Cannagistics Inc. - Quarter Report: 2021 April (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Cannagistics, Inc.

(Exact name of registrant as specified in its charter)

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, 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 filer [ ] Smaller reporting company [X]

Emerging growth company [ ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 183,166,659 common shares as of June 15, 2021.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

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 April 30, 2021, are not necessarily indicative of the results that can be expected for the full year.

CANNAGISTICS INC.

GLOBAL3PL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the consolidated financial statements 

CANNAGISTICS INC.

GLOBAL3PL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2021 

 (UNAUDITED)  

See accompanying notes to the consolidated financial statements 

CANNAGISTICS INC.

GLOBAL3PL, INC. AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED APRIL 30, 2021

(UNAUDITED)

See accompanying notes to the consolidated financial statements 

CANNAGISTICS INC

GLOBAL3PL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED APRIL 30, 2021

(UNAUDITED)

See accompanying notes to the consolidated financial statements 

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021 

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).

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

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).

Current Projects in Development

Global3PL Inc. (NY)

During the past 24 months, 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

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

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:

GMP Certified Facilities

We have plans to develop a GMP certified biotech lab in Malta with a fundamental skill in initially the cosmetic and then potentially the medicinal, nutraceutical and cannabis/hemp/CBD industries. Our plan is to have this Malta lab cater to customers in the EU. We also plan to potentially have other facilities that will cover our target customers in the US, Canada and Columbia, potentially located in Baton Rouge, Toronto and Bogotá, respectively. 

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

If we are successful in fully developing such capabilities we intend to seek out and employ a team of a multidisciplinary professionals in the pharmaceutical, nutraceutical and over the counter industries, and utilize complex supply chain and logistics management, unique technology and intellectual property. Cannagistics’ Lab’s purpose is to add value and offer a progress proposal to the Malta medicinal cannabis industry, based on its interest to support, educate, take advantage of and focus on the development of potentially breakthrough medicinal cannabis products with different therapeutic uses in patients around the world to whom science and traditional medicine simply could not reach. Such products will be subject to testing and certification from various governmental agencies, which may be a difficult expensive and time-consuming process. Our vision and knowledge will potentially focus on GMP biopharmaceutical cannabis-based medicines, - with the highest standards starting from the raw material - for multiple applications in patients, using latest technology, ancestral knowledge, scientific studies, with an exceptional team of research and development following the strictest standards and good distribution practices for export and national use.

We have no manufacturing plant or GMP facilities at the present time. As we continue our search to find suitable facilities, we believe that we will need to have the following areas for the production process, which will implement the safety protocols required for the project to be developed.

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.

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

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 period ended July 31, 2020.

Unaudited Consolidated Interim Financial Statements

These unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual financial statement and should be read in conjunction with those annual financial statements filed on Form 10-K for the year ended July 31, 2020. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results for a full year or for any future period.

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,

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

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 instrument are 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.

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

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:

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 April 30, 2021 and July 31, 2020:

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

Accounts receivable and allowance for doubtful accounts

Accounts receivable 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 April 30, 2021, and 2020 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, (iv) 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.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) which establishes revenue recognition standards. ASU 2014-09 was effective for annual reporting periods beginning after December 15,2017. We adopted ASU 2014-09 effective August 1, 2018. ASU 2014-09 has not had a significant effect on the Company’s financial position and results of operations.

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.

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.

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

NOTE 3 – GOING CONCERN

Management does not expect existing cash as of April 30, 2021, to be sufficient to fund the Company’s operations for at least twelve months from the issuance date of these April 30, 2021, 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 April 30, 2021, the Company has an accumulated deficit of $14,890,153, 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 April 30, 2021, and July 31, 2020, the summaries of liabilities pertaining to discontinued operations were as follows:

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

NOTE 5 – PROMISSORY NOTES

Promissory notes payable as of April 30, 2021 and July 31, 2020 consisted of the following:

Interest expense for the nine months ended April 30, 2021 and 2020 was $11,035 and $12,885, respectively.

NOTE 6 - CONVERTIBLE DEBT

Convertible debt as of April 30, 2021, and July 31, 2020, consisted of the following:

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

The Company recognized $0 of debt discount accretion expense on the above notes. Interest expense related to these notes for the nine months ended April 30, 2021 and 2020 was $304,188 and $284,564.

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 stock 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.

During the nine months ended April 30, 2021, four 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 $866,327. Since the fair value of the derivative was in excess of the proceeds received, a full discount to the convertible notes payable and a day one loss on derivative liabilities of $608,327 was recorded during the nine months ended April 30, 2021. The Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0029 to $0.0058, the closing stock price of the Company's common stock on the dates of valuation ranging from $0.007 to $0.034, an expected dividend yield of 0%, expected volatilities ranging from 219%-279%, risk-free interest rate ranging from 0.12% to 0.15%, and expected terms of one year. 

As of July 31, 2020, the Company had existing derivative liabilities of $205,796 related to two convertible notes. During the nine months ended April 30, 2021, $146,905 in principal and accrued interest of these convertible notes along with fees of $16,000 were converted into 70,497,100 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 nine months ended April 30, 2021, the Company recorded $822,001 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 $0.0011 to $0.007, the closing stock price of the Company's common stock on the dates of valuation ranging from $0.006 to $0.034, an expected dividend yield of 0%, expected volatility ranging from 215% to 278%, risk-free interest rates ranging from 0.12% to 0.15%, and expected terms ranging from 0.01 to 0.48 years.

On April 30, 2021, the derivative liabilities on these convertible notes were revalued at $551,662 resulting in a loss of $669,038 and $301,530 for the three and nine months ended April 30, 2021, related to the change in fair value of the derivative liabilities, respectively. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0070 to $0.0104, the closing stock price of the Company's common stock on the date of valuation of $0.065, an expected dividend yield of 0%, expected volatility of 286%, risk-free interest rate of 0.13%, and an expected term ranging from 0.20 to 0.72 years.

The Company amortizes the discounts over the term of the convertible promissory notes using the straight-line method which is similar to the effective interest method. During the nine months ended April 30, 2021, the Company amortized $204,556 to interest expense. As of April 30, 2021, discounts of $247,336 remained for which will be amortized through October 2021.

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

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 $3,065 and $19,490 during the nine months ended April 30, 2021 and 2020, respectively. As of April 30, 2021, and July 31, 2020, there were $391,159 and $388,094 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 nine months ended April 30, 2021, and 2020 consulting fees paid were $114,841 and $146,334 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 $65,277 and $77,621 for the nine months ended April 30, 2021, and 2020, 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 April 30, 2021, and July 31, 2020, there were 183,166,659 and 105,099,277 shares of common stock outstanding, respectively. There were 10,000,000 shares of Series D Preferred stock outstanding as of April 30, 2021, and July 31, 2020, respectively.

On November 1, 2017, we effected a one-for- four reverse stock split. All share and per share information has been retroactively adjusted to reflect the stock split.  

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 $0.15 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.

Cannagistics, Inc., and Subsidiaries

Notes to Financial Statements

April 30, 2021

NOTE 11 – SUBSEQUENT EVENTS

Management of the Company has evaluated the subsequent events that have occurred through the date of the report and determined that the following subsequent events require disclosure:

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Overview

We plan to become a complete end-to-end supply chain management company focused on serving the pharmaceutical, OTC medical, nutraceutical, cosmetic, and CBD/Hemp-related (and other) product industries as a gateway for products to penetrate the USA, and potentially in the E.U., Colombia and Canada marketplace through GMP certified manufacturing facilities possibly in Baton Rouge, Malta, Bogotá, and Toronto. Currently, we have no GMP certified manufacturing facilities in these areas or anywhere and do not have any affiliation with any facilities. We are developing plans to source production, or to joint venture with existing facilities, or potentially to acquire or build GMP Certified facilities in those areas. These developing plans would include seeking out already existing facilities currently in operation, either already GMP Certified or willing to become GMP Certified, as well as preliminary discussions with potential joint venture partners. We are also in the preliminary planning stages regarding the possibility of obtaining the license to operate in Malta. While no specific plans have been finalized, the Company is continuing to pursue all options. Combining the production through these facilities and compliance services with our proprietary information and transactional SAAS (Software as a Service) platform (being developed by Corengine for our Global3PL, Inc. subsidiary), Cannagistics, Inc. plans to offers its clients the ability to manage, track and oversee their inventory, from raw materials to production to shipping to delivery, and review in real-time the shipping of their products in the supply chain from factory to customer in our logistics management platform.

Our plan to enter the industry as a supply chain management company is in the development stages. We own no properties, plants or equipment, we have no full or part time employees, other than our President and Vice President, and we have no revenues under our planned logistics operations. There is substantial doubt about our ability to continue as a going concern. Our ability to implement our plan is dependent on the finished development of our SAAS software platform, and the ability to raise the necessary funding and acceptance by customers.

With the execution of the Letter of Intent with Recommerce Group, Inc., on January 26, 2021, we plan to enter into the reverse logistics, reverse supply chain industry. Reverse Logistics or reverse supply chain logistics is essentially handling customer returns, from either damaged items previously delivered or purchased or items not wanted that have been purchased at a location and/or delivered to the customer. This can entail returns made directly to a “brick and mortar” location or directly from a consumer. We have entered a binding Letter of Intent for this potential acquisition. However, the closing is based upon completion of proper due diligence by the parties and agreement on definitive documents as well as the necessary funding being in place. The closing is to be targeted to take place on or about March 31, 2021. Pursuant to the Letter of Intent, both parties may extend the date of closing upon mutual agreement.

With the current situation related to the COVID-19 pandemic, our developmental plans to seek out existing GMP facilities have been delayed by the restrictions on travel domestically, and internationally and the difficulties in raising the necessary capital. Regardless, we have been able to conduct some due diligence in our search and we plan to conduct site visits and other due diligence once domestic travel is more practical and international travel is less restrictive. The Company believes as the ability to travel once again becomes possible, specifically including internationally travel, that our above plans can be better implemented in locating suitable facilities.

To serve the EU market, we would like to have a GMP facility in Malta that would focus on cosmetics, pharmaceutical, nutraceutical or “bioceutical” and medicinal products for our clients, and our plan would be to provide end to end tracking, manufacturing and testing. Our plan is to have this Malta lab cater to customers in the EU. We also plan to potentially have other facilities that will cover our target customers in the US, Canada and Columbia, potentially located in Baton Rouge, Toronto and Bogotá, respectively.

Initially, the products we intend to focus on are skin care and anti-aging creams and other over the counter products, and subsequently would be seeking to add products with potentially hemp-based application. Our services would include the production, under their requirements, distribution and handling of orders as a third-party.

We have discussed the plan to create the Malta facility and other facilities with potential customers for products manufactured at these facilities. We have received positive feedback on the initiative and commitments from at least two clients to which we plan to sell products.

Our principal executive offices are located at 2480 Stanfield Road, Unit B, Mississauga, Ontario L4Y 1S2, and our Executive Office is located at 1200 Veterans Highway, Suite 310, Hauppauge, NY 11788. Our telephone number is 631-676-7230.

Parent Holding Company Reorganization

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.

Results of Operation for Three and Nine Months Ended April 30, 2021 and 2020

Revenues

No revenue was generated for the nine months ended April 30, 2021 and April 30, 2020.

Our cost of revenues was $0 for the nine months ended April 30, 2021, as compared with cost of revenue of $0 for the same period ended April 30, 2020.

Operating Expenses

Total operating expenses decreased to $157,028 for the three months ended April 30, 2021, from $1876,032 at April 30, 2020. This decrease was mainly due mainly to a decrease in Professional fees.

Operating expenses for the nine months ended April 30, 2021, consisted of general and administrative expenses of $112,502, professional fees of $220,356, rent of $12,382, and consulting fees of $88,125. Our operating expenses for the nine months ended April 30, 2020, consisted of general and administrative expenses of $(25,741), professional fees of $271,483, rent of $23,394, and consulting fees of $107,947.

Other Income and Expenses

We had interest income of $65,277 for the nine months ended April 30, 2021, and $65,277 for the nine months ended April 30, 2020. We had interest expense of $421,014 for the nine months ended April 30, 2021 as compared to $305,249 for the nine months ended April 30, 2020. We had Settlement Fees of $25,000 for the nine months ended April 30, 2021, as compared to $0.00 for the nine months ended April 30, 2020. We had a Loss on Derivative Liabilities of $33,589 for the nine months ended April 30, 2021, as compared to $0.00 for the April 30 months ended April 30, 2020. We had a Change in fair value of derivative labilities of $942,946 for the nine months ended April 30, 2021, as compared to $0.0 for nine months ended April 30, 2020.

Loss from Discontinued Operations

Net loss from discontinued operations for the nine months ended April 30, 2021, was $0.00 compared $173,377 for the nine months ended April 30, 2020.

Net Loss

Net loss for the nine months ended April 30, 2021 was $1,723,459 compared to net loss of $790,432 for the nine months ended April 30, 2020.

Liquidity and Capital Resources

As of April 30, 2021, we had total current assets of $33,177 and total current liabilities of $4,381,614 as of April, 2021. We had a negative working capital of $4,348,437 as of April 30, 2021.

We intend to fund operations through sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Off Balance Sheet Arrangements

As of April 30, 2021, there were no off-balance sheet arrangements.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our accounting policies are discussed in detail in the footnotes to our financial statements included in our Annual Report on Form 10-K for the year ended July 31, 2020, however we consider our critical accounting policies to be those related to inventory, fair value of financial instruments, derivative financial instruments and long-lived assets

Going Concern

As of April 30, 2021, we had an accumulated deficit of $14,945,297. Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations. While we are expanding our best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about our ability to continue as a going concern.

Recently Issued Accounting Pronouncements

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of January31, 2018, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of April 30, 2021, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described below.

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following three material weaknesses that have caused management to conclude that, as of April 30, 2021, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

1.       We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending January31, 2018. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2.       We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

3.       Effective controls over the control environment were not maintained. Specifically, a formally adopted written code of business conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has not developed and effectively communicated to employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.

We intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective internal controls once resources become available.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report, the period ended April 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

I.

Our wholly owned subsidiary, Global Transition Corporation (a Delaware corporation), formerly known as Cannagistics, Inc., (a Nevada corporation, and formerly the public entity and formerly the parent company) is a party to a case titled William Prusin v. Precious Investments Inc., and Kashif Khan. The litigation was commenced in the Ontario Superior Court of Justice (Commercial List) on July 20, 2016. The litigation stems from a diamond purchase agreement entered into on April 1, 2016 between Dr. William Prusin and Precious Investments Inc. By virtue of the terms of the agreement, Precious Investments purchased Dr. Prusin’s diamond portfolio, which was valued at $3.8 million (CDN) for the purposes of the agreement. In exchange for the diamond portfolio, Dr. Prusin was provided with 1,324,413 common shares of Precious Investments.

In the Statement of Claim, the plaintiff is alleging a breach of the Ontario Securities Act and claims that documents provided to him contain untrue statements of material fact or omissions. The plaintiff has also alleged that Precious Investment and Mr. Khan distributed securities in Ontario without issuing a prospectus and obtaining the required prospectus exemption or a registration exemption. In the alternative, the plaintiff has alleged that Mr. Khan made fraudulent misrepresentations which induced Dr. Prusin to enter into the diamond purchase agreement. The fraudulent misrepresentation allegation involves the future value of Precious shares, the timing by which Dr. Prusin had to sign the diamond purchase agreement, the involvement of Dundee Capital Markets, Mr. Khan’s investment in Precious Investments, and the management team at Precious Investments. Given these allegations, the plaintiff claims that he is entitled to obtain an order rescinding the diamond purchase agreement.

The Company and Mr. Khan deny all of the plaintiff’s allegations. The Company and Mr. Khan deny that any documents provided to Dr. Prusin constitute an “offering memorandum”, or that any prospectus was required under the Ontario Securities Act since the transaction falls within the exemption set out in National Instrument 45-106. In addition, the defendants deny that any fraudulent misrepresentation was made to Dr. Prusin. The defendants have filed a counter-claim against Dr. Prusin, alleging a breach of the diamond purchase agreement.

The action is currently dormant, although the plaintiff has retained new counsel. Current local Counsel for the Company believes that it will be ultimately successful in defending the action. There has been no action on this matter in over two years.

As a result of the actions taken pursuant to the Reorganization under Section 251(g) of the Delaware Corporation Law, as described in the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2021, the Company has determined that there would be no material effect on the Company from this litigation.

II.

KRG Logistics, Inc., now known as Global3pl, Inc., (an Ontario corporation), a now discontinued operational subsidiary of Global Transition Corporation (a Delaware corporation), formerly known as Cannagistics, Inc., (a Nevada corporation, and formerly the public entity and formerly the parent company), was named as the defendant in an action in the Ontario Superior Court of Justice by Ron Alvares, one of the original shareholders of KRG Logistics, Inc., when it was purchased by the Company in 2017. The action is for breach of contract for monies due as a result of the Purchase Agreement and for an amount due from a shareholder loan claimed by Mr. Alvares to KRG Logistics on September 30, 2014. The Company intended to defend against the breach of contract claim as the amount claimed to be due is incorrect, based on payments already made. It intended to also file counterclaims based on intentional interference of contracts by Mr. Alvares and his son for stealing clients of the Company and industrial sabotage of the Company’s software systems. With respect to the claim of an outstanding shareholder loan it is the position of the Company that said shareholder loan was never disclosed to the Company at the time of the purchase and based on information available, any such shareholder loan was paid off with the down payment provided by the Company for the purchase of KRG Logistics, Inc.

Procedurally the plaintiff has named the wrong parties and Counsel in Ontario is waiting for an amended complaint to file an answer and counterclaims. There has been no action on this matter in over a year. In the interim, the subsidiary of the Company has ceased operations. As a result, there would be no material effect on the Company.

As a result of the actions taken pursuant to the Reorganization under Section 251(g) of the Delaware Corporation Law, as described in the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2021, the Company has determined that there would be no material effect on the Company from this litigation.

III.

On February 4, 2020, Jeffrey Gates commenced an action in the Supreme Court of the State of New York, County of Suffolk against Global Transition Corporation (a Delaware corporation), at the time of commencement of the action, known as Cannagistics, Inc., (a Nevada corporation, and formerly the public entity and formerly the parent company) and Mr. Zimbler for the non-payment of a Promissory Note, of which the balance of $135,000, plus interest. The Company has retained Counsel to appear and defend the action.

Due to current conditions related to COVID-19, the New York State Supreme Court has administratively adjourned substantially all matters indefinitely.

As a result of the actions taken pursuant to the Reorganization under Section 251(g) of the Delaware Corporation Law, as described in the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2021, the Company has determined that there would be no material effect on the Company from this litigation.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q.

On April 1, 2021, the Company issued 1,242,759 shares of its common stock at $0.0290 for the conversion of notes payable.

 On April 13, 2021, the Company issued 1,673,684 shares of its common stock at $0.0209 for the conversion of notes payable.

  On April 20, 2021, the Company issued 2,154,011 shares of its common stock at $0.0187 for the conversion of notes payable.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.