flooidCX Corp. - Quarter Report: 2019 November (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarter ended November 30, 2019

OR

For the transition period from ______________ to _______________

Commission File No. 000-55965

(855) 535-6643

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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

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

As of January 14, 2020, there were 147,103,318 shares of our common stock issued and outstanding, par value $0.001.

TABLE OF CONTENTS

Cautionary Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements”. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to our future operating results; plans for the marketing of our services; future economic conditions; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, as well as statements relating to future dividend payments. Other forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Readers should refer to the discussions under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 2019 concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These Risk Factors are hereby incorporated by reference into this Quarterly Report.

ITEM 1. FINANCIAL STATEMENTS

FLOOIDCX CORP.

Condensed Consolidated Financial Statements

Three and Nine Months Ended November 30, 2019 and 2018

(Expressed in U.S. dollars)

(unaudited)

FLOOIDCX CORP.

Condensed Consolidated Balance Sheets

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

FLOOIDCX CORP.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

FLOOIDCX CORP.

Condensed Consolidated Statements of Stockholders’ Deficit

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

FLOOIDCX CORP.

Condensed Consolidated Statements of Stockholders’ Deficit (continued)

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

FLOOIDCX CORP.

Condensed Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

FLOOIDCX CORP.

Nine Months Ended November 30, 2019 and 2018

(Expressed in U.S. Dollars)

(unaudited)

1. Nature of Operations and Continuance of Business

flooidCX Corp. (formerly Gripevine, Inc. and Baixo Relocation Services, Inc.) (the “Company”) was incorporated in the state of Nevada on January 7, 2014. The Company is in the business of developing and building an online resolution platform.

On May 17, 2019, the Company and Resolution 1, Inc. (“R1”) and the shareholders of R1 who collectively own 100% of R1 entered into and consummated transactions pursuant to a Share Exchange Agreement, whereby the Company agreed to issue to the R1 shareholders an aggregate of 10,000,000 shares of its common stock in exchange for 100% of the equity interests of R1 held by the R1 shareholders. As a result of the share exchange, R1 became a wholly owned subsidiary of the Company.

As a result of the Share Exchange Agreement, the acquisition transaction was accounted for as a common control transaction in accordance with the Financial Accounting Standards Board (“FASB”) (Accounting Standard Codification (“ASC”) 805-50, Business Combinations – Common control transactions). The Company evaluated the guidance contained in ASC 805-50 with respect to the combinations among entities or businesses under common control and concluded that since the majority shareholders of the Company and R1 are the same, this was a common control transaction and did not result in a change in control at the ultimate parent or the controlling shareholder level.

Consequently, common control transactions are not accounted for at fair value. Rather, common control transactions are generally accounted for at the carrying amount of the net assets or equity interests transferred. Any differences between the proceeds received or transferred and the carrying amounts of the net assets are considered equity transactions that would be eliminated in consolidation, and no gain or loss would be recognized in the consolidated financial statements of the ultimate parent. As a result, the financial position and the results of operations of the Company and R1 were consolidated together as if they were operating as one entity from the beginning.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, creditors, and related parties, and the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As at November 30, 2019, the Company has a working capital deficit of $3,477,078 and has an accumulated deficit of $54,149,162 since inception. Furthermore, during the nine months ended November 30, 2019, the Company used $526,163 in operating activities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These 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.

2. Significant Accounting Policies

(a) Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and the following entities:

All inter-company balances and transactions have been eliminated.

(b) Reclassifications

Certain of the prior period figures have been reclassified to conform to the current period’s presentation.

FLOOIDCX CORP.

Notes to the Condensed Consolidated Financial Statements

Nine Months Ended November 30, 2019 and 2018

(Expressed in U.S. Dollars)

(unaudited)

2. Significant Accounting Policies (continued)

(c) Interim Financial Statements

The accompanying condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2019. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

(d) Revenue Recognition

The Company will derive revenue from developing and building online resolution platforms. Under ASC 606, “Revenue from Contracts with Customers”, the Company recognizes revenue by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

(e) Recent Accounting Pronouncements

In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of this standard on March 1, 2019, did not have any impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s consolidated financial statements.

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

3. Property and Equipment

FLOOIDCX CORP.

Notes to the Condensed Consolidated Financial Statements

Nine Months Ended November 30, 2019 and 2018

(Expressed in U.S. Dollars)

(unaudited)

4. Loans Payable

As at November 30, 2019, the Company owed $2,694,314 (Cdn$3,580,474) (February 28, 2019 – $2,526,650 (Cdn$3,326,587)) which is non-interest bearing, unsecured, and due on demand. Refer to Notes 6(c) and (d).

5. Related Party Transactions

(a) As at November 30, 2019, the Company owed $738,994 (Cdn$982,050) (February 28, 2019 – $633,060 (Cdn$833,486)) to the President of the Company which is unsecured, non-interest bearing, and due on demand.

(b) During the nine months ended November 30, 2019, the Company incurred $135,522 (2018 – $138,378) in research and development fees to the President of the Company.

(c) During the nine months ended November 30, 2019, the Company incurred $28,272 (2018 – $28,991) in research and development fees to the Chief Operating Officer of the Company.

(d) During the nine months ended November 30, 2019, the Company incurred $6,400 (2018 - $35,388) in administrative fees included in general and administrative to the office manager who is also the spouse of the President of the Company.

(e) During the nine months ended November 30, 2019, the Company recognized stock-based compensation of $1,236,760 (2018 - $104,024) to the President, spouse of the President, and Chief Operating Officer of the Company.

6. Common Stock

(a) During the three months ended November 30, 2019, the Company issued 4,500,000 shares of common stock at $0.05 per share for proceeds of $225,000.

(b) On October 11, 2019, the Company issued 2,500,000 shares of common stock with a fair value of $172,500 for financial advisory and investment bank services to be provided. Refer to Note 9(b).

(c) On November 4, 2019, the Company issued 1,500,000 shares of common stock with a fair value of $96,000 to settle a loan payable $75,000, resulting in a loss of $21,000. The fair value of the common stock was determined based on the closing price of the Company’s common stock on the date of issuance.

(d) On November 4, 2019, the Company issued 2,000,000 shares of common stock with a fair value of $128,000 to settle a loan payable of $100,000, resulting in a loss of $28,000. The fair value of the common stock was determined based on the closing price of the Company’s common stock on the date of issuance.

7. Share Purchase Warrants

As at November 30, 2019, the following share purchase warrants were outstanding:

FLOOIDCX CORP.

Notes to the Condensed Consolidated Financial Statements

Nine Months Ended November 30, 2019 and 2018

(Expressed in U.S. Dollars)

(unaudited)

8. Stock Options

The following table summarizes the continuity of stock options:

Additional information regarding stock options outstanding as at November 30, 2019 is as follows:

The fair value of stock options granted was estimated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures and the following weighted average assumptions:

The fair value of stock options recognized during the nine months ended November 30, 2019 was $1,373,465 (2018 - $323,404), which was recorded as additional paid-in capital and charged to operations. The weighted average fair value of stock options granted during the nine months ended November 30, 2019 was $0.20 (2018 – $0.20) per option.

9. Commitments

(a) The minimum lease payments over the remaining terms of the premises leases are as follows:

(b) On October 7, 2019, the Company entered into an agreement with a company who is to provide general financial advisory and investment banking services to the Company. The Company is to pay this company $5,000 per month for a period of six months. The monthly fee can be paid in cash or in shares at the Company’s option. If paid in shares of common stock of the Company, the shares shall be valued using the volume-weighted average price of the shares for the five trading days immediately preceding each monthly fee payment due date. The Company is to issue 2,500,000 shares of common of stock upon execution of the agreement (issued) and 2,500,000 shares of common stock upon an uplisting of the Company’s common stock to a national exchange. For any financing, the Company will pay this company a commission of 8% of financing raised, a cash fee for unallocated expenses of 1% of the amount of financing raised, and issue agent’s warrants equal to 8% of the number of shares of common stock underlying the securities issued in the financing. Each agent’s warrant will be exercisable at an exercise price equal to the price of the securities issued to the investors in the financing expiring five years from the date of issuance.

10. Subsequent Event

On December 23, 2019, the Company issued 1,500,000 shares of common stock for proceeds of $75,000.

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

The following discussion provides an analysis of the Company’s financial condition and results of operations and should be read in conjunction with the Interim Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K filed for the fiscal year ended February 28, 2019. The discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.

Overview

flooidCX Corp., formerly known as Gripevine, Inc. (the “Company”), was incorporated under the name Baixo Relocation Services, Inc. in the state of Nevada on January 7, 2014, to operate as a relocation service provider for clients moving to the State of Goa, India. On May 31, 2016, Rosy Rodrigues, our prior majority shareholder, sole executive officer and member of the Board of Directors, entered into those certain stock purchase agreements effective October 3, 2016 with certain individuals and/or entities, and sold and transferred the control block of the Company consisting of 5,000,000 shares of restricted common stock, representing approximately 62.5% of the total issued and outstanding shares of common stock and resulting in a change in control.

Effective February 28, 2017, we entered into a share exchange agreement (the “MBE Exchange Agreement”) with MBE Holdings Inc., a private corporation organized under the laws of Delaware (“MBE”) and the shareholders of MBE (the “MBE Shareholders”), pursuant to which MBE Exchange Agreement we acquired all the technology and assets and assumed all liabilities of MBE, and MBE became our wholly-owned subsidiary. In accordance with the terms and provisions of the MBE Exchange Agreement, an aggregate of 5,248,626 shares of our restricted common stock were issued to the MBE Shareholders in exchange for 157,458,778 of the total issued and outstanding shares of MBE.

Effective March 18, 2019, we changed our name to flooidCX Corp. pursuant to Certificate of Amendment to its Articles of Incorporation filed with the Nevada Secretary of State. The name of the Company was changed as part of our rebranding, which better reflects our new business direction into the customer care and feedback solutions space – offering easy to adapt customer care and feedback solutions to enterprises of all sizes.

On May 17, 2019, we entered into a Share Exchange Agreement (the “R1 Exchange Agreement”) with the stockholders of Resolution 1, Inc., a Delaware corporation (“R1”), to acquire all of the outstanding shares of R1 in exchange for 10,000,000 restricted shares of our common stock (the “Acquisition”). R1 has developed a comprehensive customer care and feedback management platform, which is delivered as a cloud-based, software as a service solution. R1 was founded in August 2012 by Richard Hue, the CEO and a director of our Company. The Acquisition was approved by the independent members of the board of directors of the Company. Since the majority shareholders of the Company and R1 are the same, this did not result in the change in control at the ultimate parent or the controlling shareholder level, and was accounted for as a common control transaction.

Our mission is to help businesses bring back the conversation with customers with innovative, simple to use solutions that empower both the businesses and customers to communicate and create positive outcomes. With the consummation of the R1 Exchange Agreement resulting in R1 being our subsidiary, we now offer a suite of customer relationship management (CRM) solutions that enhances and builds upon our initial offering, “GripeVine.”

We offer unified communications and collaboration online CRM solutions - GripeVine and Resolution1. GripeVine is a consumer-to-business platform that helps build a customer feedback-minded community, focused on transparency, mutual respect and open communications among like-minded customers and businesses – all working together – to facilitate positive outcomes. It allows for private messaging between customers and businesses for positive resolutions, so that businesses are not forced to communicate via the comments section. Resolution1 functions as a cloud-based customer care and feedback workflow management platform, where businesses can manage the entire logistics of customer care, feedback or inquiries throughout their entire organizations. Businesses can respond quickly and accurately to customers, while keeping track of every customer interaction. The platform is designed to grow and scale, so that businesses of all sizes, from small to medium-size enterprises (SMEs) to large enterprises, can use this cloud-based customer care and feedback management system.

Results of Operations

The following discussions are based on our unaudited interim consolidated financial statements, including our wholly-owned subsidiaries. These discussions summarize our unaudited interim consolidated financial statements for the three and nine-month periods ended November 30, 2019, and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended February 28, 2019 and notes thereto included in the Form 10-K filed with the SEC on June 13, 2019.

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Three-Month Period Ended November 30, 2019 Compared to Three-Month Period Ended November 30, 2018

Revenue. We did not generate any revenue during the three months ended November 30, 2019 or 2018.

Operating expenses: During the quarter ended November 30, 2019, we incurred operating expenses in the amount of $658,728 compared to operating expenses incurred during the quarter ended November 30, 2018 of $276,276 (an increase of $382,452). Operating expenses include: (i) general and administrative of $346,650 (2018: $117,636); and (ii) research and development of $316,078 (2018: $158,640). General and administrative expenses increased by $229,014 due to issuance of shares for financial services and stock-based compensation. Research and development expenses increased by $157,438 due to increase in stock-based compensation.

Nine-Month Period Ended November 30, 2019 Compared to Nine-Month Period Ended November 30, 2018

Revenue. We did not generate any revenue during the nine months ended November 30, 2019 or 2018.

Operating expenses: During the nine months ended November 30, 2019, we incurred operating expenses in the amount of $2,215,644 compared to operating expenses incurred during the nine months ended November 30, 2018 of $1,181,527 (an increase of $1,034,117). Operating expenses include: (i) general and administrative of $730,209 (2018: $385,863); and (ii) research and development of $1,485,435 (2018: $795,664). General and administrative expenses increased by $344,346 due to new stock options and issuance of shares as compensation in general and administrative services. Research and development expenses increased by $689,771 due to new stock options as compensation in research and development expenses.

Liquidity and Capital Resources

As of November 30, 2019

As at November 30, 2019, our current assets were $100,098 and our current liabilities were $3,577,176, which resulted in a working capital deficit of $3,477,078. As of November 30, 2019, current assets were comprised of: (i) $90,709 in cash; and (ii) $9,389 in prepaid expenses and deposits. Also as of November 30, 2019, current liabilities were comprised of: (i) $128,868 in accounts payable and accrued liabilities; (ii) $15,000 in deferred revenue; (iii) $2,694,314 in loans payable and (iv) $738,994 due to related party.

As of November 30, 2019, our total assets were $120,383 comprised of: (i) current assets of $100,098; and (ii) equipment, net of depreciation of $20,285. The increase in total assets during the nine months ended November 30, 2019 from the fiscal year ended February 28, 2019 was due to an increase in cash, offset by decreases in prepaid expenses and deposits and the depreciated value of equipment.

As of November 30, 2019, our total liabilities were $3,577,176 comprised of current liabilities.

Stockholders’ deficit increased from $3,232,026 as of February 28, 2019 to $3,456,793 as of November 30, 2019.

Cash Flows from Operating Activities

We have generated negative cash flows from operating activities. For the nine months ended November 30, 2019, net cash flows used in operating activities was $526,163 compared to $849,529 for the nine months ended November 30, 2018.

Cash Flows from Financing Activities

Net cash flows provided from financing activities during the nine months ended November 30, 2019 was $639,907, which consisted of $364,907 in proceeds from loans and $275,000 in proceeds from the issuance of common stock. During the nine months ended November 30, 2018, cash flows provided by financing activities was $835,492, which consisted of $625,000 from the issuance of shares and $215,938 from the proceeds of loans, offset by $5,446 in repayments of loans payable.

Material Commitments

The balance due to a related party is interest free, unsecured and are repayable on demand. The balance due to a related party is mainly in connection with the services and financing provided for the development of an online complaint resolution platform.

On October 7, 2019, the Company entered into an agreement with a company who is to provide general financial advisory and investment banking services to the Company. The Company is to pay this company $5,000 per month for a period of six months. The monthly fee can be paid in cash or in shares at the Company’s option. If paid in shares of common stock of the Company, the shares shall be valued using the volume-weighted average price of the shares for the five trading days immediately preceding each monthly fee payment due date. The Company is to issue 2,500,000 shares of common of stock upon execution of the agreement (issued) and 2,500,000 shares of common stock upon an uplisting of the Company’s common stock to a national exchange. For any financing, the Company will pay this company a commission of 8% of financing raised, a cash fee for unallocated expenses of 1% of the amount of financing raised, and issue agent’s warrants equal to 8% of the number of shares of common stock underlying the securities issued in the financing. Each agent’s warrant will be exercisable at an exercise price equal to the price of the securities issued to the investors in the financing expiring five years from the date of issuance.

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements during the nine months ended November 30, 2019 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Plan of Operation

As at November 30, 2019, we had a working capital deficit of $3,477,078 and we will require additional financing in order to enable us to proceed with our plan of operations. There can be no assurance that additional financing will be available to us or that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due. We are pursuing various alternatives to meet our immediate and long-term financial requirements.

We anticipate continuing to rely on equity sales of our common stock and loans in order to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing to fund our planned business activities.

Our auditor has issued a going concern opinion on our financial statements for the fiscal year ended February 28, 2019. Additionally, at November 30, 2019, the Company has a working capital deficit of $3,477,078, and has an accumulated deficit of $54,149,162 since inception. Furthermore, during the nine months ended November 30, 2019, the Company used $526,163 in operating activities. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we generate sufficient revenues. There is no assurance we will ever reach that point. In the meantime, the continuation of the Company is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations and the attainment of profitable operations.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition and results of operations.

We require approximately $1,500,000 for the next 12 months as a reporting issuer and additional funds are required. Before generation of revenue, the additional funding may come from equity financing from the sale of our common stock or loans from management or related third parties. In the event we do not raise sufficient capital to implement its planned operations or divest, your entire investment could be lost.

We have not paid any sums for public relations or investor relations.

Recent Accounting Pronouncements

As reflected in Note 2 of the Notes to the Consolidated Financial Statements, there have been recent accounting pronouncements or changes in accounting pronouncements that impacted the nine months ended November 30, 2019 or which are expected to impact future periods as follows:

In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, “Leases”. This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. The Company is currently evaluating the new guidance and has not determined the impact this standard may have on the consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s financial statements.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Principal Financial Officer, of the effectiveness 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 (the “Exchange Act”)) as of November 30, 2019. Based on such evaluation, we have concluded that, as of such date and for the reason described below, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Principal Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

Because of our limited operations, we have a limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company currently is not a party to any legal proceedings and, to the Company’s knowledge; no such proceedings are threatened or contemplated.

ITEM 1A. RISK FACTORS

Not applicable.

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

During the three months ended November 30, 2019, we issued shares of our common stock as follows:

The securities referenced above were issued in reliance on the exemption from registration afforded by Regulation S promulgated under the Securities Act. Such shares of common stock will not be registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The investors are acknowledging that the securities to be issued have not been registered under the Securities Act, that they understand the economic risk of an investment in the securities, and that they have had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

Except as set forth in this Item 2, there were no unregistered securities sold by us during the quarter ended November 30, 2019 that were not otherwise disclosed in a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Form 10-Q:

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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.