These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.
In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the
interim period ended January 31, 2022, are not necessarily indicative of the results that can be expected for the full year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2022
(UNAUDITED)
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and Description of Business
Cannagistics, Inc. (Formerly FIGO Ventures, Inc., formerly
Precious Investments, Inc.) (‘The Company’) was incorporated under the laws of the State of Nevada on May 26, 2004. The Company
was an Exploration Stage Company with the principal business being the acquisition and exploration of resource properties.
The Company had allowed its charter with the state
of Nevada to be revoked by the Secretary of State for failure to file the required annual lists and pay the required annual fees. Its
last known officers and directors reflected in the records of the Secretary of State were unresponsive or stated they were no longer involved
with the Company. The purported replacement officers and directors were unresponsive.
On September 14, 2012, NPNC Management, LLC filed a
petition in the Eighth Judicial District Court in Clark County, Nevada and was appointed custodian of the Company on January 15, 2012.
On October 24, 2012, the interim board authorized the
sale of 55,000,000 (2,200,000 split adjusted) shares of common stock for $6,000 to NPNC Management, LLC, in a private placement transaction
exempt from the Securities Act of 1933, as amended, pursuant to section 4(2) thereof and the rules and regulations promulgated there under.
On March 1, 2017, the Company then entered into a joint
venture agreement with Eddeb Management (“Eddeb”). The purpose of the joint venture is to build a fund for the purpose of
trading in precious gems, notably, colored diamonds.
On November 16, 2017, the Company entered into
an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with American Freight Xchange, Inc., a privately
held New York corporation (“American Freight”), and Shipzooka Acquisition Corp. (“Shipzooka Sub”), a newly formed
wholly owned Nevada subsidiary of Precious Investments, Inc. In connection with the closing of this merger transaction, Shipzooka Sub
merged with and into American Freight (the “Merger”) on December 5, 2017, with the filing of Articles of Merger with the Nevada
Secretary of State and Certificate of Merger with the New York Division of Corporations.
The transaction resulted in the Company acquiring Subsidiary
by the exchange of all of the outstanding shares of Subsidiary for 1,000,000 newly issued Series C Preferred shares of stock, $0.001 par
value (the “Preferred Stock”) of Parent which have conversion and voting rights of 72.5 votes for each share, representing
approximately 90.2% of the voting rights.
For accounting purposes, the transaction was treated
as a reverse merger since the acquired entity now forms the basis for operations and the transaction resulted in a change in control,
with the acquired company electing to become the successor issuer for reporting purposes. The accompanying financial statements have been
prepared to reflect the assets, liabilities and operations of American Freight Xchange, Inc. exclusive of Precious Investments, Inc since
all predecessor operations were discontinued.
As part of the transaction, amounts due to former officers
were forgiven, with the balances recorded as Contributed Capital. For equity purposes, accumulated deficit shown are those American Freight
Xchange, Inc. Shipzooka Acquisition Corp. is a dormant corporation.
On July 23, 2018, the Company amended the name of its
subsidiary, KRG Logistics, Inc., to Global3pl, Inc. (an Ontario corporation).
On September 4, 2018, the Company incorporated Cannagistics,
Inc., in the province of Ontario, Canada. This is intended to be a possible new line of business for the Company but is dormant at this
time.
On April 17, 2019, we filed Articles of Merger with
the Secretary of State of Nevada in order to effectuate a merger with our wholly owned subsidiary, Cannagistics, Inc. Shareholder approval
was not required under Section 92A.180 of the Nevada Revised Statutes. As part of the merger, our board of directors authorized a change
in our name to “Cannagistics, Inc.” and our Articles of Incorporation have been amended to reflect this name change.
On September 26, 2019, the Board of Directors approved
the registered spinout of its Global3pl, Inc., (a New York corporation) (“Global3pl”) subsidiary. Global3pl is to be a logistics
technology provider, along with the American Freight Xchange and UrbanX Platforms that have been under development by the Company.
The Board of Directors also declared a stock dividend
for all shareholders, with a record date of October 10, 2019. For every 50 shares of common stock of the Company, all shareholders of
record on the record date will receive one share of common stock in Global3pl. Global3pl will also file a registration statement as part
of its raise of capital to complete the development of American Freight Xchange, a North American freight broker-driven 3pl network to
handle the management of long haul LTL (less than truckload), and specialty freight (white glove) services and Urbanx, a North American
network of rush-messenger local trucking services for forward and reverse last mile delivery (including white glove service).
However, the Company has carefully reconsidered its
position with respect to the previously announced and subsequently amended spin off of Global3pl, Inc., (a New York corporation). Due
to the current situation resulting from the COVID-19 pandemic and especially in light of the development of the supply chain management
strategy of the Company, it has been determined that the finalization of the development of the Global3pl platform will be integral and
serve as the “engine” for the supply chain management of the Company. Therefore, at this time the “spin-off” has
been indefinitely postponed until such time and it may make sense from a business standpoint. The Company has not issued any shares in
the Global3pl, Inc (New York) subsidiary.
Effective October 1,
2019, the Company suspended operations of its subsidiary Global3pl, Inc., formerly known as KRG Logistics, Inc., (an
Ontario corporation), suspended future operations related to the operations in Mississauga, Ontario. It is in the process of collecting
accounts receivables still due and working on a plan to pay its payables. It has entered into an agreement with 10451029 Canada Inc.,
d/b/a Reliable Logistics, for the assignment and of the assets of Global3pl, Inc., (an Ontario Corporation). The transaction was completed
on November 6, 2019. The Company anticipates formally liquidating and dissolving the subsidiary in the next fiscal Quarter. This is a
separate corporation from Global3pl, Inc. (A New York corporation).
On May 6, 2021, the issuer (having been renamed, immediately
prior to this Holding Company Reorganization, from “Cannagistics, Inc.” to “Global Transition Corporation”) completed
a corporate reorganization (the “Holding Company Reorganization”) pursuant to which Global Transition Corporation, as previously
constituted (the “Predecessor”) merged with a company which became a direct, wholly-owned subsidiary of a newly formed Delaware
Corporation, Cannagistics, Inc. (in this capacity referred to as the “Holding Company”), which became the successor issuer.
In other words, the Holding Company is now the public entity, albeit with the same name as the original issue or the Predecessor. The
Holding Company Reorganization was effected by a merger conducted pursuant to Delaware General Corporation Law (the “DGCL”),
which provides for the formation of a holding company without a vote of the stockholders of the constituent corporations (such constituent
corporations being the Predecessor, as renamed to Global Transition Corporation and the newly formed Cannagistics, Inc.).
In accordance with the DGCL, Global3pl, Inc. (“Merger
Sub”), another newly formed Delaware Corporation and, prior to the Holding Company Reorganization, was an indirect, wholly owned
subsidiary of the Holding Company, merged with and into the Predecessor, with Merger Sub surviving the merger as a direct, wholly owned
subsidiary of the Holding Company (the “Merger”). The Merger was completed pursuant to the terms of an Agreement and Plan
of Merger among the Predecessor, the Holding Company and Merger Sub, dated May 6, 2021 (the “Merger Agreement”).
As of the effective time of the Merger and in connection
with the Holding Company Reorganization, all outstanding shares of common stock and preferred stock of the Predecessor were automatically
converted into identical shares of common stock or preferred stock, as applicable, of the Holding Company on a one-for-one basis, and
the Predecessor’s existing stockholders and other holders of equity instruments, became stockholders and holders of equity instruments,
as applicable, of the Holding Company in the same amounts and percentages as they were in the Predecessor immediately prior to the Holding
Company Reorganization.
The executive officers and board of directors
of the Holding Company are the same as those of the Predecessor in effect immediately prior to the Holding Company Reorganization.
For purposes of Rule 12g-3(a), the Holding Company
is the successor issuer to the Predecessor, now as the sole shareholder of the Predecessor. Accordingly, upon consummation of the Merger,
the Holding Company’s common stock was deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934,
as amended, pursuant to Rule 12g-3(a) promulgated thereunder.
On May 21, 2021,
the Company incorporated Global3pl Logistical Technologies, Inc., (a Delaware corporation) On May 21, 2021. It is a wholly owned subsidiary
of Cannagistics, Inc.
The previously executed Letter of Intent with
Recommerce Group, Inc. has expired, although the Company has continued discussions with Recommerce Group, Inc. about a potential business
combination.
On July 1, 2021, Cannagistics, Inc. (the “Company”)
entered into a Reorganization and Stock Purchase Agreement (the “Agreement”) with Availa Bio, Inc. (“Availa”)
and The Integrity Wellness Group, Inc., formerly known as Cannaworx Holdings, Inc. (“Integrity Wellness”). Pursuant to the
Agreement, the Company purchased 100% of the outstanding capital stock of Integrity Wellness from Availa in exchange for 4,400,000 shares
of the Company’s Series F Convertible Preferred Stock (the “Series F”).
The Agreement provides for certain post-closing actions
to be taken by the Company, including (i) effecting a 1-for-100 reverse stock split of the Company’s common stock (later modified
to be 1-for-40 reverse stock split), (ii) the Company using its best efforts to consummate a $5,000,000 financing, some of the proceeds
of which to be used to pay the Note as defined below, (iii) the Company effecting a name change, (iv) the officers and directors of the
Company consisting of Rob Gietl, President and Director and James W. Zimbler, Vice-President and Director, and (v) the holders of the
Company’s 10,000,000 outstanding shares of Series D Convertible Preferred Stock converting their shares into a total of 745,000,000
shares of the Company’s common stock pursuant to conversion agreements with such holders.
In connection with the Agreement, the Company borrowed
$175,000 from Cimarron Capital, Inc. (“Cimarron”) and issued Cimarron two separate Promissory Notes for $150,000 and $200,000,
respectively, both dated July 6, 2021 (the “Notes”). The Notes bears 0% interest and is payable upon the earlier of the closing
of a securities offering or July 6, 2022.
In addition, pursuant to the Agreement the Company,
either directly or through Integrity Wellness which as a result of the share exchange became a wholly owned subsidiary of the Company,
entered into the following employment and consulting agreements:
The Company previously entered into a Consulting Agreement
with Rob Geitl dated July 1, 2020, for an initial term of three years. Under this Consulting Agreement, Mr. Geitl will serve as the Chief
Executive Officer of the Company and will be compensated as follows: (i) (A) for the first year of the initial term, $15,000 per month,
(B) for the second year of the initial term, $17,500 per month, and (C) for the third year of the initial term, $20,000 per month; and
(ii) a number of shares of restricted common stock equal to 5% of the Company’s issued and outstanding common stock, or 9,158,333
shares, with one-half of such shares vesting in 18 months and the other half vesting of such shares at the end of the initial term.
The Company entered into a Consulting Agreement with
Emerging Growth Advisors, Inc., wholly owned by James W. Zimbler, dated July 1, 2021, for an initial term of three years. Under this Consulting
Agreement, Emerging Growth Advisors, Inc. will be compensated 12,500 per month and a Health Insurance Allowance of up to $1,500 per month.
The Agreement also provides that Emerging Growth Advisors, Inc., shall receive 900,000 shares of Series E Preferred Stock in exchange
for the cancellation of 6,000,000 shares of Series D Preferred Stock in the name of Emerging Growth Advisors, Inc.
The Company entered into a Consulting Agreement with
Cimarron dated July 1, 2021, for an initial term of 30 months. Under this Consulting Agreement, Cimarron will provide the Company certain
strategic and business development services in exchange for (i) 900,000 shares of its Series E Convertible Preferred Stock (the “Series
E”), (ii) a monthly fee of $5,000, and (iii) 10% of the net proceeds of any business generated for the Company by Cimarron.
The Company entered into a Consulting Agreement with
Leonard Tucker LLC (“LT LLC”) dated July 1, 2021, for an initial term of 30 months. Under this Consulting Agreement, LT LLC
will provide the Company with certain business and compliance services in exchange for (i) 1,800,000 shares of its Series E, (ii) a monthly
fee of $12,500, and (iii) 10% of the net proceeds of any business generated for the Company by LT LLC.
The Agreement also contains customary indemnification
obligations in the event of a material breach of any representation, warranty, agreement, or covenant contained in the Agreement.
On
September 15, 2021, the Company filed a DEF14C Information Statement. The DEF14C Information Statement set out the plan of the Company
to amend its name to The Integrity Wellness Group, Inc., or some other similar name, and to effectuate a reverse stock split of its common
stock of one (1) new share of common stock for each forty (40) old shares of common stock .
The corporate action change has been submitted to FINRA on October 29, 2021, and the Company is awaiting a response.
Current Projects in Development
Integrity Wellness
Our
Products
Through
Integrity Wellness we currently have 4 developed products, the majority of which we offer at retail prices ranging from approximately
$30 to $60 (excluding our veterinary and agricultural product offerings). [Our current developed products are either backlogged, in the
process of being produced or are ready for production.] We have received approval from the U.S. Food and Drug Administration (the “FDA”)
for 4 of our products’ claims, and we have FDA applications in process for 15 products’ claims, as indicated below. We have
patents issued for six of our products, and 15 patent applications pending, as indicated below. However, we presently lack the capital
to produce sufficient inventory and, accordingly, will be reliant upon raising additional funds in this offering to further commercialize
these products If we are unable to raise sufficient funds in this offering or through other means, the production and distribution of
these products may be delayed or discontinued. Further, some of the patent rights and licenses for the below products are subject to uncertainty
due to potential procedural and documentation issues in connection with the July 2021 Integrity Wellness acquisition. See the risk titled
“If we cannot obtain or protect intellectual property rights related to our products, including due to uncertainties surrounding
our acquisition of Integrity Wellness and its purported product portfolio, we may not be able to compete effectively in our markets”
for more information. The following is a brief description our current products portfolio:
Products
with Issued Patents Canagel - (Anhydrous Hydrogel Composition and delivery system)
Canagel
®,- (Anhydrous Hydrogel Composition and delivery system)
Patented Full
Spectrum Phytocannabinoid delivery with FDA approved pain claim. The one and only FDA-approved pain claim in the market for an oral CBD
product.
We have Exclusive
World-wide access to Patent No. US 10,143,755
Patent Issued:
December 4, 2018
Patent Expires:
December 8, 2037
Comments: Please
note this patent is owned by Acupac Packaging Inc., however an exclusive worldwide license agreement has been granted to SkinScience labs,
Inc.
Silverpro
®, - (FDA Cleared)
Patented Compression
Fabric in the marketplace with FDA pain clearance
Patent No. US
9,878,175 (European Patent has been allowed)
Patent Issued:
January 30, 2018
Patent Expires:
June 2036
Thin Film
Toothpaste Strip
Product Name:
KidzStrips ®,
Patented Fluoride
doses-controlled children’s toothpaste strip
(2 Patents issued)
Patent No. US 9,656,102
Patent Issued:
May 23, 2017
Patent Expires:
December 21, 2033
Patent No. US
10,105,296
Patent Issued:
October 23, 2018
Patent Expires:
December 31, 2034
ImmuniZin TM (Immune Booster)
Some ImmunaZin Ingredients and
Expectations
● Pepsin
-- the main ingredient now famous for rapid recovery. We take pepsin and break it down into fragmented particles that are better absorbed
into the digestive tract. These pepsin fragments directly modulate immune system activity by inducing potent T-cell response resulting
in boosted immunity.
● Hemp
seed oil helps balance healthy cholesterol levels, fights depression and anxiety, improves eye health, promotes brain health, reduces
metabolic syndrome, reduces inflammation, fights autoimmune disease and mental disorders, reduces fatty liver, promotes bone and joint
health and improves sleep and skin.
Irreversibly-inactivated
pepsinogen fragments for modulating immune function (Immune Booster- FDA Cleared)
Patent No. US
8,309,072
Patent Issued:
November 13, 2012
Patent Expires:
June 18, 2029
Patent Expires:
June 18, 2029
Novel Fertilizer
Patent No. US
9,981,886
Patent Issued:
May 29, 2018
Patent Expires:
August 12, 2036
Pending Patent
Applications
Cannabinoid,
Menthol and Caffeine Dissolvable Film Composition, Devices and Methods
US Application
No. 16/558,872; International Application PCT/US2019/049309
Cannabinoid
and Menthol Gum and Lozenge Compositions and Methods
US Application
No. 16/555,022 (US Application No. 62/869,121 is a provisional US application for this US application); International Application PCT/US2019/048740
Cannabinoid
and Anesthetic Gum and Lozenge Compositions and Methods
US Application
No. 16/554,930 (US Application No. 62/869,118 is a provisional US application for this US application); International Application PCT/US2019/048728
Cannabinoid
and Anesthetic Compositions and Methods
US Application
No. 16/419,274; International Application PCT/US2019/048690
C-Biscuit TM
Hemp rich suppository
for racehorse industry for rapid recovery from injury Veterinary Cannabinoid, Menthol and Anesthetic Compositions and Methods
Application
No. 16/555,241; International Application PCT/US2019/048789
Veterinary
Cannabinoid and Menthol Compositions and Methods
Application
No. 16/419,392; International Application PCT/US2019/048695
Cannabinoid
and Menthol Gel Compositions, Patches and Methods
US Application
No. 16/558,780; International Application PCT/US2019/049294
Cannabinoid
and Menthol Compositions and Methods
US Application
No. 16/419,336; International Application PCT/US2019/048691
Thin Film
Toothpaste Strip, European Application
Product Name:
KidzStrips ®
Application
No. 14876319.6
Thin Film
Toothpaste Strip, Eurasian Application
Product Name:
KidzStrips ®
Application
No. 201600502/28.
U.S. Application
No. 17/412442
Fertilizer
Product Name:
HydroSoil ®,
Water retaining
Hemp enhanced fertilizer, water plant once every two weeks
U.S. Application
No. 15/986,111
Inactivated
Pepsin Fragment (IPF) and Full Spectrum Cannabidiol (CBD) Compositions and Methods
U.S. Provisional
Patent Application No. 62/859,422
Skin Cream
Relates to compositions
and methods for the prevention and treatment of skin disorders and for the rejuvenation of the skin. In particular, the application describes
topical compositions and methods of treatments comprising the combined use of one or more cannabinoids and one or more hydroxy acids in
a suitable carrier.
U.S. Application
No. Application 15/233,251
Other Products
IcyEase
Adhesive Ice
Pack for muscle/joint pain to cool surface and address pain.
Patent-pending,
FDA pain claim in progress
Slim-D
Appetite-suppressant
oral strip with 50 mg Hoodia & 10 mg Full Spectrum Phytocannabinoid
Energy Lighting
Strips
High caffeine
fast dissolving oral energy strip with Matcha Green Tea and Hemp/Full Spectrum Phytocannabinoid
Micro Voltage
Trans Derm C
for pain with
unique and superior absorbing features due to wearer‘s movement generated Micro Voltage
CBD 600
Hemp Rich oral
tincture with FDA cleared legal pain claim. One and only with FDA clearance.
Global3PL Inc. (NY)
During the past 2 plus
years, Global3PL Inc. (a New York Corporation) has consulted with logistics and technology experts to design and begin the development
of a best-of-breed, first-of-kind information technology system. To date, about eighteen (18) months’ worth of custom coding by
our contractor has been completed with an expectation of an additional 2-3 months of work still required for
it to be ready for testing. Upon completion, it is intended that clients shall be able to login to the system to communicate and transact
business with the Company in real-time, as it relates to aspects of the client’s supply chain. This can include the tracking of
inbound raw material from various vendors, the manufacturing schedule of finished goods, inventory tracking of raw materials and finished
goods, international compliance documentation, and the contacting and tracking of the shipping of the finished goods to their delivery
destination(s). Though the Company has high expectations for the functionality of the new system, it does not make any assurances that
the system will be completed, shall work as planned if completed, nor be embraced by potential clients as intended.
Therefore Global3pl,
Inc. (NY) will be a logistics subsidiary serving the just-in-time inventory & distribution industry, as well as the special and general
commodities sector of the North American freight industry. “Just-in-time” is an industry word for delivery a product or other
item to an end user right before it is needed. It is used in place of an end user storing a large quantity of inventory. Shippers will
be able to sync to our system for a real-time 360 views of their product shipments, including, location updates, verification, and risk
mitigation. The customer will be able to Geolocation GPS tracking of freight movement; create automated notifications with consolidated
and automated notifications, payments, and reporting. The Shipper interface will also allow
customers to push or post freight orders. The software system will also allow for lead-generation, data analysis, collaboration among
shippers, Automated billing and collections, and automated payments. The SAAS-based platform ecosystem will fully integrate all aspects
of the Company’s operations, from receiving raw materials for clients, through product manufacturing, document compliance, distribution,
and shelf-life batch tracking. It had been expected to be operational in the third or fourth quarter of 2020, however due to economic
conditions from the COVID-19 Pandemic, and the need for funding related to this Offering, to complete the process, we have been delayed
and hope to be operational by the end of the second quarter of 2021.
The SaaS-based platform ecosystem will fully integrate
all aspects of the Cannagistics operations, from receiving raw materials for clients, through product manufacturing, document compliance,
distribution, and shelf-life batch tracking. It is intended to operate with four separate brands or identities, that being Global3pl,
AFX (the acronym for American Freight Xchange) UrbanX and Cannagistics.
Our targeted client markets (OTC, pharmaceutical,
nutraceutical, cosmetics, and Hemp/CBD-related products) are heavily regulated, and highly fragmented from state to state, and country
to country. Every country has their own certified product standards, such as the FDA in the U.S. Target client markets require batch product
tracking throughout shelf life and GMP certified standards in manufacturing. There is currently, we believe, a lack of seamless automation
across the supply chain.
Our solution offers a fully automated and scalable
service for end-to-end information, manufacturing, sales, and tracking. We believe the benefits achieved from our logistics services for
clients are as follows:
| |
§ |
Ability to track products from ingredient stage all the way to sale; |
| |
§ |
Provides 24/7 visibility; |
| |
§ |
Provide a single point of access: |
| |
§ |
Incorporates big data and client behavior statistics; |
| |
§ |
Increases productivity; |
| |
§ |
Offers a subscription-based model; and |
| |
§ |
Capable of supporting multiple client usage. |
Competition
The Global Supply Chain management area has many different
entities, all competing. Some are very large. However, our model is significantly different from most of the providers already operating.
To be successful in the global supply chain management
area, a company must be involved in planning the function of the entire process, from start to finish, or end to end. We intend to concentrate
our model on the cannabis, nutraceutical, pharmaceutical and cosmetic areas. We believe this makes our approach unique and distinguishable
at this time.
There is no guarantee that a larger, more fully funded,
company will determine to seek to gain access to the same business.
Intellectual Property
Our Global3pl SAAS Platform is a proprietary software
developed by the Company. The SaaS-based platform ecosystem will fully integrate all aspects of the Cannagistics operations, from receiving
raw materials for clients, through product manufacturing, document compliance, distribution, and shelf-life batch tracking.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the
accounts of Cannagistics, Inc. and its wholly owned subsidiaries American Freight Xchange, Inc and Global3pl, Inc. (Ontario), formerly
known as KRG Logistics, Inc. All significant inter-company transactions and balances have been eliminated.
Basis of Presentation
We have summarized our most significant accounting
policies for the fiscal years ended July 31, 2020, and July 31, 2020
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 the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could differ from those estimates.
COVID-19 Pandemic Update
In March 2020, the World Health Organization declared
a global health pandemic related to the outbreak of a novel coronavirus. The COVID-19 pandemic adversely affected the company's financial
performance in the third and fourth quarters of fiscal year 2020 and could have an impact throughout fiscal year 2021. In response to
the COVID-19 pandemic, government health officials have recommended and mandated precautions to mitigate the spread of the virus, including
shelter-in-place orders, prohibitions on public gatherings and other similar measures. As a result, the company and certain of the company's
customers and suppliers temporarily closed locations beginning late in the second quarter of fiscal year 2020, continuing into the third
quarter of fiscal year 2020. There is uncertainty around the duration and breadth of the COVID-19 pandemic, as well as the impact it will
have on the company's operations, supply chain and demand for its products. As a result, the ultimate impact on the company's business,
financial condition or operating results cannot be reasonably estimated at this time.
Income Taxes
The Company accounts for income taxes under ASC 740
“Income Taxes,” which codified SFAS 109, "Accounting for Income Taxes" and FIN 48 “Accounting for Uncertainty
in Income Taxes – an Interpretation of FASB Statement No. 109.” Under the asset and liability method of ASC 740, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company
will not realize tax assets through future operations.
Derivative Financial Instruments
The Company does not use derivative instruments to
hedge exposures to cash flow, market, or foreign currency risks.
The Company reviews the terms of convertible loans,
equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded
conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection
with the issuance of financing instruments, the Company may issue freestanding options or warrants to employees and non-employees in connection
with consulting or other services. These options or warrants may, depending on their terms, be accounted for as derivative instrument
liabilities, rather than as equity.
Derivative financial instruments are initially measured
at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at fair value and then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.
To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds
received an immediate charge to income is recognized in order to initially record the derivative instrument liabilities at their fair
value.
The discount from the face value of the convertible
debt instruments resulting from allocating some or all of the proceeds to the derivative instruments, together with the stated rate of
interest on the instrument, is amortized over the life of the instrument through periodic charges to income, using the effective interest
method.
The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification
is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits
to income for changes in the fair value of the derivative instruments is not reversed. Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required
within twelve months of the balance sheet date.
Fair value of financial instruments
The Company’s financial instruments consist
of its liabilities. The carrying amount of payables and the loan payable – related party approximate fair value because of the short-term
nature of these items. The promissory notes, and convertible notes payables are measured at amortized cost using the effective interest
method, which approximates fair value due to the relationship between the interest rate on long-term debt and the Company’s incremental
risk adjusted borrowing rate.
Fair value is defined under FASB ASC Topic 820 as
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous
market for an asset or liability in an orderly transaction between participants on the measurement date. Valuation techniques used to
measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair
value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be
used to measure fair value. The levels are as follows:
| |
· |
Level 1 - Quoted prices in active markets for identical assets or liabilities |
| |
· |
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data for substantially the full term of the assets or liabilities |
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· |
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities |
The
following is a listing of the Company’s liabilities required to be measured at fair value on a recurring basis and where they are
classified within the fair value hierarchy as of January 31, 2022, and July 31, 2021:
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January 31, 2022 |
| | |
Level 1 | |
Level 2 | |
Level 3 | |
Total |
| Derivative liabilities | |
$ | — | | |
$ | — | | |
$ | 123,908 | | |
$ | 123,908 | |
| | |
July 31, 2021 |
| | |
Level 1 | |
Level 2 | |
Level 3 | |
Total |
| Derivative liabilities | |
$ | — | | |
$ | — | | |
$ | 529,171 | | |
$ | 529,171 | |
Accounts receivable and allowance for doubtful
accounts
Accounts receivables are stated at the amount management
expects to collect. The Company generally does not require collateral to support customer receivables. The Company provides an allowance
for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic
conditions. As of January 31, 2022, and July 31, 2021, the allowance for doubtful accounts was $0 and $0, respectively.
Revenue Recognition
The Company recognizes revenue related to
transaction from its third-party logistics sales by performing the following five steps: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (i) allocate the transaction price to
the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The
Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including 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. At
contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised
within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes
as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance
obligation is satisfied. Amounts invoiced or collected in advance of product delivery or providing services are recorded as unearned revenue
or customer deposits. The company accrues for sales returns, bad debts, and other allowances based on its historical experience.
Foreign Currency
FASB ASC Topic 830, Foreign Currency Matters (formerly
FASB Statement No. 52, Foreign Currency Translation) provides accounting guidance for transactions denominated in a foreign currency,
and for operations undertaken in a foreign currency environment. To prepare consolidated financial statements, an entity translates all
functional currency financial statements into a single reporting currency. The same applies if an entity uses different currencies for
reporting purposes and for its functional currency. The company reports its currency in US dollars.
Stock-Based Compensation
The Company measures expenses associated with all
employee stock-based compensation awards using a fair-value method and record such expense in our consolidated financial statements on
a straight-line basis over the requisite service period.
Leases
In
February 2016, FASB issued ASU-2016-02 (Topic 842) “Leases”, provides accounting guidance for leases, recognizing lease assets
and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for annual
reporting periods beginning after December 15, 2018. Effective August 1, 2019, the Company implemented ASU 2016-02 under the modified
retrospective method. As a result, the Company recognized right of use assets of $54,475 and lease liabilities of $57,064. During the
year ended July 31, 2021, the Company terminated its’ existing lease and entered a new lease on a month-to-month basis. As such,
the Company no longer has a right of use asset or lease liability at July 31, 2021.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit
losses of certain financial instruments, including trade receivables, contract assets, and lease receivables. This standard will be effective
for the Company beginning August 1, 2020. The Company does not believe that this standard will have a material impact on its’ consolidated
financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt
– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the guidance
on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion
feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity
an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions
are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have
issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December
15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to early
adopt this ASU and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and
related disclosures. See Note 6 for convertible notes issued during the three months ended October 31, 2021 to which this ASU applies.
NOTE 3 – GOING CONCERN
Management
does not expect existing cash as of January 31, 2022, to be sufficient to fund the Company’s operations for at least twelve months
from the issuance date of these January 31, 2022, financial statements. These financial statements have been prepared on a going concern
basis which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As
of January 31, 2022, the Company has an accumulated deficit of $32,033,618 ,
and has not yet generated material revenue from operations, and will require additional funds to maintain its operations. These factors
raise substantial doubt regarding the Company’s ability to continue as a going concern within one year after the consolidated financial
statements are issued. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable
operations and obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations
when they become due. The Company intends to finance operating costs over the next twelve months through its existing financial resources
and we may also raise additional capital through equity offerings, debt financings, collaborations and/or licensing arrangements. If adequate
funds are not available on acceptable terms, we may be required to delay, reduce the scope of, or curtail, our operations. The accompanying
consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – DISCONTINUED OPERATIONS
On November 6, 2019, the Company discontinued its operations of subsidiary Global3pl, Inc., formerly known as KRG Logistics, Inc., (an
Ontario corporation) and sold the assets of $54,296 for $10 dollars. As such, the assets of KRG Logistics, Inc. were removed from the
accounts, and all remaining liabilities were classified as Discontinued Operations in the accompanying Balance Sheets. As of January
31, 2022, and July 31, 2021, the summaries of liabilities pertaining to discontinued operations were as follows:
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January 31, 2022 | |
July 31, 2021 |
| Accounts payable | |
$ | 460,262 | | |
$ | 460,262 | |
| Royal Bank line of credit | |
| 289,242 | | |
| 289,242 | |
| Unearned revenue | |
| 14,833 | | |
| 14,833 | |
| Accrued liabilities | |
| 64,663 | | |
| 64,663 | |
| Custom duties & GST payable | |
| 6,019 | | |
| 6,019 | |
| HST | |
| 2,759 | | |
| 2,759 | |
| Liabilities of discontinued operations | |
$ | 837,778 | | |
$ | 837,778 | |
NOTE 5 – PROMISSORY NOTES
Promissory notes payable as of January 31, 2022, and July 31, 2021, consisted
of the following:
| Description | |
January 31, 2022 | |
July 31, 2021 |
| Note payable dated March 8, 2018, matured March 8, 2019, bearing
interest at 10% per annum. | |
$ | 30,000 | | |
$ | 30,000 |
| Note payable dated July 18, 2018, matured July 18, 2019, bearing interest
at 8% per annum. | |
$ | 135,000 | | |
$ | 135,000 |
| Note payable dated February 4, 2020, matured February 4, 2021, bearing
interest at 18% per annum. | |
$ | 5,000 | | |
$ | 5,000 |
| Note payable dated June 6, 2021, matured June
6, 2022, bearing interest at 8%
per annum. | |
$ | 200,000 | | |
$ | 200,000 |
| Note payable dated June 6, 2021, matured June
6, 2022, bearing interest at 8%
per annum. | |
$ | 150,000 | | |
$ | 150,000 |
| Total | |
$ | 520,000 | | |
$ | 520,000 |
| Less current portion of long-term debt | |
$ | 520,000 | | |
$ | 520,000 |
| Total long-term debt | |
| — | | |
| — |
Interest expense for the six months ended January 31, 2022 and 2021, was
$7,410 and $7,410, respectively.
NOTE 6 - CONVERTIBLE DEBT
Convertible debt as of January 31, 2022, and July 31, 2021, consisted
of the following:
| Description | |
October 31, 2021 | |
July 31, 2021 |
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| Convertible note agreement dated November 1, 2013, in the amount of $30,000 payable and due on demand bearing interest at 12% per annum. Principal and accrued interest is convertible at $.002250 per share. | |
$ | 11,041 | | |
$ | 11,041 |
| Convertible note agreement dated February 20, 2018, in the amount of $1,034,000 payable and due on demand bearing interest at 10% per annum. Principal and accrued interest is convertible at $.028712 per share. | |
$ | 1,034,000 | | |
$ | 1,034,000 |
| Convertible note agreement dated March 13, 2019, in the amount of $800,000 payable and due on March 20, 2020, bearing interest at 24% per annum. | |
$ | 800,000 | | |
$ | 800,000 |
| Convertible note agreement dated June 28, 2019, in the amount of $300,000 payable and due on June 28, 2020, bearing interest at 20% per annum. | |
$ | 300,000 | | |
$ | 300,000 |
| Convertible note agreement dated August 6, 2019, in the amount of $31,500 payable and due on August 6, 2020, bearing interest at 20% per annum. | |
$ | 31,500 | | |
$ | 31,500 |
| Convertible note agreement dated August 19, 2019, in the amount of $3,800 payable and due on August 19, 2020, bearing interest at 24% per annum. | |
$ | 3,800 | | |
$ | 3,800 |
| Convertible note agreement dated September 4, 2019, in the amount of $36,500 payable and due on September 4, 2020, bearing interest at 20% per annum. | |
$ | 36,500 | | |
$ | 36,500 |
| Convertible note agreement dated December 4, 2019, in the amount of $95,000 payable and due on December 4, 2020, bearing interest at 12% per annum. | |
$ | 147,500 | | |
$ | 147,500 |
| Convertible note agreement dated April 15, 2020, in the amount of $31,500 payable at April 15, 2021, bearing interest at 10% per annum, net of discount. | |
$ | 15,887 | | |
$ | 15,877 |
| Convertible note agreement dated December 2, 2020, in the amount of $40,000 payable and due on December 2, 2021, bearing interest at 12% per annum. | |
$ | 40,000 | | |
$ | 40,000 |
| Convertible note agreement dated April 6, 2021, in the amount of $53,000 payable and due on April 6, 2022, bearing interest at 12% per annum. | |
$ | — | | |
$ | 53,000 |
| Convertible note agreement dated April 7, 2021, in the amount of $111,555 payable and due on April 7, 2022, bearing interest at 10% per annum. | |
$ | 111,555 | | |
$ | 111,555 |
| Convertible note agreement dated April 12, 2021, in the amount of $43,000 payable and due on April 12, 2022, bearing interest at 12% per annum. | |
$ | 29,500 | | |
$ | 43,000 |
| Convertible note agreement dated April 20, 2021, in the amount of $43,750 payable and due on April 7, 2022, bearing interest at 12% per annum. | |
$ | 65,625 | | |
$ | 43,750 |
| Convertible note agreement dated August 5, 2021, in the amount of $500,000 payable and due on August 5, 2022, non-interest bearing. | |
$ | 500,000 | | |
$ | — |
| Convertible note agreement dated August 10, 2021, in the amount of $150,000 payable and due on August 10, 2022, non-interest bearing. | |
$ | 150,000 | | |
$ | — |
| Convertible note agreement dated August 23, 2021, in the amount of $200,000 payable and due on August 23, 2022, bearing interest at 12% per annum . | |
$ | 200,000 | | |
$ | — |
| Convertible note agreement dated December 14, 2021, in the amount of $78,750 payable and due on December 14, 2022, bearing interest at 12% per annum. |
|
$ |
78,750 |
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$ |
— |
| Convertible note agreement dated December 30, 2021, in the amount of $53,750 payable and due on December 30, 2022, bearing interest at 12% per annum . |
|
$ |
53,750 |
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$ |
— |
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Convertible notes total: |
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$ |
3,051,233 |
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$ |
2,631,533 |
The Company amortizes the
discounts arising from on-issuance discounts and derivative liabilities (see discussion below) over the term of the convertible promissory
notes using the straight-line method which is similar to the effective interest method. During the six months ended January 31, 2022,
the Company amortized $187,875 to interest expense. As of January 31, 2022, discounts of $551,038 remained for which will be amortized
through December 2022.
Derivative
liabilities
Certain of
the Company’s convertible notes are convertible into a variable number of shares of common stock for which there is not a floor
to the number of common shares the Company might be required to issue. Based on the requirements of ASC 815 Derivatives and Hedging, the
conversion feature represented an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability.
The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and
reporting period. Changes in the derivative liability fair value are reported in operating results each reporting period. The Company
uses the Black-Scholes option pricing model for the valuation of its derivative liabilities as further discussed below. There are no material
differences between using the Black-Scholes option pricing model for these estimates as compared to the Binomial Lattice model.
As of July
31, 2021, the Company had existing derivative liabilities of $529,171 related to four convertible notes. During the six months ended January
31, 2022, approximately $192,000 in principal and accrued interest of the outstanding convertible notes were converted into 67,422,926
shares of common stock. At each conversion date, the Company recalculated the value of the derivative liability associated with the convertible
note recording a gain (loss) in connection with the change in fair market value. In addition, the pro-rata portion of the derivative liability
as compared to the portion of the convertible note converted was reclassed to additional paid-in capital. During the six months ended
January 31, 2022, the Company recorded $234,330 to additional paid-in capital for the relief of the derivative liabilities. The derivative
liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from
$0.0007 to $0.0062, the closing stock price of the Company's common stock on the dates of valuation ranging from $0.001 to $0.012,
an expected dividend yield of 0%, expected volatility ranging from 219% to 285%, risk-free interest rates ranging from 0.1% to 0.27%,
and expected terms ranging from 0.38 to 0.5 years.
During the
six months ended January 31, 2022, two new notes with a variable-rate conversion feature were issued. The Company valued the conversion
features on the date of issuance resulting in initial liabilities totaling $71,111.
Since the fair value of the derivative was in excess of the proceeds received for one of these notes, a full discount to the convertible
notes payable and a day one loss on derivative liabilities of $11,942
was recorded during the six months ended January 31, 2022. The
Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion prices
of $0.01 to $0.01, the closing stock price of the Company's common stock on the dates of valuation ranging from $0.002 to $0.013, an
expected dividend yield of 0%, expected volatilities ranging from 222%-290%, risk-free interest rate ranging from 0.26% to 0.38%, and
expected terms of one year.
On January
31, 2022, the derivative liabilities on these convertible notes were revalued at $123,910 resulting in a gain of $242,042 for the six
months ended January 31, 2022 related to the change in fair value of the derivative liabilities. The derivative liabilities were revalued
using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0008 to $0.01, the closing
stock price of the Company's common stock on the date of valuation of $0.004, an expected dividend yield of 0%, expected volatility of
297%, risk-free interest rate of 0.78%, and an expected term ranging from 0.21 to 0.91 years.
NOTE 7 – RELATED PARTY TRANSACTIONS
A shareholder of the Company has paid certain expenses
of the Company. These amounts are reflected as a loan payable to related party. The shareholder advanced $3,806 and $0 during the six
months ended January 31, 2022, and January 31, 2021, respectively. As of January 31, 2022, and January 31, 2021, there were $493,854 and
$443,359 due to related parties, and a shareholder, respectively.
The Company has consulting agreements with two of
its shareholders to provide management and financial services that commenced on December 1, 2017. For the six months ended January31,
2022, and January 31, 2021, and consulting fees paid were $177,295 and $96,635 respectively. The consulting fees are included as part
of professional fees on the Company’s consolidated statements of operations.
The Company on February 20, 2018, entered into
a related party (that being Recommerce Group, Inc. and our former President and current Vice-President of Corporate Finance and a Director,
is a principal in Recommerce Group, Inc.) note receivable in the amount of $1,034,000. The Company made an additional advance in the amount
of $175,000 that is non-interest bearing. The note is payable and due on demand and bears interest at the rate of 10%. A total of $153,217
has been applied as payments against this Note. Interest expense in the amount of $43,518 and $43,518 for the six months ended January
31, 2022 and January 31, 2021, respectively, has been recorded in the financial statements.
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)
The Company is authorized to issue 500,000,000
shares of its $0.001 par value
common stock and 20,000,000 shares of Preferred
stock. As of January 31, 2022, and July 31, 2021, there were 266,424,608
and 189,561,572 shares of common stock outstanding,
respectively. There were 900,000 shares
of Series E Preferred stock and 4,400,000 shares
of Series F Preferred stock outstanding as of January 31, 2022, and July 31, 2021, respectively. The Company had 290,000,000 shares
of common stock issuable at January 31, 2022, and July 31, 2021, respectively.
During the six months ended January 31, 2022, the
Company issued 67,422,926 for the conversion of convertible debt and 9,440,110 for services.
Series E Preferred Stock
The Company has 3,600,000 of Series E convertible
preferred stock authorized. Each share is non-voting and convertible into 100 shares of common stock. Each share is treated pari passu
with common stock, adjusted for conversion, in relation to dividends and liquidation preferences.
The holders of the Series E convertible preferred
stock shall have anti-dilution rights during the two-year period after the Series E convertible preferred converted into shares of Common
Stock at its then effective conversion rate. The anti-dilution rights shall be pro-rata to the holder's ownership of the Series E convertible
preferred stock. The Company agrees to assure that the holders of the Series E convertible preferred stock shall have and maintain at
all times, full Ratchet anti-dilution protection rights as to the total number of issued and outstanding shares of common stock and preferred
stock of the Company from time to time, at the rate of 36%,calculated on a fully diluted basis.
Series F Preferred Stock
The Company has 4,400,000 of Series E convertible
preferred stock authorized. Each share is non-voting and convertible into 100 shares of common stock. Each share is treated pari passu
with common stock, adjusted for conversion, in relation to dividends and liquidation preferences.
The holders of the Series F convertible preferred
stock shall have anti-dilution rights during the two-year period after the Series F convertible preferred converted into shares of Common
Stock at its then effective conversion rate. The anti-dilution rights shall be pro-rata to the holder's ownership of the Series F convertible
preferred stock. The Company agrees to assure that the holders of the Series E convertible preferred stock shall have and maintain at
all times, full Ratchet anti-dilution protection rights as to the total number of issued and outstanding shares of common stock and preferred
stock of the Company from time to time, at the rate of 44%,calculated on a fully diluted basis.
NOTE 9 – WARRANT
On April 15, 2020, the Company issued a five year
Common Stock Purchase Warrant in connection with a $31,500 convertible promissory note. The warrant is convertible into 437,500 shares
of the Company’s common stock at $.12 per share.
On April 23, 2020, the Company issued a three year
Common Stock Purchase Warrant in connection with a $75,000 investment in the Company’s common stock. The warrant has a conversion
price of $.15 per share of the Company’s common stock.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Litigations, Claims and Assessments
The Company may become involved in various lawsuits
and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise that may harm its business. The Company is currently not aware of any such legal proceedings
or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition
or operating results.
The Company has been made aware of potential litigation
from a creditor of the Company, Sanguine Group, LLC and Garden State Holdings LLC, which are controlled by the same individual. While
the Company does not have actual notice of such potential litigation, the Company was made aware of the statement from the Sanguine Group,
LLC, in a separate litigation involving Availa Bio, Inc., the now controlling shareholder of the Company, and a party unrelated to the
Company.
Other
Effective September 1, 2021, the Company leased office
space through Regus at Hauppauge Center, 150 Motor Parkway, Suite 401, Hauppauge, NY 11788. The term is for 6 months at a base rent of
$1,200. The space is sufficient for the Company needs.
NOTE
11 – SUBSEQUENT EVENTS
Management of the Company has evaluated the subsequent
events that have occurred through the date of the report and determined there are no subsequent events require disclosure:
