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Filed: 12 Nov 20, 7:00pm

 

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 

ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

  o   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

 

Commission file number:  000-55809

 

CANNASSIST INTERNATIONAL CORP.

 (Exact name of registrant as specified in its charter)

 

 Delaware  82-1873116
(State or Other Jurisdiction of Incorporation or
Organization)
 (I.R.S. Employer Identification No.)
   
   
855 South Mission Ave, Ste K #400, Fallbrook, California 92028
(Address of Principal Executive Offices) (Zip Code)
   

Registrant’s telephone number, including area code: (760) 990-3091 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading Symbol(s)Name of each exchange on which
registered
Common StockCNSCOTCQB

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days).    Yes  x    No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer¨Accelerated filer¨
Non-accelerated filerxSmaller Reporting Companyx
Emerging growth companyx  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(1) of the Exchange Act. ¨

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No x  

 

As of November 12, 2020, the Company had 18,435,000 shares of its common stock, par value $.0001 per share, issued and outstanding.

 

 

 

  
 

 

TABLE OF CONTENTS

 

PART I  
   
Item 1.Condensed Unaudited Financial Statements3
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of
Operations
13
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk15
   
Item 4.Controls and Procedures16
   
PART II  
   
Item 1.Legal Proceedings17
   
Item 1A.Risk Factors17
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds17
   
Item 3.Defaults Upon Senior Securities17
   
Item 4.Mining Safety Disclosures17
   
Item 5.Other Information17
   
Item 6.Exhibits18
   
 Signatures19

 

 2 
 

 

 PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

 

CANNASSIST INTERNATIONAL CORP.

INDEX TO FINANCIAL STATEMENTS

 

 

Balance Sheets as of September 30, 2020 (unaudited) and December 31, 20194
  
Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)5
  

Statements of Changes in Stockholders’ Equity (Deficit) for the nine months ended September 30, 2020

and 2019 (unaudited)

6
  
Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)7
  
Notes to Condensed Financial Statements (unaudited)8

 

 3 
 

 

CannAssist International Corp.

Balance Sheets

  September 30,
2020
  December 31,
 2019
 
ASSETS (unaudited)    
Current assets:      
Cash $57,421  $80,021 
Accounts receivable  68,202   1,135 
Prepaid expenses  4,308   4,145 
Other asset  53   1,567 
Inventory  95,866   50,592 
         
Total assets $225,850  $137,460 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current liabilities:        
Accounts payable and accruals $243,848  $124,796 
Accounts payable – related party  20,370   9,857 
Convertible notes payable, net of debt discount of $3,451  26,049   - 
Customer deposits  -   54,660 
Due to a related party  22,970   9,498 
Loans payable  11,000   1,000 
Total current liabilities  324,237   199,811 
         
Commitments and contingencies  -   - 
         
Stockholders’ 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 issued and
outstanding
  1,844   1,844 
Additional paid in capital  3,142,299   358,317 
 Accumulated deficit  (3,242,530)  (422,512)
Total Stockholders’ deficit  (98,387)  (62,351)
         
Total Liabilities and Stockholders’ Deficit $225,850  $137,460 

 

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

 

 4 
 

 

CannAssist International Corp.

Statements of Operations

(Unaudited)

  

For the Three Months Ended
September 30,

  For the Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
Revenue $409,138  $77,264  $679,050  $515,942 
Cost of revenue  273,325   15,161   416,923   343,729 
Gross margin  135,813   62,103   262,127   172,213 
                 
Operating expenses:                
     General and administrative  56,112   70,163   210,535   194,771 
     General and administrative– related party  -   3,350   -   157,450 
     Commissions – related party  8,527   11,395   12,900   23,962 
     Professional fees  29,600   56,120   86,450   161,152 
     Preferred stock issued for change of control  -   -   2,765,250   - 
Total operating expenses  94,239   141,028   3,075,135   537,335 
                 
Income (loss) from operations  41,574   (78,925)  (2,813,008)  (365,122)
                 
Other expense:                
     Interest expense  (2,653)  (1,903)  (7,010)  (2,419)
Total other expense  (2,653)  (1,903)  (7,010)  (2,419)
                 
Income (loss) before provision for income taxes  38,921   (80,828)  (2,820,018)  (367,541)
Provision for income taxes  -   -   -   - 
                 
Net income (loss) $38,921  $(80,828) $(2,820,018) $(367,541)
                 
Income (loss) per share, basic and diluted $0.00  $(0.00) $(0.15) $(0.03)

Weighted average shares outstanding, basic

and diluted

  18,435,000   17,878,478   18,435,000   12,431,452 

 

 

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

 

 5 
 

 

CannAssist International Corp.

Statements of Changes in Stockholders’ Deficit

For the Nine Months Ended September 30, 2020 and 2019

(Unaudited)

 

     Additional  Stock     Total 
  Common Stock  Paid-in  Subscription  Retained  Stockholders' 
  Shares  Amount  Capital  Receivable  Earnings  Deficit 
Balance, December 31,
2018
 12,410,000  $1,241  $13,920  $(30)  $20,294  $35,425 
Cash collected on receivable              30   -   30 
Net loss  -   -   -   -   (36,150)  (36,150)
Balance, March 31, 2019  12,410,000   1,241   13,920   -   (15,856)  (695)
Common stock issued for
license agreement – related party
  5,000,000   500   149,500   -   -   150,000 
Net loss  -   -   -   -   (250,563)  (250,563)
Balance, June 30, 2019  17,410,000   1,741   163,420   -   (266,419)  (101,258)
Common stock issued for cash  850,000   85   149,915   -   -   150,000 
Common stock issued for services  125,000   13   31,237   -   -   31,250 
Net loss  -   -   -   -   (80,828)  (80,828)
Balance, September 30, 2019  18,385,000  $1,839  $344,572  $-  $(347,247) $(836)

 

 

                   
           Additional     Total 
  Preferred Stock  Common Stock  Paid-in  Retained  Stockholders' 
  Shares  Amount  Shares  Amount  Capital  Earnings  Deficit 
Balance, December 31, 2019  -  $-   18,435,000  $1,844  $358,317  $(422,512) $(62,351)
Preferred stock issued for change of control  1,000   -   -   -   2,765,250   -   2,765,250 
Net loss  -   -   -   -   -   (2,775,369)  (2,775,369)
Balance, March 31, 2020  1,000   -   18,435,000   1,844   3,123,567   (3,197,881)  (72,470)
Warrants issued  -   -   -   -   9,022   -   9,022 
Net loss  -   -   -   -   -   (83,570)  (83,570)
Balance, June 30, 2020  1,000  $-   18,435,000   1,844   3,132,589   (3,281,451)  (147,018)
Warrants issued  -   -   -   -   9,710   -   9,710 
Net loss  -   -   -   -   -   38,921   38,921 
Balance, September 30, 2020  1,000  $-   18,435,000  $1,844  $3,142,299  $(3,242,530) $(98,387)

 

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

 

 6 
 

  

CannAssist International Corp.

Statements of Cash Flows

(Unaudited)

 

 

  For the Nine Months Ended September 30, 
  2020  2019 
Cash flows from operating activities:      
Net loss $(2,820,018) $(367,541)
Adjustments to reconcile net loss to net cash
used in operating activities:
        
Preferred stock issued for change of control  2,765,250   - 
Warrant expense  12,520   - 
Debt discount  2,763     
Common stock issued for licensing expense – related party  -   150,000 
Common stock issued for services  -   31,250 
Changes in Operating Assets and Liabilities:        
Accounts receivable  (67,066)  (2,472)
Inventory  (45,275)  (19,971)
Prepaid expenses and other assets  1,351   8,045 
Accounts payable and accrued liabilities  129,564   68,020 
Customer deposits  (54,660)  (456)
Net cash used by operating activities  (75,571)  (133,125)
         
Cash flows from Investing activities:  -   - 
         
Cash flows from Financing activities:        
Proceeds from loans - related party  18,981   12,450 
Repayment of related party loans  (5,510)  (11,618)
Proceeds from loans payable  10,000   - 
Proceeds from convertible loans payable  29,500   - 
Proceeds from sale of common stock  -   150,000 
Proceeds from stock subscription receivable  -   30 
Net cash provided by financing activities  52,971   150,862 
         
Net decrease in cash  (22,600)  17,737 
Cash, beginning of period  80,021   67,351 
Cash, end of period $57,421  $85,088 
         
Supplemental Disclosure of Cash Flow Information:        
Cash paid for interest $-  $- 
Cash paid for taxes $-  $- 

 

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

 

 7 
 

 

CANNASSIST INTERNATIONAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

 

NOTE 1 - DESCRIPTION OF BUSINESS AND 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 recast 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 creation of a line of CBD products, most notably its CBD product, Cibidinol. Cibidinol will be available in a line of consumable and topical products that the Company believes will make enhanced CBD products more available and accessible to consumers.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company’s financial statements have been prepared in accordance with accounting 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.

 

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.

 

 8 
 

 

CANNASSIST INTERNATIONAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 both a prepaid expense of $4,145 and customer deposits of $54,660, for orders to be shipped in Q1, 2020.

 

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.

 

 Recently issued accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 - GOING CONCERN

 

The accompanying unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated revenues of $679,050 during the nine months ended September 30, 2020 and had a net loss of $2,820,018 for nine months ended September 30, 2020, which consisted of a $2,765,250 non-cash expense for the issuance of preferred stock. The Company has an accumulated deficit of $3,242,530 as of September 30, 2020. The Company requires capital for its contemplated operational and marketing activities. The obtainment of additional financing, through an initial capital raise, the successful development of the Company’s contemplated plan of operations, and its transition to the attainment of continued profitable operations are necessary for the Company to continue operations. There is no guarantee that the Company will be able to obtain the necessary financing or profitable operations. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

NOTE 4 – LOANS 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.

 

On June 29, 2020, the Company received a $10,000 loan from a third party. The loan is unsecured, due on demand and non-interest bearing.

 

 9 
 

 

CANNASSIST INTERNATIONAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE

 

On June 2, 2020, the Company issued a convertible note payable to a third party for $10,000. The note is unsecured, non-interest bearing and is due and payable in six months. If the loan is not repaid by the due date is can be converted into shares of common stock at $0.25 per share. In addition, the Company issued warrants to purchase 13,500 shares of common stock. The warrants have an exercise price of $0.50 and expire in five years.

 

On June 12, 2020, the Company issued a convertible note payable to a third party for $5,000. The note is unsecured, non-interest bearing and is due and payable in six months. If the loan is not repaid by the due date is can be converted into shares of common stock at $0.25 per share. In addition, the Company issued warrants to purchase 6,667 shares of common stock. The warrants have an exercise price of $0.50 and expire in five years.

 

During July and August 2020, the Company issued a convertible notes payable to third parties for a total of $14,500. The notes are all unsecured, non-interest bearing and due and payable in six months. If the loans are not repaid by the due date they can be converted into shares of common stock at $0.25 per share. In addition, the Company issued warrants to purchase 20,669 shares of common stock. The warrants have an exercise price of $0.50 and expire in five years.

 

The above notes are shown net of $3,451 of debt discount.

 

NOTE 6 – 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 September 30, 2020, and December 31, 2019, the balance due to Ms. Palumbo for cash advances is $22,670 and $9,498, respectively. Ms. Palumbo is the President of the Company and wife of the CEO, Mark Palumbo.

 

During the nine months ended September 30, 2020 and 2019, the Company paid sales commissions of $12,900 and $23,962, respectively, to EME Ltd.

 

During the nine months ended September 30, 2020 and 2019, respectively, the Company incurred $0 and $7,450 of expense for Matthew 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 par value per share, at the effective date of the 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.

 

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. Based on the rights of the designation the shares of preferred stock were value at 60% of the value of the total common stock outstanding. The shares of common stock have a current fair value of $0.25 per shares resulting in total non-cash expense of $2,765,250.

 

 10 
 

 

CANNASSIST INTERNATIONAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

 

NOTE 7 – PREFERRED STOCK

 

The Company has designated 1,000 shares of Series A Preferred Stock. The shares of Series A Preferred Stock have a par value of $0.0001 per share. The Series A Preferred Shares do not have a dividend rate or liquidation preference and are not convertible into shares of common stock. Series A Preferred Stock, voting together as a class, have the right to vote 60% of the Company’s voting shares on any and all shareholder matters (the “Majority Voting Rights”). Additionally, the Company shall not adopt any amendments to the Company’s Bylaws, Articles of Incorporation, as amended, make any changes to the Certificate of Designations establishing the Series A Preferred Stock, or effect any reclassification of the Series A Preferred Stock, without the affirmative vote of at least a majority of the outstanding shares of Series A Preferred Stock. However, the Company may, by any means authorized by law and without any vote of the holders of shares of Series A Preferred Stock, make technical, corrective, administrative or similar changes to such Certificate of Designations that do not, individually or in the aggregate, adversely affect the rights or preferences of the holders of shares of Series A Preferred Stock. Other than the Majority Voting Rights, the Series A Preferred Stock does not have any other dividend, liquidation, conversion, or redemption rights, whatsoever.

 

NOTE 8 – WARRANTS

 

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 $0.25 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.

 

The warrants were evaluated for purposes of classification between liability and equity. The warrants do not contain features that would require a liability classification and are therefore considered equity. The warrants were fair valued at $25,038. The expense is being amortized over the one-year term of the agreement. The Black Scholes pricing model was used to estimate the fair value of the Warrants issued with the following inputs:

 

Warrants  110,000 
Share price $0.25 
Exercise Price $0.25 
Term  10 years 
Volatility  103.5%
Risk Free Interest Rate  2.49%
Dividend rate  - 

 

During the nine months ended September 30, 2020, the Company issued 40,836 warrants in conjunction with the issuance of convertible promissory notes (Note 5). The warrants have an exercise price of $0.50 and expire in five years. Using the fair value calculation, the relative fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of 6,212, accounted for in additional paid in capital.

 

The Black Scholes pricing model was used to estimate the fair value of the warrants issued with the following inputs: 

 

Warrants  40,836 
Share price $0.25 
Exercise Price $0.25 
Term  5 years 
Volatility  103.5 – 111.89%
Risk Free Interest Rate  0.22 - 1.88%
Dividend rate  - 

 

 11 
 

 

CANNASSIST INTERNATIONAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

 

NOTE 8 – WARRANTS (CONTINUED)

 

A summary of the status of the Company’s outstanding stock warrants and changes during the year is presented below:

Activity for the nine months ended September 30, 2020 is as follows: 

 

  Number of
Warrants
  

Weighted
Average
Exercise

Price

  Weighted
Average
Remaining
Contract
Term
  

Aggregate

Intrinsic

Value

 
Outstanding at December 31, 2019 -  -  -    
Granted  150,836  $0.25   8.22  $- 
Expired  -  $-   -  $- 
Exercised  -  $-   -  $- 
Outstanding at September 30, 2020  150,836  $0.25   8.22  $- 
Exercisable at September 30, 2020  76,000  $0.25   8.22  $- 

 

 

Range of Exercise
Prices
  Number Outstanding 9/30/2020  Weighted Average Remaining
Contractual Life
  Weighted Average
Exercise Price
 
$0.25   150,836   8.22 years  $0.25 

  

 

NOTE 9 – SUBSEQUENT EVENTS

 

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

 12 
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following information should be read in conjunction with our financial statements and related notes thereto included in Part I, Item 1, above.

 

Forward Looking Statements

 

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:

 

·our future strategic plans

·our future operating results;

·our business prospects;

·our contractual arrangements and relationships with third parties;

·the dependence of our future success on the general economy;

·our possible future financings; and

·the adequacy of our cash resources and working capital.

 

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

Executive Overview

 

CannAssist International Corporation (“CannAssist” or the "Company") was incorporated on May 17, 2017 under the laws of the State of Delaware.

 

CannAssist produces and sells 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, most notably its CBD product, Cibidinol. Cibidinol will be available in a line of consumable and topical products that the Company believes will make enhanced CBD products more available and accessible to consumers.

 

The Company's independent auditors have issued a report raising substantial doubt about the Company's ability to continue as a going concern. At present, the Company has no operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for the combination of that target company with it.

 

Results of Operation for the Three Months Ended September 30, 2020 and 2019

 

Revenues

 

For the three months ended September 30, 2020, the Company had revenues of $409,138, cost of revenue of $273,325 and a gross margin of $135,813. In comparison, for the three months ended September 30, 2019, the Company had revenue of $77,264, cost of revenue of $ 15,161 and a gross margin of $62,103. The increase in revenue, cost of revenue and gross margin is from a change in the demand for our products derived from expanded commercialization of our products.

 

General and administrative expenses

 

General and administrative expenses (“G&A”) were $56,112 for the three months ended September 30, 2020 compared to $70,163 for the three months ended September 30, 2019. The decrease in general and administrative expenses are related to decreases in expenses related to product testing, supplies and materials, insurance and travel.

 

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General and administrative expenses to a related party, were $0 for the three months ended September 30, 2020 compared to $3,350 for the three months ended September 30, 2019. General and administrative expenses to a related party, which were incurred for product design services provided by the son of the CEO, decreased because they were not recurring expenses.

 

Commissions

 

Commission expense was $8,527 for the three months ended September 30, 2020 compared to $11,395 for the three months ended September 30, 2019. Commission expense was paid to EME, LLC, a related party, and has decreased in the current period in conjunction with the decrease in sales attributable to customers managed by EME, LLC.

 

Professional fees

 

Professional fees were $29,600 for the three months ended September 30, 2020 compared to $56,120 for the three months ended September 30, 2019. Professional fees consist of audit, accounting, consulting and legal fees. The fees have decreased with the decrease in services required to comply with SEC filing requirements during the relevant periods.

 

Other expense

 

For the three months ended September 30, 2020 we incurred $2,653 of credit card interest expense compared to $ 1,903 for three months ended September 30, 2019.

 

Net Income

 

For the three months ended September 30, 2020, we realized net income of $38,921 as compared to net loss of $ 80,828 for three months ended September 30, 2019. The increase from a net loss in the prior period to net income in the current period is the result of higher revenue combined with decreased expenses.

 

Results of Operation for the Nine Months Ended September 30, 2020 and 2019

 

Revenues

 

For the nine months ended September 30, 2020, the Company had revenues of $679,050, cost of revenue of $416,923 and gross margin of $262,127. In comparison, for the nine months ended September 30, 2019, the Company had revenue of $515,942, cost of revenue of $343,729 and gross margin of $172,213. The increase in revenue, cost of revenue and gross margin is from a change in the demand for our products derived from expanded commercialization of our products.

 

General and administrative expenses

 

General and administrative expenses were $210,535 for the nine months ended September 30, 2020 compared to $194,771 for the nine months ended September 30, 2019. In general G&A expenses have increased with the increase in business activity.

 

General and administrative expenses to a related party, were $0 for the nine months ended September 30, 2020 compared to $157,450 for the nine months ended September 30, 2019. General and administrative expenses to a related party, which were a result of the issuance of 5,000,000 shares of common stock for a licensing agreement for total non-cash expense of $150,000 and for product design services provided by the son of the CEO, have decreased because they were not recurring expenses.

 

Commissions

 

Commission expense was $12,900 for the nine months ended September 30, 2020 compared to $23,962 for the nine months ended September 30, 2019. Commission expense was paid to EME, LLC, a related party, and has decreased in the current period in conjunction with the decrease in sales attributable to customers managed by EME, LLC.

 

Professional fees

 

Professional fees were $86,450 for the nine months ended September 30, 2020 compared to $161,152 for the nine months ended September 30, 2019. Professional fees consist of audit, accounting, consulting and legal fees. The fees have decreased with the decrease in services required to comply with SEC filing requirements during the relevant periods.

 

Other expense

 

For the nine months ended September 30, 2020 we incurred $7,010 of credit card interest expense compared to $2,419 for nine months ended September 30, 2019.

 

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Net Loss

 

For the nine months ended September 30, 2020, we realized a net loss of $2,820,018 as compared to net loss of $367,541 for the nine months ended September 30, 2019. The increase in net loss in the current period is primarily due to the expense incurred in connection with the issuance of preferred stock.

 

Liquidity and Capital Resources

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated revenues of $679,050 for the nine months ended September 30, 2020 and had a net loss of $2,820,018 for the nine months ended September 30, 2020. The Company has an accumulated deficit of $3,242,530 as of September 30, 2020. The Company requires capital for its contemplated operational and marketing activities. The obtainment of additional financing, through an initial capital raise, the successful development of the Company’s contemplated plan of operations, and its transition to the attainment of continued profitable operations are necessary for the Company to continue operations. There is no guarantee that the Company will be able to obtain the necessary financing or profitable operations. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

The Company used $75,571 of cash from operations for the nine months ended September 30, 2020. Net cash provided by financing activities for the nine months ended September 30, 2020 was $52,971.

 

As of September 30, 2020, the Company had $57,421 in cash.

 

Critical Accounting Estimates and Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 2 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

 

We are subject to various loss contingencies arising in the ordinary course of business.  We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies.  An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated.  We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

 

Off-Balance Sheet Arrangements 

 

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended September 30, 2020.

 

The following aspects of the Company were noted as potential material weaknesses:

 

·timely and accurate reconciliation of accounts
·lack of segregation of duties

 

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.

 

Changes in Internal Controls

 

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended September 30, 2020, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On June 2, 2020, the Company issued a convertible note payable to a third party for $10,000. The note is unsecured, non-interest bearing and is due and payable in six months. If the loan is not repaid by the due date is can be converted into shares of common stock at $0.25 per share. In addition, the Company issued warrants to purchase 13,500 shares of common stock. The warrants have an exercise price of $0.50 and expire in five years. The issuance of the promissory notes and warrants were each exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D as promulgated under the Securities Act.

 

On June 12, 2020, the Company issued a convertible note payable to a third party for $5,000. The note is unsecured, non-interest bearing and is due and payable in six months. If the loan is not repaid by the due date is can be converted into shares of common stock at $0.25 per share. In addition, the Company issued warrants to purchase 6,667 shares of common stock. The warrants have an exercise price of $0.50 and expire in five years. The issuance of the promissory notes and warrants were each exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D as promulgated under the Securities Act.

 

During July and August 2020, the Company issued convertible notes payable to third parties for a total of $14,500. The notes are all unsecured, non-interest bearing and due and payable in six months. If the loans are not repaid by the due date, they can be converted into shares of common stock at $0.25 per share. In addition, the Company issued warrants to purchase 20,669 shares of common stock. The warrants have an exercise price of $0.50 and expire in five years. The issuance of the promissory notes and warrants were each exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D as promulgated under the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINING SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None

 

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ITEM 6. EXHIBITS

 

No.Description
  
31.1Chief Executive Officer Section 302 Certification
  
31.2Chief Financial Officer Section 302 Certification
  
32.1Section 906 Certification
  
101.INSXBRL Instance Document
  
101.SCHXBRL Taxonomy Extension Schema Document
  
101.CALXBRL Taxonomy Calculation Linkbase Document
  
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
  
101.LABXBRL Taxonomy Label Linkbase Document
  
101.PREXBRL Taxonomy Presentation Linkbase Document

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CANNASSIST INTERNATIONAL CORPORATION

 

 Dated: November 12, 2020

By:  /s/ Mark Palumbo

Mark Palumbo

Chief Executive Officer

 
   
 

By: /s/ Mark Palumbo

Mark Palumbo

Chief Financial Officer

 

 

 

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