—(I) plants, whether growing or not, that are produced in violation of this subtitle; and (II) products derived from those plants; (iv) a procedure to comply with enforcement procedures [ ]; (v) a procedure for conducting annual inspections of, at a minimum, a random sample of hemp producers to verify that hemp is not produced in violation of [applicable law]; (vi) a procedure for submitting the information [ ], as applicable, to the Secretary of Agriculture (the “Secretary”) not more than 30 days after the date on which the information is received; and (vii) a certification that the State or Indian tribe has the resources and personnel to carry out the practices and procedures described in clauses (i) through (vi).” Further, a hemp producer in a State or the territory of an Indian tribe for which a State or Tribal plan is approved shall be determined to have negligently violated the State or Tribal plan, including by negligently— “(i) failing to provide a legal description of land on which the producer produces hemp; (ii) failing to obtain a license or other required authorization from the State department of agriculture or Tribal government, as applicable; or (iii) producing Cannabis sativa L. with a delta-9 tetrahydrocannabinol concentration of more than 0.3 percent on a dry weight basis.” A hemp producer that negligently violates a State or Tribal plan 3 times in a 5-year period shall be ineligible to produce hemp for a period of 5 years beginning on the date of the third violation. If the State department of agriculture or Tribal government in a State or the territory of an Indian tribe for which a State or Tribal plan, as applicable, determines that a hemp producer in the State or territory has violated the State or Tribal plan with a culpable mental state greater than negligence— “(i) the State department of agriculture or Tribal government, as applicable, shall immediately report the hemp producer to —(I) the Attorney General; and (II) the chief law enforcement officer of the State or Indian tribe, as applicable.” In the case of a State or Indian tribe for which a State or Tribal plan is not approved, the production of hemp in that State or the territory of that Indian tribe shall be subject to a plan established by the Secretary to monitor and regulate that production. A plan established by the Secretary under shall include— “(A) a practice to maintain relevant information regarding land on which hemp is produced in the State or territory of the Indian tribe, including a legal description of the land, for a period of not less than 3 calendar years; (B) a procedure for testing, using post-decarboxylation or other similarly reliable methods, delta-9 tetrahydrocannabinol concentration levels of hemp produced in the State or territory of the Indian tribe; (C) a procedure for the effective disposal of—(i) plants, whether growing or not, that are produced in violation of [applicable law]; and (ii) products derived from those plants; (D) a procedure to comply with the enforcement procedures; (E) a procedure for conducting annual inspections of, at a minimum, a random sample of hemp producers to verify that hemp is not produced in violation of this subtitle; and (F) such other practices or procedures as the Secretary considers to be appropriate. The Secretary shall also establish a procedure to issue licenses to hemp producers. In the case of a State or Indian tribe for which a State or Tribal plan is not approved under applicable law, it shall be unlawful to produce hemp in that State or the territory of that Indian tribe without a license issued by the Secretary. A violation of a plan established by the Secretary shall be subject to enforcement and the Secretary shall report the production of hemp without a license issued by the Secretary to the Attorney General. In the event that the Company’s CBD products are found to be in violation of these regulations, the Company may become subject to enforcement action as provided for in the 1946 Agricultural Act (as amended by the 2018 Farm Bill) and may become subject to prosecution thereunder.
Furthermore, the Company’s CBD products are subject to the application of laws relating to health and safety of our products. Specifically, the Company’s CBD products may be governed by the Federal Food Drug and Cosmetic Act (FD&C Act) as a drug. The FD&C Act is intended to assure the consumer, in part, that drugs and devices are safe and effective for their intended uses and that all labeling and packaging is truthful, informative, and not deceptive. The FD&C Act and FDA regulations define the term drug, in part, by reference to its intended use, as “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease” and “articles (other than food) intended to affect the structure or any function of the body of man or other animals.” Therefore, almost any ingested or topical or injectable product that, through its label or labeling (including internet websites, promotional pamphlets, and other marketing material), that is claimed to be beneficial for such uses will be regulated by FDA as a drug. The definition also includes components of drugs, such as active pharmaceutical ingredients. The FD&C Act defines cosmetics by their intended use, as "articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body...for cleansing, beautifying, promoting attractiveness, or altering the appearance." See FD&C Act, sec. 201(i). Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial makeup preparations, cleansing shampoos, permanent waves, hair colors, and deodorants, as well as any substance intended for use as a component of a cosmetic product. Under the FD&C Act, cosmetic products and ingredients, with the exception of color additives, do not require FDA approval before they go on the market. Drugs, however, must generally either receive premarket approval by FDA through the New Drug Application (NDA) process or conform to a "monograph" for a particular drug category, as established by FDA's Over-the-Counter (OTC) Drug Review. These monographs specify conditions whereby OTC drug ingredients are generally recognized as safe and effective, and not misbranded. Certain OTC drugs may remain on the market without an NDA approval until a monograph for its class of drugs is finalized as a regulation. However, once FDA has made a final determination on the status of an OTC drug category, such products must either be the subject of an approved NDA (see FD&C Act, sec. 505(a) and (b), or comply with the appropriate monograph for an OTC drug. The Company’s CBD topical lotion has a NDC code 72519-101-11 and can be referred to as a pain cream. It uses Methyl Salicylate as a monographed pain reliever at monographed levels. All of the Company’s other products are cosmetic or ingestible forms with no claims subject to pre-approval by the FDA.
In April 2019, the Company filed an application to obtain a Bulk Drug Substance License under Section 503b of the Federal Food Drug and Cosmetic Act (FD&C Act) in order to expand the Company’s business into a new market segment and attract new potential customers operating as “contract compounders.” Generally, the grant of a Bulk Drug Substance License under Section 503b by the FDA is an approval for contract compounder pharmacists to use the Issuer’s product in prescribed drug blends customized for patient use. While the Company’s operations are still currently being reviewed as part of the FDA’s Bulk Drug Substance License (503b) program and is still pending, the continuation of the Company’s business is not related to the outcome of the FDA’s Bulk Drug Substance License (503b) program review and the Company will be permitted to continue its current business and operations even if the Company’s application for a Bulk Drug Substance License under Section 503b is denied; the continuation of the Issuer’s current business and operations is completely independent of its application for a Bulk Drug Substance License under Section 503b, which, to reiterate, was primarily instituted as a means to expand the Issuer’s business into a new market segment and attract new potential customers operating as “contract compounders.”
Costs and Effects of Compliance with Environmental Laws
Not applicable.
Legal Matters
We know of no material, existing or pending legal proceedings against CannAssist, nor is it involved as a plaintiff in any material proceeding or pending litigation. There are no 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.
THE COMPANY
Change of Control
CannAssist International Corp. (“CannAssist” or the “Company”) was incorporated as “Iris Grove Acquisition Corporation” on December 7, 2016 under the laws of the State of Delaware.
In June 2018, the Company effected a change in control of Iris Grove Acquisition Corporation. As part of that change in control, the then officers and directors of Iris Grove resigned, the Company redeemed 20,000,000 shares of the then 20,000,000 shares of common stock outstanding. Mark Palumbo was appointed the sole officer and director of Tiber Creek Corporation. Tiber Creek Corporation assists companies in
becoming public companies and assists companies with introductions to
the financial community. Such services may include, when and if
appropriate, the use of an existing reporting company such as the Company as a vehicleand the Company issued an aggregate of 3,000,000 shares of common stock to take a company public. Tiber CreekMr. Palumbo.
In connection with the change in control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Iris Grove Acquisition Corporation to CannAssist International Corp.
The Company's corporate offices are located at 1548 Loch Ness Dr., Fallbrook, CA 92028. The Company's email address is info@xceptorllc.com, and its website is xceptorcbd.com. The Company’s telephone number is 760-990-3091. The Company’s fiscal year end is December 31. Neither the Company nor its predecessors have filed for bankruptcy, receivership or any similar proceedings nor are in the process of filing for bankruptcy, receivership or any similar proceedings.
Property
All manufacturing and distribution operations will occur at CannAssist's facilities in Carrollton, Texas. The facility's address is:
2210 Hutton Drive
Carrollton, Texas 75006
CannAssist's corporate facilities are located at:
1548 Loch Ness Dr.
Fallbrook, CA 92028
Management permits the Company to use these premises free of charge.
Intellectual Property
On April 29, 2019, CannAssist International Corp. (the “Company”) entered into a contractTechnology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its common stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also an officer and director of the Company.
Notwithstanding the foregoing, the Company does not currently hold any other intellectual property or trade secret protection on any other aspects of its business. The Company currently plans on attempting to obtain patents, copyright, trademarks and/or service marks on its products; provided, there can be no assurance that the Company can obtain effective protection against unauthorized duplication or the introduction of substantially similar products.
Employees
Currently, the Company has two employees, who have agreed to assist the Company without pay until the Company is more stable and has recurring cash flow from operations.
Subsidiaries
The Company has one subsidiary, Xceptor LLC, a Wyoming limited liability company.
Jumpstart Our Business Startups Act
In April, 2012, the Jumpstart Our Business Startups Act (“JOBS Act”) was enacted into law. The JOBS Act provides, among other things:
Exemptions for emerging growth companies from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies;
Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934;
Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings;
Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and
Exemption from registration by a non-reporting company of offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and exemption of such sales from state law registration, documentation or offering requirements.
In general, under the JOBS Act a company is an emerging growth company if its initial public offering (“IPO”) of common equity securities was effected after December 8, 2011 and the company had less than $1 billion of total annual gross revenues during its last completed fiscal year. A company will no longer qualify as an emerging growth company after the earliest of
(i) the completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more,
(ii) the completion of the fiscal year of the fifth anniversary of the company’s IPO;
(iii) the company’s issuance of more than $1 billion in nonconvertible debt in the prior three-year period, or
(iv) the company becoming a “larger accelerated filer” as defined under the Securities Exchange Act of 1934.
The JOBS Act provides additional new guidelines and exemptions for non-reporting companies and for non-public offerings. Those exemptions that impact the Company are discussed below.
Financial Disclosure. The financial disclosure in a registration statement filed by an emerging growth company pursuant to the Securities Act of 1933 will differ from registration statements filed by other companies as follows:
(i) audited financial statements required for only two fiscal years;
(ii) selected financial data required for only the fiscal years that were audited;
(iii) executive compensation only needs to be presented in the limited format now required for smaller reporting companies.
(A smaller reporting company is one with a clientpublic float of less than $75 million as of the last day of its most recently completed second fiscal quarter)
However, the requirements for financial disclosure provided by Regulation S-K promulgated by the Rules and Regulations of the SEC already provide certain of these exemptions for smaller reporting companies. The Company is a smaller reporting company. Currently a smaller reporting company which may useis not required to file as part of its registration statement selected financial data and only needs audited financial statements for its two most current fiscal years and no tabular disclosure of contractual obligations.
The JOBS Act also exempts the Company’s independent registered public accounting firm from complying with any rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) after the date of the JOBS Act’s enactment, except as otherwise required by SEC rule.
The JOBS Act also exempts an emerging growth company from any requirement adopted by the PCAOB for mandatory rotation of the Company’s accounting firm or for a supplemental auditor report about the audit.
Internal Control Attestation. The JOBS Act also provides an exemption from the requirement of the Company’s independent registered public accounting firm to file a report on the Company’s internal control over financial reporting, although management of the Company asis still required to file its behiclereport on the adequacy of the Company’s internal control over financial reporting.
Section 102(a) of the JOBS Act exempts emerging growth companies from the requirements in §14A(e) of the Securities Exchange Act of 1934 for companies with a class of securities registered under the 1934 Act to becomehold shareholder votes for executive compensation and golden parachutes.
Other Items of the JOBS Act. The JOBS Act also provides that an emerging growth company can communicate with potential investors that are qualified institutional buyers or institutions that are accredited to determine interest in a public companycontemplated offering either prior to or after the date of filing the respective registration statement. The Act also permits research reports by a changebroker or dealer about an emerging growth company regardless if such report provides sufficient information for an investment decision. In addition the JOBS Act precludes the SEC and FINRA from adopting certain restrictive rules or regulations regarding brokers, dealers and potential investors, communications with management and distribution of a research reports on the emerging growth company IPO.
Section 106 of the JOBS Act permits emerging growth companies to submit 1933 Act registration statements on a confidential basis provided that the registration statement and all amendments are publicly filed at least 21 days before the issuer conducts any road show. This is intended to allow the emerging growth company to explore the IPO option without disclosing to the market the fact that it is seeking to go public or disclosing the information contained in controlits registration statement until the company is ready to conduct a roadshow.
Election to Opt Out of Transition Period. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a 1933 Act registration statement declared effective or do not have a class of securities registered under the 1934 Act) are required to comply with the new or revised financial accounting standard.
The JOBS Act provides a company can elect to opt out of the extended transition period and possible subsequent business combination. If,comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of the transition period.
Reports to Security Holders
In July 2017, the Company (as Iris Grove Acquisition Corporation) filed a Form 10-12G general registration of securities pursuant to the Exchange Act and when,is a reporting company pursuant such transaction becomes finalized,Act and files with the SEC quarterly and annual reports and management shareholding information. The Company intends to deliver a copy of its annual report to its security holders, and will voluntarily send a copy of the annual report, including audited financial statements, to any registered shareholder who requests the same.
The Company’s documents filed with the SEC may be inspected at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the SEC, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 0001709542.
PLAN OF OPERATION
Business Plan and Potential Revenue
The Company produces and sells a topical lotion and plans on developing other products formulated using its CBD product, Cibidinol, and plans to generate revenues from sales of its products.
For the next few months, the Company will file a Form 8-K.
Item 2. Propertiesbe focusing on marketing and identifying customers to sell its products.
There is no assurance that the Company’s activities will generate sufficient revenues to sustain its operations without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company. Accordingly, given the Company’s limited cash and cash equivalents on hand, the Company will be unable to implement its business plans and proposed operations unless it obtains additional financing or otherwise is able to generate revenues and profits. The Company has no propertiesmay raise additional capital through sales of debt or equity, obtain loan financing or develop and at this time has no
agreementsconsummate other alternative financial plans. In addition, 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 acquire any properties. independently continue its operations.
The Company currently usesanticipates that it would need approximately $4,500,000 over the officesnext 12 months to continue as a going concern, satisfy its capital commitments and continue its operations in accordance with its current business plan, which will be used to fund expenses related to operations, office supplies, travel, salaries and other incidental expenses. Management believes that this capital would allow the Company to meet its operating cash requirements, cover overhead cost and general liabilities of the Company, and allow the Company to achieve overall sustainable profitability by facilitating the Company’s business.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company,” we have elected not to provide the disclosure required by this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
All manufacturing and distribution operations will occur at CannAssist's facilities in Carrollton, Texas. The facility's address is:
2210 Hutton Drive
Carrollton, Texas 75006
CannAssist's corporate facilities are located at:
1548 Loch Ness Dr.
Fallbrook, CA 92028
Management permits the Company to use these premises at no cost to the Company. ItemCurrently, this space is sufficient to meet our needs, however, once we expand our business to a significant degree, we will have to find a larger space. We do not foresee any significant difficulties in obtaining any required additional space. We do not currently own any real property.
ITEM 3. Legal Proceedings
There is no litigation pending or threatened by or against the
Company.
Management is aware that certain current and prior blank check
companies of which Messrs. Cassidy and McKillop were the former
officers and directors have received subpoenas for documents in regard
to an inquiry by the Securities and Exchange Commission requesting
documentation regarding the transactions and filings for the past
five years and former share ownership of certain blank check companies.
Management of the Company has received subpoenas from the
Securities and Exchange Commission in regard to certain of the
transactions and filings for the past five years of certain of its
blank check companies. Management has no independent knowledge or
information as to the intent or purpose of such subpoenas but believes
the SEC is investigating whether the change in control transaction is
considered a sale of a security and if so whether a broker needs to be
used to effect the transaction.
ItemLEGAL PROCEEDINGS.
None.
ITEM 4. Mine Safety Disclosures.
MINE SAFETY DISCLOSURES.
Not applicable.
PART II
Item
ITEM 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
There is currently no public market for the Company'sCompany’s securities.
Following a business combination, a target company will normally
wish
The Company intends to cause the Company's common stock to trade in one or more United
States securities markets. The target company may elect to take the
steps requiredinitially apply for such admission to quotation followingof its securities on the business
combination or at some later time.
At such timeOTCQB® Venture Market as it qualifies,soon as possible. There can be no assurance that the Company may choose to applywill qualify for quotation of its securities on the OTC Bulletin Board.OTCQB® Venture Market.. The OTC Bulletin BoardOTCQB® Venture Market is a dealer-driven quotation service. Unlike the Nasdaq Stock Market, companies cannot directly apply to be quoted on the OTC Bulletin Board,OTCQB® Venture Market, only market makers can initiate quotes, and quoted companies do not have to meet any quantitative financial requirements. Any equity security of a reporting company not listed on the Nasdaq Stock Market or on a national securities exchange is eligible.
As such time as it qualifies, the Company may choose to apply for quotation of its securities on the Nasdaq Capital Market. In general, there is greatest liquidity for traded securities on the Nasdaq Capital Market and less on the OTC Bulletin Board.OTCQB® Venture Market. It is not possible to predict where, if at all, the securities of the Company will be traded following a business combination.
Since
Stockholders
As of the date of this report, there were approximately 69 stockholders.
Dividends
We have not paid, nor declared, any cash dividends since our inception and do not intend to declare or pay any such dividends in the foreseeable future. Our ability to pay cash dividends is subject to limitations imposed by state law.
Securities Authorized for Issuance Under Equity Compensation Plans
As of the year ended December 31, 2019, the Company has solddid not have any compensation plans (including individual compensation arrangements) under which our Common Stock was authorized for issuance; provided, however, on April 29, 2019, the Company entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its common stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also an officer and director of the Company.
The Company’s management will review the adoption of an equity compensation plan in the future.
Recent sales of unregistered securities which
were not registered as follows:
NUMBER OF
DATE NAME SHARES CONSIDERATION
May 17, 2017 James Cassidy (1) 10,000,000 Services
May 17, 2017 James McKillop 10,000,000 Services
(1) James M. Cassidy, president
On March 30, 2020, the Company issued 1,000 shares of its Series A Preferred Stock to Mark Palumbo, an officer and a director of the Company, isfor $0.0001 per share in reliance on the soleexemption from registration under Section 4(a)(2). 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 directorwithout any vote of Tiber Creek Corporation,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.
On April 1, 2020, the Company entered into an agreement with an independent consultant pursuant to which the consultant shall be paid a Delaware corporation.
Itemcash monthly retainer of $5,000 a month and shall be issued 110,000 warrants to purchase shares of the common stock of the Company at an exercise price equal to $0.0001 per share, subject to certain conditions regarding vesting. This agreement has a term of 12 months and shall be automatically renewed on a month to month basis unless terminated upon 30 days’ written notice.
ITEM 6. Selected Financial Data.
There is no selectedSELECTED FINANCIAL DATA.
As a “smaller reporting company,” we have elected not to provide the disclosure required by this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited financial data requiredstatements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.
Certain information included herein contains statements that may be filedconsidered forward-looking statements, such as statements relating to our anticipated revenues, gross margin and operating results, future performance and operations, plans for a smaller reporting company.
Item 7. Management's Discussionfuture expansion, capital spending, sources of liquidity, and Analysis of Financial Conditionfinancing sources. This forward-looking information involves important risks and Results of Operations
The Company has no operations nor does it currently engageuncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any business activities generating revenues. The Company's principal
business objective isforward-looking statements made herein. These risks and uncertainties include those relating to achieve a business combination with a target
company.
A combination will normally takeour liquidity requirements, the form of a merger, stock-for-
stock exchange or stock-for-assets exchange. In most instances the
target company will wish to structure the business combination to be
within the definition of a tax-free reorganization under Section 351
or Section 368continued growth of the Internal Revenue CodeCompany’s industry, the success of 1986, as amended.
Tiber Creek Corporation assists companiesour product development, marketing and sales activities, vigorous competition in becoming public companiesthe construction industry, dependence on existing management, leverage and assists companies with introductionsdebt service (including sensitivity to fluctuations in interest rates), domestic or global economic conditions, the financial community. Such
services may include, wheninherent uncertainty and if appropriate,costs of prolonged arbitration or litigation, and changes in federal or state tax laws or the useadministration of an existing
reporting company such aslaws.
Overview
CannAssist International Corp. (formerly Iris Grove Acquisition Corporation) (the “Company”) was incorporated on May 17, 2017 under the Company.laws of the State of Delaware. The presidentbusiness purpose of the Company is to produce, sell and market its CBD based products. The Company's corporate offices are located at 1548 Loch Ness Dr., Fallbrook, CA 92028. The Company's email address is info@xceptorllc.com, and its website is xceptorcbd.com. The Company’s telephone number is 760-990-3091.
In July 2017, Iris Grove Acquisition Corporation filed a registration statement with the presidentSecurities and Exchange Commission on Form 10-12g pursuant to Securities Exchange Act of 1934 and became a public reporting company. In June 2018, the Company effected a change in control of Iris Grove Acquisition Corporation. As part of that change in control, the then officers and directors of Iris Grove resigned, the Company cancelled 20,000,000 shares of the then 20,000,000 shares of common stock outstanding, which were contributed by the Company’s then shareholders, James Cassidy and James McKillop, at no cost to the Company. Mark Palumbo was appointed the sole officer and director of the Company and the Company issued an aggregate of 3,000,000 shares of common stock to Mr. Palumbo. In addition, the Company changed its name to CannAssist International Corp.
On July 12, 2018, CannAssist International Corp., a Delaware corporation (the “Company”), entered into a share exchange acquisition agreement (the “Acquisition Agreement”) with Xceptor LLC, a private company organized under the laws of Wyoming (“Xceptor”). Under the Acquisition Agreement, the Company issued to the members of Xceptor a total amount of 3,000,000 shares of its common stock, valued at $0.0001 per share, in exchange for all of the issued and outstanding membership interests of Xceptor. Mr. Mark Palumbo, who is the officer, director and majority shareholder of Tiber Creek Corporation.
the Company, was an officer and member of Xceptor LLC prior to the Acquisition. As a result of the Acquisition, Xceptor became a wholly owned subsidiary of the Company and the Company had taken over its operations and business plan. Prior to the Acquisition, the Company had no ongoing business or operations. Just prior to the business combination on July 12, 2018, Mark Palumbo, the Company’s sole officer and director currently and just prior to the business combination, was the owner of 60% of the outstanding membership interests of Xceptor LLC and also was the owner of 3,000,000 shares of the common stock of the Company, which constituted a majority of the issued and outstanding shares at that time. Since the Company and Xceptor were entities under common control prior to the Acquisition, the transaction is accounted for as a restructuring transaction.
The Company anticipates that it would need approximately $4,500,000 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.
As of December 31, 2017,2019, the Company had not generated total revenues and had no income or cash flows from operations since inception.of $686,400. At December 31, 2017,2019, the Company had sustaineda net loss of $4,312.
The Company's$442,806 and had an accumulated deficit of $422,512.
For the period ended December 31, 2019, the Company’s independent auditors have issued a report raising substantial doubt about the Company'sCompany’s ability to continue as a going concern. At present, the Company has no operations and theThe 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 continue operations and/orsell its services to successfully locate and negotiate with
a business entity for the combination of that target company with
the Company.
2017 Year-End Analysis
generate consistent profitability.
The Company has receivedfiled a registration statement on Form S-1 to register the resales of common stock shares held by certain existing shareholders of the Company, which was declared effective on April 29, 2019.
Revenues and Losses
During the year ended December 31, 2019, the Company posted total revenues of $686,400 and costs of revenues of $461,606 resulting in a gross margin of $224,794. For that same year ended, total operating expenses were $663,149, consisting of general and administrative expenses of $267,895, general and administrative expenses to a related party of $158,500, commissions to a related party of $25,562 and professional fees of $211,192. Loss from operations and before income taxes totaled $442,806. After income tax expense of $0, the Company generated net loss of $442,806.
Liquidity and Capital Resources
The Company had total assets of $137,460, consisting of a cash balance of $80,021, accounts receivable of $1,135, prepaid expenses of $4,145, other assets of $1,567 and inventory of $50,592, as of December 31, 2019.
Since its inception, the Company has devoted most of its efforts to business planning, research and development, recruiting management and staff and raising capital. Accordingly, the Company was considered to be in the development stage until it recently began formal operations. The Company generated no income, has hadrevenues since its inception and there is no assurance of future revenues.
The Company’s proposed activities will necessitate significant uses of capital beyond 2020.
There is no assurance that the Company’s activities will generate sufficient revenues to sustain its operations nor expenses,without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company. Accordingly, given the Company’s limited cash and cash equivalents on hand, the Company will be unable to implement its business plans and proposed operations unless it obtains additional financing or otherwise is able to generate revenues and profits. The Company may raise additional capital through sales of debt or equity, obtain loan financing or develop and consummate other than Delaware state fees and accounting fees
as required for incorporation andalternative financial plans. In the interim, the Company plans to rely on its primary shareholder to continue his commitment to fund the Company’s continuing operating requirements. Management anticipates a total capital raise between $5-10M USD over the course of the following four consecutive quarters; provided, however, that the Company will require a minimum of $100,000 for the preparationnext 12 months to fund its operations, which will be used to fund expenses related to operations, office supplies, travel, salaries and other incidental expenses. Management believes that this capital would allow the Company to meet its operating cash requirements, and would facilitate the Company’s business of selling and distributing its products. Management also believes that the acquisition of such assets would generate revenue to cover overhead cost and general liabilities of the Company's financial statements.
Item 8. Financial StatementsCompany, and Supplementary Data
allow the Company to achieve overall sustainable profitability.
21 |
Discussion of the Year Ended December 31, 2019 as compared to the Year Ended December 31, 2018
The financial statementsCompany generated total revenues of $686,400 during the year ended December 31, 2019, as compared to revenues of $745,165 during the year ended December 31, 2018. The decrease in revenues is a result of a decrease in revenues received from a related party.
During the year ended December 31, 2019, the Company posted operating expenses of $663,149, consisting of general and administrative expenses of $267,895, general and administrative expenses to a related party of $158,500, commissions to a related party of $25,562 and professional fees of $211,192. In contrast, during the year ended December 31, 2018, the Company posted operating expenses of $136,966, consisting of general and administrative expenses of $34,471, general and administrative expenses to a related party of $4,800, commissions to a related party of $28,655 and professional fees of $69,040. The increase in operating expenses is attributable to an expansion of operations and costs related to the commercialization of the Company’s products.
During the year ended December 31, 2019, the Company posted a net loss of $438,355, compared to a net income of $32,133 for the year ended December 31, 20172018. The increase in net loss is primarily the result of increases in operating expenses attributable to an expansion of operations.
During the year ended December 31, 2019, the Company used $139,443 in cash from operating activities and generated $152,113 in cash from financing activities. The Company did not use or generate any cash in investing activities.
The Company had a cash balance of $80,021 and $67,351 as of December 31, 2019 and 2018, respectively.
Plan of Operations
For the next few months, the Company will be focusing on marketing and identifying customers to sell its products.
There is no assurance that the Company’s activities will generate sufficient revenues to sustain its operations without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company. Accordingly, given the Company’s limited cash and cash equivalents on hand, the Company will be unable to implement its business plans and proposed operations unless it obtains additional financing or otherwise is able to generate revenues and profits. The Company may raise additional capital through sales of debt or equity, obtain loan financing or develop and consummate other alternative financial plans. In addition, 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.
The Company anticipates that it would need approximately $4,500,000 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, which will be used to fund expenses related to operations, office supplies, travel, salaries and other incidental expenses. Management believes that this capital would allow the Company to meet its operating cash requirements, cover overhead cost and general liabilities of the Company, and allow the Company to achieve overall sustainable profitability by facilitating the Company’s business.
Equipment Financing
The Company has no existing equipment financing arrangements.
Potential Revenue
The Company plans to earn revenue from executing its business plan and selling its CBD products.
Alternative Financial Planning
As of December 31, 2019, the Company had cash available of $80,021.
The Company has no alternative financial plans at the moment. If the Company is not able to successfully raise monies as needed through a private placement or other securities offering (including, but not limited to, a primary public offering of securities), the Company’s ability to operate effectively will be severely jeopardized.
The Company does not anticipate that it will generate revenue sufficient to cover its planned operating expenses, and the Company must obtain additional financing in order to develop and implement its business plan and proposed operations. If the Company is not successful in generating sufficient revenues and/or obtaining additional funding to develop its business plan and proposed operations, this could have a material adverse effect on its business, results of operations liquidity and financial condition.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are attached hereto.
Item 9. Changesreasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and Disagreementsjudgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Basis of Presentation
The Company’s financial statements have been prepared in accordance with Accountantsaccounting principles generally accepted in the United States of America (“U.S. GAAP”).\
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. We believe we are not exposed to any significant credit risk on Accounting and Financial Disclosurecash.
Cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no changescash equivalents for the year ended December 31, 2019 or 2018.
Accounts Receivable
Revenues that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount of receivables to its net realizable value when needed. The allowance for uncollectible amounts is evaluated quarterly.
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 (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 (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or disagreements with accountants on
accountingliabilities and financial disclosurethe lowest priority to unobservable inputs. The three (3) 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 balance sheetreporting 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, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2019.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery.
The Company recognizes revenue when product is shipped. The Company will often receive payment and/or pay for the cost of goods prior to shipping. When this occurs, the result is both a prepaid for the supplies to be used in their product and a customer deposit. As of December 31, 2019, the Company has a prepaid expense of $4,145 and customer deposits of $54,660, for orders to be shipped in Q1, 2020. As of December 31, 2018, the Company has a prepaid expense of $62,173 and customer deposits of $59.671, for orders to be shipped in Q1, 2019.
Cost of Sales
Cost of sales is determined on the basis of the cost of production or the purchase of goods, adjusted for the variation of inventory Cost of sale is recognized as the direct cost of products or services sold during the period.
Income taxes
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal 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 the Statements of Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Stock-based Compensation
We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date coveredof grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
Net income (loss) per common share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. The Company has no dilutive shares as of December 31, 2019 and 2018.
Recently issued accounting pronouncements
Topic 606, Revenue from Contracts with Customers, of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). The guidance in ASC 606 was originally issued by the FASB in May 2014 in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Since then, the FASB has issued several ASUs that have revised or clarified the guidance in ASC 606. The Company has evaluated the impact of this accounting standard update and noted that it has had no material impact.
On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC718 and forgo revaluing the award after this date. The guidance is effective for interim and annual periods beginning after December 15, 2018.
In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.
In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date, which amended the effective date for nonpublic entities to annual reporting periods beginning after December 15, 2018. In March 2016, the FASB issued an update (ASU 2016-08) to ASC 606, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the guidance on principal versus agent considerations. In April 2016, the FASB issued an update (ASU 2016-10) to ASC 606, Identifying Performance Obligations and Licensing, which provides clarification related to identifying performance obligations and licensing implementation guidance under ASU 2014-09. In May 2016, the FASB issued an update (ASU 2016-12) to ASC 606, Narrow-Scope Improvements and Practical Expedients, which amends guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB issued an update (ASU 2016-20) to ASC 606, Technical Corrections and Improvements, which outlines technical corrections to certain aspects of the new revenue recognition standard such as provisions for losses on construction type contracts and disclosure of remaining performance obligations, among other aspects. The effective date and transition requirements are the same as those in ASU 2014-09 for all subsequent clarifying guidance discussed herein.
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). As an Emerging Growth Company, the standard is effective for the Company’s 2019 annual reporting period and for interim periods after 2019. The Company is in the process of analyzing the potential impact this standard will have on its consolidated financial position and results of operations. The Company expects to apply the modified retrospective method upon adoption.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller reporting company”, we have elected not to provide the disclosure required by this report.
Itemitem.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The required financial statements are included following the signature page of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rules adopted by
Our management, with the Securitiesparticipation of our prior principal executive and Exchange Commission.
the Company carried out an evaluation offinancial officer, evaluated the effectiveness of the
design and operation of itsour disclosure controls and procedures pursuant
to(as defined in Rule 15d-15(e) of the Securities Exchange Act Rules. This evaluation was doneof 1934, as amended, the Exchange Act) as of the end of the fiscal year under the supervisionperiod covered by this report. Based on that evaluation, our Chief Executive Officer and with the participation of the
Company's principal executive officer (who is also the principal financial officer).
Management is responsible for maintaining a system of internal
control over financial reporting ("ICFR")officer concluded that provides reasonable
assurance regarding the reliability of such reporting and the
accuracy and reliability of the preparation of financial statements
of such. Management is responsible to maintain records accurately and
fairly to reflect transactions and transactions are recorded as
necessary. The controls should provide reasonable assurance regarding
the prevention of unauthorized
acquisition or use of assets.
In the present case of the Company, management consists solely
of the president and vice president and has no employees or other
personnel. As such, management maintains sole control of all financial
transactions and all assets. Since the president of the Company is
in sole control of the financial transactions and assets management
believes that its control reasonably and adequately addresses the
risk of a misstatement in the financial reporting. Based upon that
evaluation, the principal officer believes that the Company'sour disclosure controls and procedures areas of the end of the period covered by this report (based on the evaluation of these controls and procedures required by Rule 15d-15(b) of the Exchange Act) were not effective in gathering,
analyzing and disclosing information needed to ensureensuring that the information required to be disclosed by us in reports that we file or submit under the Company in its periodic
reportsExchange Act (i) is recorded, processed, summarized and processed timely. Thereported within the time periods specified in the Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its principal executive officer is directly involved in the day-to-day operationsand principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the Company.
Management's Report of Internal Control over Financial Reporting
The Company is responsible for establishing and maintaining
adequate internal control over financial reporting in accordance with
the Rule 13a-15end of the Securities Exchange Act of 1934. The Company's
officer, its president, conducted an evaluation of the effectiveness
of the Company's internal control over financial reporting as of
December 31, 2017. In assessing its control and procedure over financial
reporting, management used the integrated framework createdperiod covered by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"). As outlined by COSO, suitable control criteria can be
grouped into a five-component structure consisting of control
environment, risk assessment, control activities, monitoring, and
information and communication. Whether a system of internal control
is effective is a subjective judgment resulting from an assessment
of those five components, that is, such components are present and
functioning effectively. Management consists solely of the president
and vice president and has no employees or otherReport, we had failed to adequately invest in personnel and management maintains sole controlsystems to accumulate, record and properly report on our results of all financial transactions and
all assets. Using the five-component guidelines in performing its
assessment, management believesoperations.
We believe that its ICFR is effective as of
December 31, 2017, based on those criteria. Aa control system, canno matter how well designed and operated, cannot provide only reasonably, not absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
KCCW Accountancy Corp.,
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the independent registered publicreliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting firmprinciples. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed our internal control over financial reporting as of December 31, 2019, the end of our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO 2013 Criteria). Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.
Based on our assessment, management has concluded that our internal control over financial reporting was not effective, as of the end of the fiscal year, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles, due to the material weaknesses set forth below.
The following is a summary of our material weaknesses as of December 31, 2019:
Lack of Thorough Controls and Segregation of Duties
The Company has not issued an attestation report
on the effectivenessdesigned nor maintained effective controls over review of the Company'sfinancial information, including cut-off, and there is also a lack of segregation of duties with regard to key treasury and accounting functions. These items contribute to a material weakness in internal control over financial reporting. The Company needs to develop an appropriate control environment, perform a risk assessment, develop control activities, and information, as well as monitoring activities, which we hope to implement over the next 12 months.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 15d-15(f) of the Exchange Act) that occurred during the year ended December 31, 2019, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth information regarding the members of the Company’s board of directors and its executive officers:
Name | Age | Position | Year Commenced | ||||
Mark Palumbo | 60 | Chief Executive Officer, Secretary, Chief Financial Officer and Director | 2018 | ||||
Marla Palumbo | 60 | President | 2019 |
Mark Palumbo
Chief Executive Officer, Secretary, Chief Financial Officer and Director of the Company
Following studies at the University of Rhode Island, Mark worked in the aerospace industry for three years starting in 1980. At Ocean Technologies he worked as an electronic technician supporting the development of submarine weapon systems of the Naval Underwater Systems Center in Newport/Middletown, RI and he then worked in a similar capacity for Hughes Aircraft. To better utilize his Biology degree Mark joined DuPont Pharmaceuticals in 1983. He initially worked as a pharmaceutical representative supporting doctors, hospitals, and pharmacies in Southern California. Later he was promoted to a management position at their Long Island, NY production facility that provided contract testing and manufacturing services to the pharmaceutical, cosmetic, personal care and nutritional industries. In 1990 Mark pursued his interest in the Cosmetic and Personal Care industries. He worked at US Cosmetics selling cosmetic ingredients to US formulators and manufacturers and then, 5 years later, he moved to Collaborative Laboratories where he directed the company’s global sales initiative. Utilizing his industry knowledge and experience Mark formed his own company, DIOW Products (Doing it our Way), in 1999. Working collaboratively with clients the company developed, manufactured, and supplied raw materials for personal care, cosmetics and nutritional products. DIOW was sold in 2008 and using the retained assets, EME Ltd. was formed that same year. Through Mark’s leadership EME Ltd. has worked independently and collaboratively to develop new products and to enhance the bioavailability and ease-of-use of existing products. EME Ltd. currently includes a cell biology laboratory and two botanically based personal care, cosmetic, food and nutritional agencies.
Marla Palumbo
President
Marla Palumbo holds a Bachelor of Science in Nursing from Point Lorna College. She has 20 years of experience as a registered nurse, acting as nursing manager of 50 employees for 7 of these years. Additionally, Ms. Palumbo has 5 years in pharmaceutical sales and 5 years as Vice President and co-owner of DIOW Products, Inc. a cosmetic raw material supplier and 10 years as co-founder and co-owner of EME Ltd, a cosmetic raw material distribution company. Ms. Palumbo is co-founder of Xceptor, LLC, a wholly owned subsidiary of the Company. She brings experience in organization, business management and growth, regulatory and FDA guidelines, personnel management and growth and creating programs and literature for product promotion and education.
Director Independence
The Board of Directors has determined that it does not have any independent directors as that term is defined by NASDAQ Marketplace Rule 5605(a)(2). In assessing the independence of the directors, the Board considers any transactions, relationships and arrangements between our Company and our independent directors or their affiliated companies. This review is based primarily on responses of the directors to questions in a director and officer questionnaire regarding employment, business, familial, compensation and other relationships with our Company or our management.
Director Compensation
Directors do not receive any compensation for serving on the Board of Directors; provided, however, on April 29, 2019, CannAssist International Corp. (the “Company”) entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its common stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also a director of the Company.
Committees and Terms
The Board of Directors has not established any committees. The Company will notify its shareholders for an annual shareholder meeting and that they may present proposals for inclusion in the Company’s proxy statement to be mailed in connection with any such annual meeting; such proposals must be received by the Company at least 90 days prior to the meeting. No other specific policy has been adopted in regard to the inclusion of shareholder nominations to the Board of Directors.
Legal Proceedings
There are no legal proceedings regarding the Company.
Code of Ethics
Our Board of Directors has not adopted a code of ethics. We anticipate that we will adopt a code of ethics when we increase either the number of our Directors or the number of our employees.
Indemnification of Officers, Directors, Employees and Agents
The Certificate of Incorporation and bylaws of the Company provide that the Company shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify all directors of the Company, as well as any officers or employees of the Company to whom the Company has agreed to grant indemnification.
Section 145 of the Delaware General Corporation Law empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers provided that this provision shall not eliminate or limit the liability of a director (I) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) arising under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation's by-laws, any agreement, vote of shareholders or otherwise.
The effect of the foregoing is to require the Company to indemnify the officers and directors of the Company for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
Identification of Significant Employees
The Company currently has two full-time employees, not including independent consultants.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past ten years:
Except as set forth in our discussion below in “Certain Relationships and Related Transactions, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Committees of the Board
Our Company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or audit committee charter. Our Directors believe that it is not necessary to have such committees, at this time, because the Board of Directors can adequately perform the functions of such committees.
Our Company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for Directors. The Board of Directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our President and Director, at the address appearing on the first page of this filing.
Risk Oversight
Effective risk oversight is an important priority of the Board of Directors. Because risks are considered in virtually every business decision, the Board of Directors discusses risk throughout the year generally or in connection with specific proposed actions. The Board of Directors’ approach to risk oversight includes understanding the critical risks in the Company’s business and strategy, evaluating the Company’s risk management processes, allocating responsibilities for risk oversight among the full Board of Directors, and fostering an appropriate culture of integrity and compliance with legal responsibilities.
Corporate Governance
The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the SEC and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has not formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers and Directors as the Company is not required to do so.
In lieu of an Audit Committee, the Company’s Board of Directors is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. The Board of Directors reviews the Company’s internal accounting controls, practices and policies.
Code of Ethics
Our Board of Directors has not adopted a code of ethics. We anticipate that we will adopt a code of ethics when we increase either the number of our Directors or the number of our employees.
ITEM 11. EXECUTIVE COMPENSATION
To date, the Company has not paid compensation to any executive officer or director. The Company may choose to pay a salary or fees to its executive management in the future. There have been no changes in the Company's internal controls
over financial reporting duringCompany’s compensation policy since the end of the Company’s last fiscal year, December 31, 2019.
Narrative Disclosure to Summary Compensation Table
On April 29, 2019, CannAssist International Corp. (the “Company”) entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its fourth fiscal quartercommon stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also an officer and director of the Company.
Notwithstanding the foregoing, there are no current employment agreements between the Company and its executive officers. The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officers. There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our officers and directors other than as described herein.
Outstanding Equity Awards at Fiscal Year-End
There are no current outstanding equity awards to our executive officers as of December 31, 2019.
Committees of the Board
Our Company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or audit committee charter. Our sole Director believes that it is not necessary to have materially affected,such committees, at this time, because he can adequately perform the functions of such committees.
Our Company does not have any defined policy or are reasonably likelyprocedural requirements for shareholders to materially affect,
its internal control over financial reporting.
Item 9B. Other information
Not applicable.
PART III
Item 10. Directors, Executive Officers,submit recommendations or nominations for Directors. The sole Director believes that, given the stage of our development, a specific nominating policy would be premature and Corporate Governance;
Theof little assistance until our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and Officerswe do not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our President and Director, at the address appearing on the first page of this filing.
Risk Oversight
Effective risk oversight is an important priority of the Company:
Name Age PositionsCompany. Because risks are considered in virtually every business decision, the Director’s approach to risk oversight includes understanding the critical risks in the Company’s business and Offices Held
----------------- ---- -------
James Cassidy 82 President, Secretary, Director
James McKillop 58 Vice President, Director
Managementstrategy, evaluating the Company’s risk management processes, allocating responsibilities for risk oversight among the future full Board of Directors, and fostering an appropriate culture of integrity and compliance with legal responsibilities.
Corporate Governance
The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the SEC and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has no full time employees. James Cassidynot formally adopted a written code of business conduct and James McKillop areethics that governs the Company’s employees, officers and Directors as the Company is not required to do so.
In lieu of an Audit Committee, the Company’s sole Director is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. The Company’s sole Director reviews the Company’s internal accounting controls, practices and policies.
Code of Ethics
The Company has not adopted a code of ethics. We anticipate that we will adopt a code of ethics when we increase either the number of our Directors or the number of our employees.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act may require our executive officers and Directors, and persons who own more than ten percent of our common stock to file reports of ownership and change in ownership with the SEC and the exchange on which the common stock is listed for trading. Executive officers, Directors and more than ten percent (10%) stockholders are required by regulations promulgated under the Exchange Act to furnish us with copies of all Section 16(a) reports filed. Based solely on our review of copies of the Section 16(a) reports filed for the fiscal year ended December 31, 2019, we believe that our executive officers, Directors and ten percent (10%) stockholders complied with all reporting requirements applicable to them.
Director Compensation
On April 29, 2019, CannAssist International Corp. (the “Company”) entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its common stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also an officer and director of the Company.
Notwithstanding the foregoing, our sole Director does not currently receive any consideration for his services as a Director. The Company reserves the right in the future to award future members of the Board of Directors cash or stock-based consideration for their services to the Company, which awards, if granted shall be in the sole determination of the Board of Directors.
Executive Compensation Philosophy
Our sole Director determines the compensation given to our executive officers in his sole determination. Our sole Director also reserves the right to pay our executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, our sole Director reserves the right to grant stock options in the future, if he, in his sole determination, believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-term, Stock Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award certain executives with long-term, stock-based compensation in the future, in the sole discretion of our sole Director, which we do not currently have any immediate plans to award.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information as of the date of this prospectus regarding the beneficial ownership of the Company’s common stock by each of its executive officers and directors, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.
COMMON STOCK
Common Shares | Percentage | |||||||
Owned | Of Class(1) | |||||||
Mark Palumbo (2)(3) | 9,800,000 | 53.15 | % | |||||
Chief Executive Officer, Secretary, Treasurer and Director | ||||||||
Marla Palumbo (3)(4) | 1,200,000 | 6.5 | % | |||||
President |
(1) | Based on 18,435,000 common stock shares outstanding. |
(2) | Consists of 3,000,000 shares initially owned in the Company as a result of the change in control, 1,800,000 shares received in exchange for membership interests in Xceptor, LLC pursuant to the Acquisition and 5,000,000 shares in connection with a License Agreement by and between the Company and Mr. Palumbo. |
(3) | This individual’s address is 1548 Loch Ness Dr., Fallbrook, CA 92028. |
(4) | Consists of 1,200,000 shares received in exchange for membership interests in Xceptor, LLC pursuant to the Acquisition. |
SERIES A PREFERRED STOCK
Series A Preferred Shares Owned | Percentage of Class (1) | |||||||
Mark Palumbo (2)(3) | 1,000 | 100 | % | |||||
Chief Executive Officer, Secretary, Treasurer and Director |
(1) | Based on 1,000 Series A Preferred Stock shares outstanding. |
(2) | Consists of 1,000 shares of Series A Preferred Stock, purchased at par value, which, 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. |
(3) | Mr. Palumbo’s address is 1548 Loch Ness Dr., Fallbrook, CA 92028. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.
Transactions with Related Persons
Marla Palumbo has advanced the Company a limited amount of funds to cover some general operating expenses and travel costs. These advances are unsecured, due on demand and non-interest bearing. As of December 31, 2019 and 2018, the balance due to Ms. Palumbo for cash advances is $9,498 and $300, respectively. Ms. Palumbo is the President of the Company and wife of the CEO, Mark Palumbo.
On June 29, 2018, Ms. Palumbo advanced the Company $6,000 for general operating expenses. The advance is unsecured, due on demand and non-interest bearing. During the year ended December 31, 2019, the $6,000 was repaid.
During the year ended December 31, 2018, EME, Ltd. advanced the Company $2,366 to pay for certain operating expenses. EME, Ltd. is owned by Mark Palumbo, CEO. The advance was repaid during the year ended December 31, 2019. The advance was unsecured, non-interest bearing and due on demand. In addition, there is $9,857 and $4,373 of accounts payable due to EME, Ltd as of December 31, 2019 and 2018.
During the years ended December 31, 2019 and 2018, the Company paid sales commissions of $25,562 and $28,655, respectively, to EME Ltd.
During the years ended December 31, 2019 and 2018, respectively, the Company incurred $6,400 and $4,800 of expense for Matthew Palumbo for product design services. Matthew Palumbo is the son of Mark Palumbo, CEO.
On April 29, 2019, CannAssist International Corp. (the “Company”) entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 issued to the Licensor 5,000,000 restricted shares of its shareholders. Mr. Cassidy, as presidentcommon stock, valued at par value per share, at the effective date of the agreement and shall issue to the Licensor an additional 1,000,000 shares restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term. Mark Palumbo, the Licensor of the Technology, is also an officer and director of the Company.
On March 30, 2020, the Company issued 1,000 shares of its Series A Preferred Stock to Mark Palumbo, an officer and director of the Company, for $0.0001 per share in reliance on the exemption from registration under Section 4(a)(2). Series A Preferred Stock, voting together as a class, have the right to vote 60% of the Company’s voting shares on any and Mr. McKillop as vice president, will allocate a limited portion of
timeall shareholder matters (the “Majority Voting Rights”). Additionally, the Company shall not adopt any amendments to the activitiesCompany’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 compensation.
Potentialany 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.
Our officers and director are now and may in the future become a stockholder, officer or director of other companies that may be engaged in business activities similar to those conducted by us. Accordingly, direct conflicts of interest may arise in the future with respect to such individuals acting on our behalf or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the limited time
commitment by managementattention of such individual in the performance of his duties or otherwise. Although we do not currently have a right of first refusal pertaining to opportunities that come to management’s attention insofar as such opportunities may relate to our business operations, we have established a conflict of interest policy intended to ensure timely disclosure and avoidance of activities and relationships that conflict with the potential demandsinterests of the activitiesCompany.
Our officers and director are subject to the restriction that all opportunities contemplated by our business plan which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to our Company. A breach of this requirement will be a breach of the Company.
There are no agreements or understandings forfiduciary duties of the officer or directordirector.
All future affiliated transactions will be made or entered into on terms that are no less favorable to resign atus than those that can be obtained from any unaffiliated third party. To the requestextent possible, a majority of another personthe independent, disinterested members of our board of directors will approve future affiliated transactions.
Review, Approval and Ratification of Related Party Transactions
Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, Directors and significant stockholders. However, all of the transactions described above were approved and ratified by our Board of Directors. In connection with the approval of the transactions described above, our Board of Directors, took into account several factors, including their fiduciary duties to the Company; the relationships of the related parties described above to the Company; the material facts underlying each transaction; the anticipated benefits to the Company and related costs associated with such benefits; whether comparable products or services were available; and the above-
named officerterms the Company could receive from an unrelated third party.
We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manner:
● | Disclosing such transactions in reports where required; |
● | Disclosing in any and all filings with the SEC, where required; |
● | Obtaining disinterested directors consent; and |
● | Obtaining shareholder consent where required. |
Director Independence
Quotations for the Company’s common stock are entered on the Over-the-Counter Bulletin Board inter-dealer quotation system, which does not have director independence requirements. For purposes of determining director independence, the Company applied the definitions set out in NASDAQ Rule 4200(a)(15). Under NASDAQ Rule 4200(a)(15), a director is not acting on behalf of nor will act
at the direction of any other person.
Set forth below are the namesconsidered to be independent if he or she is also an executive officer or employee of the directors and officers of
the Company, all positions and offices with the Company held, the
period during which they have served as such, and the business
experience during at least the last five years:
James Cassidy, Esq., LL.B., LL.M., serves as a director,
president and secretary of the Company. Mr. Cassidy received a
Bachelor of Science in Languages and Linguistics from Georgetown
University in 1960, a Bachelor of Laws from The Catholic University
School of Law in 1963, and a Master of Laws in Taxation from The
Georgetown University School of Law in 1968. From 1963-1964, Mr.
Cassidy was law clerk to the Honorable Inzer B. Wyatt of the United
States District Court for the Southern District of New York. From
1964-1965, Mr. Cassidy was law clerk to the Honorable Wilbur K.
Miller of the United States Court of Appeals for the District of
Columbia. From 1969-1975, Mr. Cassidy was an associate of the law
firm of Kieffer & Moroney and a principal in the law firm of Kieffer
& Cassidy, Washington, D.C. From 1975 to date, Mr. Cassidy has been a
principal in the law firm of Cassidy & Associates, and its predecessors,
specializing in securities law and related corporate and federal
taxation matters. Mr. Cassidy is a member of the bars of the District
of Columbia and the State of New York, and is admitted to practice
before the United States Tax Court and the United States Supreme Court.
The Company believes Mr. Cassidy to have the business experience
necessary to serve as a director of the Company as it seeks to enter
into a business combination.corporation. As a lawyer involved in business
transactions and securities matters, Mr. Cassidy has had ample
experience in evaluating companies and management, understanding
business plans, assisting in capital raising and determining
corporate structure and objectives.
James McKillop serves as a director and vice president of
the Company. Mr. McKillop began his career at Merrill Lynch. Mr.
McKillop has also been involved in financial reporting and did a
daily stock market update for KPCC radio in Pasadena, California.
Mr. McKillop is the founder of MB Americus LLC which specializes
in consulting and public relations. Mr. McKillop has provided
consulting services to Tiber Creek Corporation for more than five
years. Mr. McKillop has written articles for various publications
on financial matters. He has been a past member of the World Affairs
Council. Mr. McKillop received his Bachelor of Arts in Economics
in 1984 from the University of California at Los Angeles. With his
background in financial and securities matters, the Company believes
Mr. McKillop to have experience and knowledge that will serve
the Company in seeking, evaluating and determining a suitable
target company.
Recent Blank Check Companies
James Cassidy, the president and a director of the Company
and James McKillop, vice president and a director of the Company,
are involved with other existing blank check companies, and in creating
additional similar companies. The initial business purpose of each
of these companies was or is to engage in a business combination with
an unidentified company or companies and each were or will be classified
as a blank check company until completion of a business combination.
Conflicts of Interest
There are no binding guidelines or procedures for resolving
potential conflicts of interest. Failure by management to resolve
conflicts of interest in favor of the Company could result, in
liability of management to the Company. However, any attempt by
shareholders to enforce a liability of management to the Company
would most likely be prohibitively expensive and time consuming.
Code of Ethics. The Company has not at this time adopted a
Code of Ethics pursuant to rules described in Regulation S-K. The
Company has two persons who are the only shareholders and who serve as
the directors and officers. The Company has no operations or business and
does not receive any revenues or investment capital. The adoption of an
Ethical Code at this time would not serve the primary purpose of such a
code to provide a manner of conduct as the development, execution and
enforcement of such a code would be by the same persons and only
persons to whom such code applied. Furthermore, because the Company does not have any activities, there are activities or transactions
which would be subject to this code. At the time the Company enters
into a business combination or other corporate transaction, the current
officers and directors will recommend to any new management that such a
code be adopted. The Company does not maintainindependent directors. Our sole director, Mark Palumbo, is also an Internet website on
which to post a code of ethics.
Corporate Governance. For reasons similar to those described
above, the Company does not have a nominating nor audit committee of the
board of directors. At this time, the Company consists of two shareholders
who serve as the corporate directors and officers. The Company has no
activities, and receives no revenues. At such time that the Company enters
into a business combination and/or has additional shareholders and a larger
board of directors and commences activities, the Company will propose
creating committees of its board of directors, including both a nominating
and an audit committee. Because there are only two shareholders of the
Company, there is no established process by which shareholders to the
Company can nominate members to the Company's board of directors.
Similarly, however, at such time as the Company has more shareholders and
an expanded board of directors, the new management of the Company may
review and implement, as necessary, procedures for shareholder nomination
of members to the Company's board of directors.
Item 11. Executive Compensation
The Company's officers and directors do not receive any
compensation for services rendered to the Company, nor have they
received such compensation in the past. The officers and directors
are not accruing any compensation pursuant to any agreement with the
Company.
No retirement, pension, profit sharing, stock option or
insurance programs or other similar programs have been adopted by
the Company for the benefit of its employees.
The Company does not have a compensation committee for
the same reasons as described above.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The following table sets forth, as of December 31, 2017, each
person known by the Company to be the beneficial owner of five
percent or more of the Company's common stock and the director andexecutive officer of the Company. The Company does not have any compensation
plans and has not authorized any securities for future issuance.
Except as noted, the holder thereof has sole voting and investment
power with respect to the shares shown.
Name and Address Amount of Beneficial Percent of
of Beneficial Owner Ownership Outstanding Stock
James M. Cassidy 10,000,000 50%
215 Apolena Avenue
Newport Beach, CA 92662
James K. McKillop 10,000,000 50%
9454 Wilshire Boulevard
Beverly Hills, California 90212
All Executive Officers and 20,000,000 100%
Directors as a Group (2 Persons)
Item 13. Certain Relationships and Related Transactions and
Director Independence
As of December 31, 2017, the Company had issued a total of
20,000,000 shares of common stock pursuant to Section 4(2) of the
Securities Act for services performed for the Company with a valuation
of an aggregate of $2,000.
As the organizers and developers of the Company, James M. Cassidy
and James McKillop may be considered promoters. Mr. Cassidy has
provided services to the Company without charge consisting of preparing
and filing the charter corporate documents.
The Company is not currently required to maintain an independent
director as defined by Rule 4200 of the Nasdaq Capital Market nor
does it anticipate that it will be applying for listing of its
securities on an exchange in which an independent directorship is
required. It is likely that neither Mr. Cassidy nor Mr. McKillop
would be considered independent directors if it were to do so.
Item
ITEM 14. Principal Accounting Fees and Services.
The Company has no activities, no income and no expenses
except for independent audit and Delaware state fees. The Company's
president has donated his time in preparation and filing of all
state and federal required taxes and reports.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
The aggregate fees incurred in 2017billed for each of the last two fiscal years for professional services rendered by the independent registered public accounting firmprincipal accountant for the auditsaudit of the Company's financial statements as of June 12, 2017
included in the Company's Form 10 registration statement, and theour annual financial statementsstatement and review of financial statements included in the Company's Form 10-K and Formour 10-Q reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were as follows:$35,000 for fiscal year ended December 31, 2017
-----------------
2019, and $35,000 for fiscal year ended December 31, 2018.
Audit-Related Fees $ 2,000
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements that are not reported above were nil for fiscal years ended December 31, 2019 and 2018, respectively.
Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were nil for fiscal years ended December 31, 2019 and 2018, respectively.
All Other Fees
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above were nil for fiscal years ended December 31, 2019 and 2018, respectively.
Audit Committee
As of the date of this Annual Report, the Company doesdid not currently have ana standing audit committee serving, and as a result itsour board of directors performs the duties of an audit committee. TheOur board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. The Company doesWe do not rely on pre-
approvalpre-approval policies and procedures.
PART IV
Item
ITEM 15. Exhibits, Financial Statement Schedules
ThereEXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) | Financial Statements Index |
The following financial statements are no financial statement schedules nor exhibits filed herewith.
Exhibits:
31 Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32 Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
______________________________________________________________________
FINANCIAL STATEMENTS
with this report:
Report of Independent Registered Public Accounting Firm 1
Financial
Balance Sheets at December 31, 2019 and 2018
Statements 2-5
of Operations for the years ended December 31, 2019 and December 31, 2018
Statements of Cash Flows for the years ended December 31, 2019 and December 31, 2018
Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2019 and 2018
Notes to Financial Statements 6-8
______________________________________________________________________
KCCW Accountancy Corp. CERTIFIED PUBLIC ACCOUNTANTS
REPORT
EXHIBITS
* | Filed herewith. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned in Fallbrook, CA, thereunto duly authorized, on August 19, 2020.
CANNASSIST INTERNATIONAL CORP. | ||
By: | /s/ Mark Palumbo | |
Title: Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ Mark Palumbo | |
Title: Chief Financial Officer (Principal Financial Officer) | ||
By: | /s/ Mark Palumbo | |
Title: Chief Financial Officer (Principal Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 19, 2020.
By: | /s/ Mark Palumbo | |
Title: | Chief Executive Officer (Principal Executive Officer) | |
By: | /s/ Mark Palumbo | |
Title: | Treasurer (Principal Financial Officer) | |
By: | /s/ Mark Palumbo | |
Title: | Treasurer (Principal Accounting Officer) |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons, constituting all of the members of the board of directors, in the capacities and on the dates indicated.
Signature | Capacity | Date | ||
/s/ Mark Palumbo | Director | August 19, 2020 |
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF INDEPENDENTTHE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED PUBLIC ACCOUNTING FIRM
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
We will furnish to the Securities and Exchange Commission, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with any annual stockholders’ meeting.
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm | F-1 |
Balance Sheets as of December 31, 2019 and 2018 | F-2 |
Statements of Operations for the years ended December 31, 2019 and 2018 | F-3 |
Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2019 and 2018 | F-4 |
Statements of Cash Flows for the years ended December 31, 2019 and 2018 | F-5 |
Notes to Consolidated Financial Statements | F-6 |
Report of Independent Registered Public Accounting Firm
To the Boardshareholders and the board of Directors
Iris Grove Acquisition Corporation
directors of CannAssist International Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheetsheets of Iris Grove Acquisition
Corporation)CannAssist International Corp. (the "Company") as of December 31, 2017,2019 and 2018, the related statements of operations, changes in stockholders' deficitequity (deficit), and cash flows for the Period from May 17, 2017 (Inception) to December 31, 2017,years then ended, and the related notes (collectively referred to as the financial statements)"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2018, and the results of its operations and its cash flows for the period from
May 17, 2017 (Inception) to December 31, 2017,years then ended, in conformity with accounting principalesprinciples generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2
to the financial statements, the Company has had no revenues and income
since inception. These conditions, among others, raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans concerning these matters are also described in
Note 2, which includes the raising of additional equity financing or
merger with another entity. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our auditsaudit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditsaudit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provideaudit provides a reasonable basis for our opinion.
/s/ KCCW Accountancy Corp.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2017.
Los Angeles, California
March 20, 2018
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IRIS GROVE ACQUISITION CORPORATION
BALANCE SHEET
ASSETS
December 31, 2017
------------------
Current assets
Cash $ -
---------------
Total assets $ -
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accrued liabilities $ 2,000
---------------
Total liabilities 2,000
---------------
Stockholders' deficit
Preferred stock, $0.0001 par value,
20,000,000 shares authorized; none
outstanding as of December 31, 2017 -
Common stock, $0.0001 par value, 100,000,000
shares authorized; 20,000,000 shares issued
and outstanding as of December 31, 2017 2,000
Additional paid-in capital 312
Accumulated deficit (4,312)
---------------
Total stockholders' deficit (2,000)
---------------
Total liabilities and stockholders'
deficit $ -
================
Lakewood, CO
April 8, 2020
CannAssist International Corp.
Balance Sheets
December 31, 2019 | December 31, 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 80,021 | $ | 67,351 | ||||
Accounts receivable | 1,135 | 56,160 | ||||||
Prepaid expenses | 4,145 | 62,173 | ||||||
Other asset | 1,567 | - | ||||||
Inventory | 50,592 | 19,764 | ||||||
Total assets | $ | 137,460 | $ | 205,448 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accruals | $ | 124,796 | $ | 89,565 | ||||
Accounts payable – related party | 9,857 | 4,373 | ||||||
Accrued liabilities | - | - | ||||||
Customer deposits | 54,660 | 59,671 | ||||||
Due to a related party | 9,498 | 8,666 | ||||||
Loan payable | 1,000 | 1,000 | ||||||
Accrual for income taxes | - | 6,748 | ||||||
Total current liabilities | 199,811 | 170,023 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ Equity (Deficit): | ||||||||
Preferred stock, $0.0001 par value 20,000,000 shares authorized; none issued and outstanding | - | - | ||||||
Common Stock, $0.0001 par value, 100,000,000 shares authorized; 18,435,000 and 12,410,000 issued and outstanding, respectively | 1,844 | 1,241 | ||||||
Stock subscription receivable | - | (30 | ) | |||||
Additional paid in capital | 358,317 | 13,920 | ||||||
(Accumulated deficit) / retained earnings | (422,512 | ) | 20,294 | |||||
Total Stockholders’ (deficit) / equity | (62,351 | ) | 35,425 | |||||
Total Liabilities and Stockholders’ Deficit | $ | 137,460 | $ | 205,448 |
The accompanying notes are an integral part of these financial statements.
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IRIS GROVE ACQUISITION CORPORATION
STATEMENT OF OPERATIONS
For the period from
May 17, 2017
(Inception) to
Deember 31, 2017
-----------------
Revenue $ -
Cost
CannAssist International Corp.
Statements of revenue -
-----------------
Gross profit -
-----------------
Operating expenses 4,312
-----------------
Loss before income taxes (4,312)
Income tax expense -
-----------------
Net loss $ (4,312)
==================
Loss per share - basic and diluted $ (0.00)
==================
Weighted average shares-basic and diluted 20,000,000
------------------
Operations
For the years ended December 31, | ||||||||
2019 | 2018 | |||||||
Revenue | $ | 686,400 | $ | 581,185 | ||||
Revenue – related party | - | 163,980 | ||||||
Total revenue | 686,400 | 745,165 | ||||||
Cost of revenue | 461,606 | 446,430 | ||||||
Cost of revenue– related party | - | 129,636 | ||||||
Total cost of revenue | 461,606 | 576,066 | ||||||
Gross margin | 224,794 | 169,099 | ||||||
Operating expenses: | ||||||||
General and administrative | 267,895 | 34,471 | ||||||
General and administrative– related party | 158,500 | 4,800 | ||||||
Commissions – related party | 25,562 | 28,655 | ||||||
Professional fees | 211,192 | 69,040 | ||||||
Total operating expenses | 663,149 | 136,966 | ||||||
(Loss) / income from operations | (438,355 | ) | 32,133 | |||||
Other expense: | ||||||||
Interest expense | (4,451 | ) | - | |||||
Total other expense | (4,451 | ) | - | |||||
(Loss) / income before provision for income taxes | (442,806 | ) | 32,133 | |||||
Provision for income taxes | - | (6,748 | ) | |||||
Net (loss) / income | $ | (442,806 | ) | $ | 25,385 | |||
(Loss) / income per share, basic and diluted | $ | (0.02 | ) | $ | 0.00 | |||
Weighted average shares outstanding, basic and diluted | 17,773,836 | 15,101,877 |
The accompanying notes are an integral part of these financial statements.
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IRIS GROVE ACQUISITION CORPORATION
STATEMENT OF STOCKHOLDERS' DEFICIT
Common Stock Additional Accumu- Total
------------------- Paid-in lated Stockholders'
Shares Amount Capital Deficit Deficit
---------- ------- --------- ------- ---------
Balance,
May 17, 2017
(Inception) - $ - $ - $ - $ -
Issuance of
common stock
for service 20,000,000 2,000 - - 2,000
Additional paid-in
capital - - 312 - 312
Net loss - - - (4,312) (4,312)
---------- ------- --------- -------- ---------
Balance,
December 31,
2017 20,000,000 $ 2,000 $ 312 $(4,312) $(2,000)
========== ======== ======= ======== =========
The accompanying notes are an integral part of these financial statements.
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IRIS GROVE ACQUISITION CORPORATION
STATEMENT OF CASH FLOWS
For the period from
May 17, 2017
(Inception) to
December 31, 2017
--------------
OPERATING ACTIVITIES
Net loss $ (4,312)
Non-cash adjustments to reconcile net loss to net cash:
Expenses paid for by stockholder and contributed
as capital 312
Common Stock issued for services 2,000
Changes in Operating Assets and Liabilities:
Accrued liability 2,000
-------------
Net cash (used in) operating activities -
-------------
Net increase in cash -
Cash, beginning of period -
-------------
Cash, end of period $ -
=============
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Income Tax $ -
=============
Interest $ -
=============
The accompanying notes are an integral part of these financial statements.
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IRIS GROVE ACQUISITION CORPORATION
Notes to Financial
CannAssist International Corp.
Statement of Changes in Stockholders’ Equity
December 31, 2019 and 2018
Additional | Stock | Total | ||||||||||||||||||||||
Common Stock | Paid-in | Subscription | Retained | Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Receivable | Earnings | Deficit | |||||||||||||||||||
Balance, December 31, 2017 | 20,000,000 | $ | 2,000 | $ | 471 | $ | - | $ | (5,091 | ) | $ | (2,620 | ) | |||||||||||
Common stock cancelled | (20,000,000 | ) | (2,000 | ) | 2,000 | - | - | - | ||||||||||||||||
Shares issued with merger | 3,000,000 | 300 | (300 | ) | - | - | - | |||||||||||||||||
Contributed capital | - | - | 2,400 | - | - | 2,400 | ||||||||||||||||||
Recapitalization of reverse merger | - | - | (650 | ) | - | - | (650 | ) | ||||||||||||||||
Common stock issued for cash | 5,005,000 | 501 | 9,999 | (30 | ) | - | 10,470 | |||||||||||||||||
Common stock issued for cash – related party | 4,405,000 | 440 | - | - | - | 440 | ||||||||||||||||||
Net income | - | - | - | - | 25,385 | 25,385 | ||||||||||||||||||
Balance, December 31, 2018 | 12,410,000 | 1,241 | 13,920 | (30 | ) | 20,294 | 35,425 | |||||||||||||||||
Common stock issued for cash | 850,000 | 85 | 149,915 | 30 | - | 150,030 | ||||||||||||||||||
Common stock issued for license agreement – related party | 5,000,000 | 500 | 149,500 | - | 150,000 | |||||||||||||||||||
Common stock issued for services | 175,000 | 18 | 43,732 | - | - | 43,750 | ||||||||||||||||||
Contributed capital | - | - | 1,250 | - | - | 1,250 | ||||||||||||||||||
Net loss | - | - | - | - | (442,806 | ) | (442,806 | ) | ||||||||||||||||
Balance, December 31, 2019 | 18,435,000 | $ | 1,844 | $ | 358,317 | $ | - | $ | (422,512 | ) | $ | (62,351 | ) |
The accompanying notes are an integral part of these financial statements.
CannAssist International Corp.
Statements of Cash Flows
For the year ended December 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (442,806 | ) | $ | 25,385 | |||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
Recapitalization of reverse merger | - | (650 | ) | |||||
Common stock issued to licensing expense – related party | 150,000 | - | ||||||
Common stock issued for services | 43,750 | - | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Accounts receivable | 55,024 | (56,160 | ) | |||||
Inventory | (30,828 | ) | (19,764 | ) | ||||
Prepaid expenses and other assets | 56,462 | (62,173 | ) | |||||
Accounts payable and accrued liabilities | 33,966 | 98,686 | ||||||
Customer deposits | (5,011 | ) | 59,671 | |||||
Net cash provided by operating activities | (139,443 | ) | 44,995 | |||||
Cash flows from Investing activities: | - | - | ||||||
Cash flows from Financing activities: | ||||||||
Proceeds from loans - related party | 12,450 | 8,666 | ||||||
Repayment of related party loans | (11,617 | ) | - | |||||
Contributed capital | 1,250 | 2,400 | ||||||
Proceeds from sale of common stock | 150,030 | 10,910 | ||||||
Net cash provided by financing activities | 152,113 | 21,976 | ||||||
Net increase in cash | 12,670 | 66,971 | ||||||
Cash, beginning of year | 67,351 | 380 | ||||||
Cash, end of year | $ | 80,021 | $ | 67,351 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for taxes | $ | - | $ | - |
The accompanying notes are an integral part of these financial statements.
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1 NATURE- DESCRIPTION OF OPERATIONSBUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Iris Grove Acquisition Corporation ("the Company"HISTORY
Description of business
CannAssist International Corp. (the “Company” or “CannAssist”) was incorporated on May 17, 2017 under the laws of the state of Delaware under the name Iris Grove Acquisition Corporation to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. On May 23, 2018 the Company changed its name to CannAssist International Corporation.
On June 18, 2018, the Company cancelled all 20,000,000 shares of its issued and outstanding stock and issued 3,000,000 shares of common stock pursuant to Section 4(a)(2) of the Securities Act of 1933 at par representing 100% of the total outstanding common stock at the time. With the issuance of the stock and the redemption of the 20,000,000 shares of stock, the Company effected a change in its control and the new majority shareholder was elected as the new management of the Company.
On July 12, 2018, the “Company, entered into a share exchange acquisition agreement with Xceptor LLC, a private company organized under the laws of Wyoming (“Xceptor”). The Acquisition was effected by the Company through the exchange of all the outstanding membership interests of Xceptor for 3,000,000 shares of common stock of the Company, valued at $0.0001 per share. At the time of the Acquisition, there was one shareholder of the Company who was also a shareholder and manager of Xceptor. Xceptor has become a wholly owned subsidiary of the Company and the Company has taken over its operations and business plan. Prior to the Acquisition, the Company had no ongoing business or operations. Since the Company and Xceptor were entities under common control prior to the Acquisition, the transaction is accounted for as a restructuring transaction. The Company has beenrecast prior period financial statements to reflect the conveyance of Xceptor’s common shares as if the restructuring transaction had occurred as of the earliest date of the financial statements.
CannAssist produces and sells products formulated using its cannabidiol ("CBD") product, “Cibidinol,” which is formulated based on a process developed by its founder Mark Palumbo. CBD is a non-psychoactive compound found in hemp. CannAssist’s initial research and development work, aimed at enhancing the bioavailability of desired molecular structures, resulted in the developmental stage since inception and its
operations to date have been limited to issuing shares to its original
shareholders. The Company will attempt to locate and negotiate with a business
entity for the combination of that target company with the Company. The
combination will normally take the formcreation of a merger, stock-for-stock exchange
or stock-for-assets exchange. Inline of CBD products, most instances the target companynotably its CBD product, Cibidinol. Cibidinol will wish
to structure the business combination to be within the definitionavailable in a line of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended. No assurances can be givenconsumable and topical products that the Company believes will be successful
in locating or negotiating with any target company. make enhanced CBD products more available and accessible to consumers.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company has been
formed to provide a method for a foreign or domestic private company to
become a reporting company with a class of securities registered under the
Securities Exchange Act of 1934.
BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed
to assist in understanding the Company's financial statements. SuchCompany’s financial statements and accompanying notes are the representations of the Company's
management, who are responsible for their integrity and objectivity. These
accounting policies conform tohave been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“U.S. GAAP”) in all material respects, and have
been consistently applied in preparing the accompanying financial statements.
The Company has not earned any revenue from operations since inception.
Accordingly, the Company's activities have been accounted for as those.
Use of a "Development Stage Enterprise" as set forth in ASC 915, "Development
Stage Entities." Among the disclosures required by ASC 915, are that the
Company's financial statements be identified as those of a development stage
company, and that the statements of operations, stockholders' equity and cash
flows disclose activity since the date of the Company's inception. The Company
chose December 31 as its fiscal year end.
USE OF ESTIMATES
Estimates
The preparation of financial statements in conformity with GAAPgenerally 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 periods.period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
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. We believe we are not exposed to any significant credit risk on cash.
Cash and cash equivalents include cash on hand and on deposit at banking
institutions as well as
The Company considers all highly liquid short-term investments with original
maturitiesa maturity of 90 daysthree months or less. less when purchased to be cash equivalents. There were no cash equivalents for the year ended December 31, 2019 or 2018.
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Accounts Receivable
Revenues that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount of receivables to its net realizable value when needed. The allowance for uncollectible amounts is evaluated quarterly.
Fair value of financial instruments
The Company did not havefollows 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 (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 (3) 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 (3) 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, equivalentsprepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2019.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery.
The Company recognizes revenue when product is shipped. The Company will often receive payment and/or pay for the cost of goods prior to shipping. When this occurs, the result is both a prepaid for the supplies to be used in their product and a customer deposit. As of December 31, 2017.
CONCENTRATION OF RISK
Financial instruments that potentially subject2019, the Company has a prepaid expense of $4,145 and customer deposits of $54,660, for orders to concentrations
of credit risk consist principally of cash. The Company places its cash with
high quality banking institutions. The Company did not have cash balancesbe shipped in excess of the Federal Deposit Insurance Corporation limit asQ1, 2020. As of December 31, 2017.
6
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IRIS GROVE ACQUISITION CORPORATION
Notes2018, the Company has a prepaid expense of $62,173 and customer deposits of $59.671, for orders to Financial Statements
INCOME TAXESbe shipped in Q1, 2019.
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Cost of Sales
Cost of sales is determined on the basis of the cost of production or the purchase of goods, adjusted for the variation of inventory Cost of sale is recognized as the direct cost of products or services sold during the period.
Income taxes
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under ASC 740, "Income Taxes,"this method, deferred tax assets and liabilities are recognized forbased on the future tax consequences attributable to temporary differences between the financial statement carrying amountsand tax bases of existing assets and liabilities and their respectiveusing enacted tax bases.rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established whenThe effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that some or allthe tax position will be sustained on examination by the taxing authorities, based on the technical merits of the deferredposition. The tax assets will notbenefits recognized in the financial statements from such a position should be realized. Asmeasured based on the largest benefit that has a greater than fifty percent (50%) likelihood of December 31, 2017 there werebeing realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no deferred taxes duematerial adjustments to its liabilities for unrecognized income tax benefits according to the uncertaintyprovisions of Section 740-10-25.
Stock-based Compensation
We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the realizationconsideration received or the fair value of net operating loss or carry forward priorthe equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to expiration.
LOSS PER COMMON SHARE
Basic lossnonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
Net income (loss) per common share
Net income (loss) per common share excludes dilution andis computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net lossincome (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding during the period. Diluted loss perand potentially outstanding common share reflect the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the loss of the entity. As
of December 31, 2017, there are no outstanding dilutive securities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows guidance for accounting for fair value measurements of
financial assets and financial liabilities and for fair value measurements
of nonfinancial items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. Additionally, the Company adopted
guidance for fair value measurement related to nonfinancial items that are
recognized and disclosed at fair value in the financial statements on a
nonrecurring basis. The guidance establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to measurements involving significant unobservable inputs
(Level 3 measurements). The three levels of the fair value hierarchy are as
follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilitiesshares assumes that the Company has the ability to access at the
measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
The carrying amounts of financial assets suchincorporated as cash approximate their fair
values because of the short maturitybeginning of these instruments.
NOTE 2 - GOING CONCERNthe first period presented. The Company has not yet generated any revenue since inception to date and
has sustained operating losses of $4,312 during the period ended December 31,
2017. The Company had a working capital deficit of $2,000 and an accumulated
deficit of $4,312no dilutive shares as of December 31, 2017.2019 and 2018.
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
Recently issued accounting pronouncements
Topic 606, Revenue from Contracts with Customers, of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). The Company's continuation as a
going concernguidance in ASC 606 was originally issued by the FASB in May 2014 in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Since then, the FASB has issued several ASUs that have revised or clarified the guidance in ASC 606. The Company has evaluated the impact of this accounting standard update and noted that it has had no material impact.
On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is dependent on its abilityintended to generate sufficient cash flows
from operationsreduce cost and complexity and to meet its obligations and/or obtaining additional financing
from its members or other sources, as may be required.
7
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IRIS GROVE ACQUISITION CORPORATION
Notesimprove financial reporting for share-based payments to Financial Statements
The accompanying financial statements have been prepared assuming thatnonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the Companynew standard, companies will continue as a going concern; however, the above condition
raises substantial doubt about the Company's ability to do so. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classifications of liabilities that may result should the Company be unable to
continue as a going concern.
In order to maintain its current level of operations, the Company will require
additional working capital from either cash flow from operations or from the
sale of its equity. However, the Company currently has no commitments
from any third parties for the purchase of its equity. If the Company is unable
to acquire additional working capital, it willlonger be required to significantly
reduce its current level of operations.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC718 and forgo revaluing the award after this date. The guidance is effective for interim and annual periods beginning after December 15, 2018.
In January 2017, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU No.an Accounting Standards Update (“ASU”) 2017-01, "BusinessBusiness Combinations (Topic 805): Clarifying the Definition of a Business"Business. The amendments in this ASUupdate clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals)or disposals of assets or businesses. Basically these amendments provide a screen to determine
when a set is not a business. If the screen is not met, the amendments
in this ASU first, require that to be consideredThe definition of a business a set
must include, at a minimum, an inputaffects many areas of accounting including acquisitions, disposals, goodwill, and a substantive process that
together significantly contribute to the ability to create outputconsolidation. The guidance is effective for interim and second, remove the evaluation of whether a market participant could
replace missing elements. These amendments take effect for public
businesses for fiscal yearsannual periods beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginningbe applied prospectively on or after December 15,
2018, and interim periods within annual periods beginning after
December 15, 2019.the effective date. The Company does not expect thatis in the adoptionprocess of evaluating the impact of this guidance will have a material impact on its consolidated
financial statements.
accounting standard update.
In May 2017,August 2015, the FASB issued ASU 2017-09, "Scope2015-14, Deferral of Modification
Accounting",the Effective Date, which amendsamended the scope of modification accountingeffective date for share-based payment arrangements, provides guidance on the types of
changesnonpublic entities to the terms or conditions of share-based payment awards to
which an entity would be required to apply modification accounting
under ASC 718. For all entities, the ASU is effective for annual
reporting periods, including interim periods within those annual reporting periods beginning after December 15, 2017. Early adoption2018. In March 2016, the FASB issued an update (ASU 2016-08) to ASC 606, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the guidance on principal versus agent considerations. In April 2016, the FASB issued an update (ASU 2016-10) to ASC 606, Identifying Performance Obligations and Licensing, which provides clarification related to identifying performance obligations and licensing implementation guidance under ASU 2014-09. In May 2016, the FASB issued an update (ASU 2016-12) to ASC 606, Narrow-Scope Improvements and Practical Expedients, which amends guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB issued an update (ASU 2016-20) to ASC 606, Technical Corrections and Improvements, which outlines technical corrections to certain aspects of the new revenue recognition standard such as provisions for losses on construction type contracts and disclosure of remaining performance obligations, among other aspects. The effective date and transition requirements are the same as those in ASU 2014-09 for all subsequent clarifying guidance discussed herein.
The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). As an Emerging Growth Company, the standard is permitted, including adoptioneffective for the Company’s 2019 annual reporting period and for interim periods after 2019. The Company is in the process of analyzing the potential impact this standard will have on its consolidated financial position and results of operations. The Company expects to apply the modified retrospective method upon adoption.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any interim period. Thematerial impact on the financial statements unless otherwise disclosed, and the Company does not expectbelieve that adoption of this guidance willthere are any other new accounting pronouncements that have been issued that might have a material impact on its consolidatedfinancial position or results of operations.
F-9 |
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and related
disclosures.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18,
"Statementsatisfaction of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18").liabilities in the normal course of business. The new guidance is intendedCompany has generated revenues of $686,400 during the year ended December 31, 2019 and had a net loss of $442,806 (which included $193,750 on non-cash stock compensation expense) for the year ended December 31, 2019. The Company has an accumulated deficit of $422,512 as of December 31, 201. 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 reduce diversity in practice by adding or
clarifying guidance on classification and presentationthe attainment of changes in
restricted cash on the statement of cash flows. ASU 2016-18 is effectivecontinued profitable operations are necessary for annual and interim periods beginning after December 15, 2017. Early
adoption is permitted. The amendments in this update should be applied
retrospectively to all periods presented. Managementbelieves that this
ASU will only impact the Company if it has restricted cash into continue operations. There is no guarantee that the future.
In August 2016,Company will be able to obtain the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic
230): Classification of Certain Cash Receiptsnecessary financing or profitable operations. These conditions and Cash Payments" ("ASU 2016-
15"). ASU 2016-15 will make eight targeted changesthe ability to how cash receipts and
cash payments are presented and classified insuccessfully resolve these factors raise substantial doubt about the statement of cash flows.
ASU 2016-15 is effective for fiscal years beginning after December 15, 2017.Company’s ability to continue as a going concern. The new standard will require adoption on a retrospective basis unless it
is impracticable to apply, in which case it would be required to apply the
amendments prospectively asfinancial statements of the earliest date practicable. Management
believesCompany do not include any adjustments that may result from the impactoutcome of this ASU to the Company's financial statements
would be insignificant.
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force) and the United States Securities and Exchange
Commission did not or are not believed by management to have a material
impact on the Company's present or future financial statements.
these aforementioned uncertainties.
NOTE 4 ACCRUED LIABILITIES– LOAN PAYABLE
On October 11, 2017, the Company received a $1,000 loan from a third party. The loan is unsecured, due on demand and non-interest bearing.
NOTE 5 – RELATED PARTY TRANSACTIONS
Marla Palumbo has advanced the Company a limited amount of funds to cover some general operating expenses and travel costs. These advances are unsecured, due on demand and non-interest bearing. As of December 31, 2017,2019 and 2018, the balance due to Ms. Palumbo for cash advances is $9,498 and $300, respectively. Ms. Palumbo is the President of the Company had accrued professional feesand wife of $2,000.
NOTE 5 STOCKHOLDERS' DEFICIT
the CEO, Mark Palumbo.
On May 17, 2017,June 29, 2018, Ms. Palumbo advanced the Company issued 20,000,000 founders common stock$6,000 for general operating expenses. The advance is unsecured, due on demand and non-interest bearing. During the year ended December 31, 2019, the $6,000 was repaid.
During the year ended December 31, 2018, EME, Ltd. advanced the Company $2,366 to two directorspay for certain operating expenses. EME, Ltd. is owned by Mark Palumbo, CEO. The advance was repaid during the year ended December 31, 2019. The advance was unsecured, non-interest bearing and officers pro ratadue on demand. In addition, there is $9,857 and $4,373 of accounts payable due to EME, Ltd as founder sharesof December 31, 2019 and 2018.
During the years ended December 31, 2019 and 2018, the Company paid sales commissions of $25,562 and $28,655, respectively, to EME Ltd.
During the years ended December 31, 2019 and 2018, respectively, the Company incurred $6,400 and $4,800 of expense for services
renderedMatthew Palumbo for product design services. Matthew Palumbo is the son of Mark Palumbo, CEO.
On April 29, 2019, the Company entered into a Technology License Agreement with Mark Palumbo (“Licensor”) whereby the Licensor granted to the Company an exclusive worldwide license (the “License”) to use, market, promote and distribute certain technology related to a provisional patent application for a “Process for creating Carbohydrate Complexes with Cannabinoids and other Hydrophobic Molecules in large scale,” 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”). The initial term of the License is 5-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 5,000,000 restricted shares of its common stock, valued at $0.0001 par value per share, for a
totalat the effective date of $2,000. Thethe agreement, and shall issue to the Licensor an additional 1,000,000 restricted shares of its common stock, valued at par value per share, at the commencement of each Renewal Term.
F-10 |
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 6 – COMMON STOCK
During the year ended December 31, 2018, the Company is authorized to issue 100,000,000sold 5,005,000 shares of common stock and 20,000,000 sharesto third parties for total cash proceeds of preferred stock.$10,500. As of December 31, 2017, 20,000,0002018, $30 had not been collected and has been debited to stock subscription receivable. The $30 was collected during the year ended December 31, 2019.
Pursuant to the terms of the licensing agreement with Mark Palumbo (Note 5) the Company issued 5,000,000 shares of common stock. The shares were valued at $0.03, the average price that common stock has recently been sold for, for total non-cash expense of $150,000.
During year ended December 31, 2019, the Company granted 175,000 shares of common stock for services. The shares were valued at $0.25 for total non-cash expense of $43,750.
During the year ended December 31, 2019, the Company sold 850,000 shares of common stock for total cash proceeds of $150,000.
NOTE 7 – INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and no
preferred stock were issuedoperating loss and outstanding.
NOTE 6 SUBSEQUENT EVENT
Managementtax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used due to the new tax law recently enacted.
Net deferred tax assets consist of the following components as of December 31:
2019 | 2018 | |||||||
Federal income tax benefit attributable to: | ||||||||
Current operations | $ | 93,000 | $ | (6,748 | ) | |||
Less: valuation allowance | (93,000 | ) | 6,748 | |||||
Net provision for Federal income taxes | $ | - | $ | - |
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the period ended December 31, due to the following:
2019 | 2018 | |||||||
Deferred Tax Assets: | ||||||||
NOL Carryover | $ | 88,700 | $ | 1,070 | ||||
Less valuation allowance | (88,700 | ) | (1,070 | ) | ||||
Net deferred tax assets | $ | - | $ | - |
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
ASC Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2019, the Company had no accrued interest or penalties related to uncertain tax positions.
F-11 |
CANNASSIST INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 8 – SUBSEQUENT EVENTS
On March 30, 2020, the Company issued 1,000 shares of its Series A Preferred Stock to Mark Palumbo, an officer and director of the Company, for $0.0001 per share in reliance on the exemption from registration under Section 4(a)(2). 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.
On April 1, 2020, the Company entered into an agreement with an independent consultant pursuant to which the consultant shall be paid a cash monthly retainer of $5,000 a month and shall be issued 110,000 warrants to purchase shares of the common stock of the Company at an exercise price equal to $0.0001 per share, subject to certain conditions regarding vesting. This agreement has a term of 12 months and shall be automatically renewed on a month to month basis unless terminated upon 30 days’ written notice.
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through March 20, 2018,
the date whichthat the financial statements were available to be issued.
Except for the events disclosed above, allissued and has determined that it does not have any material subsequent events requiring recognition as of December 31 2017 have been incorporated
intoto disclose in these financial statements in accordance with FASB ASC Topic
855, "Subsequent Events."
8
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SIGNATURES
Pursuant toother than the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
IRIS GROVE ACQUISITION CORPORATION
By: /s/ James Cassidy, President
Principal executive officer
Dated: April 4, 2018
By: /s/ James Cassidy
Principal financial officer
Dated: April 4, 2018
Pursuant to the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME OFFICE DATE
/s/ James Cassidy Director April 4, 2018
/s/ James McKillop Director April 4, 2018
F-12