ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since April 2016, the Company has been engaged in the identification of suitable opportunities for a business transaction. As per Note 8 below, the Company has entered into a non-binding letter of intent with CBD Brand Partners. Pursuant to the letter of intent, the Company filed a proxy statement to allow it to take the steps required to complete the transaction contemplated. Specifically, the Company amended and restated its articles of incorporation and created three (3) series of preferred stock. We will not engage in any substantive commercial business activities unless and until we consummate a business transaction, which may never occur.
Our management has broad discretion with respect to identifying and selecting a prospective target business. We have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses. There are numerous risks in connection with our current and proposed business plans, including that any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential growth companies. In addition, we may affect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
We expect that in connection with any business transaction, we will issue a significant number of shares of our common stock (equal to at least 80% of the total number of shares outstanding after giving effect to the transaction and likely, a significantly higher percentage), in order to ensure that such transaction qualifies as a “tax free” transaction under federal tax laws). The issuance of additional shares of our capital stock will significantly reduce the equity interest of our stockholders as of the date of the transaction and will likely result in the resignation or removal of our management as of the date of the transaction.
Our management anticipates that the Company likely will be able to affect only one business transaction, due primarily to our financial resources and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management's plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will concentrate the chance for our success into a single business and not permit us to offset potential losses from one venture against potential gains from another.
Management anticipates that the selection of a target business and the consummation of a business transaction will be complex and extremely risky and cannot assure investors that the Company ever will enter into such a transaction or that if we do consummate of a business transaction that the Company will achieve long-term or immediate short-term earnings.
Results of Operations
Results of Operations during the year ended December 31, 2020 as compared to the year ended December 31, 2019
During the fiscal years ended December 31, 2020 and 2019, Our net revenue for the year ended December 31, 2020, was $1,316,304, compared to $0 for the same period in 2019
Our cost of goods sold for the year ended December 31, 2020, was $914,759, compared to $0 for the same period in 2019.
Our general and administrative expense for the year ended December 31, 2020, was $110,520, compared to $56,177 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the acquisition of BH Private Label, Inc.
Our salaries expense for the year ended December 31, 2020, was $258,913, compared to $0 for the same period in 2019. This increase was mainly due to the acquisition of BH Private Label, Inc.
Our rent expense for the year ended December 31, 2020, was $146,013, compared to $10,000 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the acquisition of BH Private Label, Inc.
Our Utilities expense for the year ended December 31, 2020, was $29,956, compared to $0 for the same period in 2019. This increase was mainly due to the acquisition of BH Private Label, Inc.
Our professional fees expense for the year ended December 31, 2020, was $18,728, compared to $16,284 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the reverse merger with XLR Medical Corp.
Our consulting expense for the year ended December 31, 2020, was $667,976 compared to $383,973 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the acquisition of BH Private Label, Inc.
Our depreciation expense for the year ended December 31, 2020, was $232,271, compared to $0 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the acquisition of BH Private Label, Inc.
Our financing fees expense for the year ended December 31, 2020, was $36,860, compared to $23,800 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the reverse merger with XLR Medical Corp.
Our Interest expense for the year ended December 31, 2020, was $70,974, compared to $0 for the same period in 2019. This increase was mainly due to the startup of CBD Brand Partners, LLC and the acquisition of BH Private Label, Inc.
Our net loss for the year ended December 31, 2020, was $1,170,666 compared to $490,234 for the same period in 2019. This increase was mainly due to the factors listed above.
Liquidity and Capital Resources
As of December 31, 2020 the Company current assets of $450,711 and total assets of $3,193,657. As of December 31, 2019 the Company current assets of $1,045 and total assets of $1,045.
As of December 31, 2020 the Company current liabilities of $3,483,329 and total Liabilities of $4,457,673 As of December 31, 2019 the Company current liabilities of $433,116 and total liabilities of $473,916
The Company has funded its operations from contributions made by management. The Company has no present sources of capital or liquidity.
At present, the Company has no business operations and no cash resources other than as are provided by management. We are dependent upon interim funding provided by management to pay professional fees and expenses. Our management has agreed to provide funding as may be required to pay for professional fees and other administrative expenses of the Company until the Company enters into a business transaction. The Company would be unable to continue as a going concern without interim financing provided by management. If we require additional financing, we cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all. The Company depends upon services provided by management to fulfill its filing obligations under the Exchange Act. At present, the Company has no financial resources to pay for such services and may be required to issue restricted shares in lieu of cash or, in the alternative, issue debt instruments evidencing financial obligations if and when they arise. Any funds advanced by management will be advanced as loans that will bear interest at the rate of 8% per year and which shall mature on the closing of a business transaction.
Over the next twelve months, we expect to incur costs and expenses related to:
|
·
|
maintaining our corporate existence, such as annual fees due to the State of Nevada;
|
|
·
|
filing periodic reports under the Exchange Act including filing accounting and legal fees;
|
|
·
|
investigating and analyzing targets and possibly consummating a business transaction.
|
These costs are difficult to quantify given the multitude of variables associated with such activities. Our ongoing expenses will result in continued net operating losses that will increase until we can consummate a business transaction with a profitable target business, if ever. We estimate that these costs will be in the range of to six to eight thousand dollars per year, and that we will be able to meet these costs as necessary, to be advanced to us by management.
The following table summarizes our cash flows for the fiscal years ended December 31, 2020 and December 31, 2019:
|
|
2020
|
|
|
2019
|
|
Net cash provided (used) from operating activities
|
|
$
|
821,026
|
|
|
$
|
(57,119
|
)
|
Net cash used in investing activities
|
|
$
|
(2,702,687
|
)
|
|
$
|
-
|
|
Net cash provided by financing activities
|
|
$
|
1,952,821
|
|
|
$
|
58,164
|
|
Net Increase (Decrease) In Cash
|
|
$
|
71,160
|
|
|
$
|
1,045
|
|
Going Concern
Our lack of revenues, continuing operating losses and lack of operating capital create substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on its ability to obtain capital from our affiliates to fund our operations, generate cash from the sale of its securities and attain future profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Contractual Obligations
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of XLR Medical Corp
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of XLR Medical Corp as of December 31, 2020 and 2019, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2019
Lakewood, CO
April 15, 2021
XLR Medical Corp
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
72,205
|
|
|
$
|
1,045
|
|
Accounts receivable - net
|
|
|
36,274
|
|
|
|
-
|
|
Inventory
|
|
|
195,681
|
|
|
|
-
|
|
WIP
|
|
|
96,551
|
|
|
|
-
|
|
Investment in life on earth Series B
|
|
|
50,000
|
|
|
|
-
|
|
Total Current Assets
|
|
|
450,711
|
|
|
|
1,045
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment - Net
|
|
|
2,070,416
|
|
|
|
-
|
|
Loan receivable
|
|
|
50,000
|
|
|
|
|
|
Right of use asset
|
|
|
258,019
|
|
|
|
-
|
|
Goodwill
|
|
|
300,000
|
|
|
|
-
|
|
Other assets
|
|
|
64,511
|
|
|
|
-
|
|
Total Assets
|
|
$
|
3,193,657
|
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' (Deficit)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable - trade
|
|
$
|
1,747,852
|
|
|
$
|
433,116
|
|
Accrued expenses
|
|
|
73,501
|
|
|
|
-
|
|
Accrued expenses related party
|
|
|
14,235
|
|
|
|
-
|
|
Unearned revenue
|
|
|
149,966
|
|
|
|
|
|
Customer JV account liabilities
|
|
|
600,000
|
|
|
|
-
|
|
Lease liability current
|
|
|
114,675
|
|
|
|
-
|
|
Notes payable
|
|
|
150,000
|
|
|
|
-
|
|
Notes payable PPP
|
|
|
310,000
|
|
|
|
-
|
|
Notes payable - related party
|
|
|
120,800
|
|
|
|
-
|
|
Notes payable - convertibles
|
|
|
202,300
|
|
|
|
-
|
|
Total Current Liabilities
|
|
|
3,483,329
|
|
|
|
433,116
|
|
Long-Term Debt:
|
|
|
|
|
|
|
|
|
Lease liability
|
|
|
143,344
|
|
|
|
-
|
|
Notes payable
|
|
|
831,000
|
|
|
|
40,800
|
|
Total Liabilities
|
|
|
4,457,673
|
|
|
|
473,916
|
|
|
|
|
|
|
|
|
|
|
Stockholders' (Deficit)
|
|
|
|
|
|
|
|
|
Common stock ($0.00001 par value; 950,000,000 shares authorized; 12,508,011 shares issued and outstanding at December 31, 2020 and 2019 respectively
|
|
|
125
|
|
|
|
125
|
|
Additional paid-in capital
|
|
|
3,059,920
|
|
|
|
2,680,399
|
|
Accumulated deficit
|
|
|
(4,324,061
|
)
|
|
|
(3,153,395
|
)
|
Total Stockholders' (Deficit)
|
|
|
(1,264,016
|
)
|
|
|
(472,871
|
)
|
Total Liabilities and Stockholders' Deficit
|
|
$
|
3,193,657
|
|
|
$
|
1,045
|
|
The accompanying notes are an integral part of these financial statements.
XLR Medical Corp
|
Consolidated Statement of Operations
|
for the years ended
|
December 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,316,304
|
|
|
$
|
-
|
|
Cost of Goods Sold
|
|
|
914,759
|
|
|
|
-
|
|
Gross Profit
|
|
|
401,545
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
General and Administrative expense
|
|
|
110,520
|
|
|
|
56,177
|
|
Salaries
|
|
|
258,913
|
|
|
|
-
|
|
Rent
|
|
|
146,013
|
|
|
|
10,000
|
|
Utilities
|
|
|
29,956
|
|
|
|
-
|
|
Professional fees
|
|
|
18,728
|
|
|
|
16,284
|
|
Consulting
|
|
|
667,976
|
|
|
|
383,973
|
|
Depreciation
|
|
|
232,271
|
|
|
|
|
|
Total Expenses
|
|
|
1,464,377
|
|
|
|
466,434
|
|
Net Profit From Operations
|
|
|
(1,062,832
|
)
|
|
|
(466,434
|
)
|
|
|
|
|
|
|
|
|
|
Other Income / (Expenses)
|
|
|
|
|
|
|
|
|
Gain on Debt settlement
|
|
|
-
|
|
|
|
-
|
|
Financing Fees
|
|
|
(36,860
|
)
|
|
|
(23,800
|
)
|
Interest Expense
|
|
|
(70,974
|
)
|
|
|
-
|
|
Net Profit / (Loss) Before Income Taxes
|
|
|
(1,170,666
|
)
|
|
|
(490,234
|
)
|
Income Tax Expense
|
|
|
-
|
|
|
|
-
|
|
Net Profit / (Loss)
|
|
$
|
(1,170,666
|
)
|
|
$
|
(490,234
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE - BASIC & DILUTED
|
|
$
|
(0.09
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC & DILUTED
|
|
|
12,508,011
|
|
|
|
12,508,011
|
|
The accompanying notes are an integral part of these financial statements.
XLR Medical Corp
|
Consolidated Statement of Stockholders Equity
|
December 31, 2020
|
|
|
|
Common Stock
.00001 Par
|
|
|
|
|
|
|
|
|
Stockholders'
|
|
Description
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid in Capital
|
|
|
Accumulated
Deficit
|
|
|
Deficit
Totals
|
|
December 31, 2018
|
|
|
12,508,011
|
|
|
$
|
125
|
|
|
$
|
2,663,035
|
|
|
$
|
(2,663,160
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Contributions
|
|
|
-
|
|
|
|
-
|
|
|
|
16,864
|
|
|
|
-
|
|
|
|
16,864
|
|
CBD Capital contribution
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(490,235
|
)
|
|
|
(490,235
|
)
|
December 31, 2019
|
|
|
12,508,011
|
|
|
|
125
|
|
|
|
2,680,399
|
|
|
|
(3,153,395
|
)
|
|
|
(472,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Contributions
|
|
|
-
|
|
|
|
-
|
|
|
|
11,225
|
|
|
|
-
|
|
|
|
11,225
|
|
CBD Equity
|
|
|
|
|
|
|
|
|
|
|
368,296
|
|
|
|
|
|
|
|
368,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,170,666
|
)
|
|
|
(1,170,666
|
)
|
December 31, 2020
|
|
|
12,508,011
|
|
|
$
|
125
|
|
|
$
|
3,059,920
|
|
|
$
|
(4,324,061
|
)
|
|
$
|
(1,264,016
|
)
|
The accompanying notes are an integral part of these financial statements.
XLR Medical Corp
|
|
Consolidated Statement of Cash flows
|
|
for the year ended
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
Cash provided (used) from operating activities
|
|
Net Income (Loss)
|
|
$
|
(1,170,666
|
)
|
|
$
|
(490,234
|
)
|
Depreciation
|
|
|
232,271
|
|
|
|
-
|
|
Change in Accounts Receivable
|
|
|
(36,274
|
)
|
|
|
-
|
|
Change in inventory
|
|
|
(292,232
|
)
|
|
|
-
|
|
Change in other assets
|
|
|
(64,511
|
)
|
|
|
-
|
|
Change in JV liabilities
|
|
|
600,000
|
|
|
|
-
|
|
Change in Accounts Payable and Accrued Expenses
|
|
|
1,388,237
|
|
|
|
433,115
|
|
Change in Accrued Expenses - related party
|
|
|
14,235
|
|
|
|
-
|
|
Change in Unearned Revenue
|
|
|
149,966
|
|
|
|
-
|
|
Net cash provided (used) from operating activities
|
|
|
821,026
|
|
|
|
(57,119
|
)
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
|
|
|
|
|
|
Purchase of Equipment
|
|
|
(2,302,687
|
)
|
|
|
-
|
|
Investment in series B
|
|
|
(50,000
|
)
|
|
|
-
|
|
Shareholder loan
|
|
|
(50,000
|
)
|
|
|
-
|
|
Investment in XLR
|
|
|
(300,000
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(2,702,687
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities
|
|
|
|
|
|
|
|
|
Proceeds from Notes Payable
|
|
|
1,452,500
|
|
|
|
40,800
|
|
Contributed Capital
|
|
|
379,521
|
|
|
|
17,364
|
|
Proceeds from Notes Payable related parties
|
|
|
120,800
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
1,952,821
|
|
|
|
58,164
|
|
Net Increase (Decrease) In Cash
|
|
|
71,160
|
|
|
|
1,045
|
|
|
|
|
|
|
|
|
|
|
Cash At Beginning of Period
|
|
|
1,045
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash At End of Period
|
|
$
|
72,205
|
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cashflow Information
|
|
|
|
|
|
|
|
|
Interest Paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Taxes Paid
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these financial statements.
NOTE 1 - BUSINESS ACTIVITY
XLR Medical Corp. (the "Company”) was organized under the laws of the State of Nevada on February 2, 2001 under the name Relay Mines Limited—subsequently the name of the Company was changed to XLR Medical Corp. After the October 31, 2007 10Q filing, the management of the Company abandoned the Company and it became a dormant company until 2018 when a new shareholder acquired stock to become the majority shareholder and owner of the Company. The Company’s fiscal year end is December 31st.
NOTE 2 - GOING CONCERN
The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. The Company had a total stockholder’s deficit of $1,264,016 and a net loss of $1,170,666 for the year ended December 31, 2020. The company also had an accumulated deficit of $4,324,061 as of December 31, 2020. Therefore, there is substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will achieve its goals and reach profitable operations and is still dependent upon its ability (1) to obtain sufficient debt and/or equity capital and/or (2) to generate positive cash flow from operations.
The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might arise because of this uncertainty.
To address these aforementioned, management has undertaken the following initiatives: 1) enter into discussions to secure additional equity funding from current or new shareholders; 2) undertake a program to continue to monitor the Company’s ongoing working capital requirements and minimum expenditure commitments; 3) continue their focus on maintaining an appropriate level of corporate overhead in line with the Company’s available cash resources.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates may be materially different from actual financial results. Significant estimates include the recoverability of long-lived assets, the collection of accounts receivable and valuation of inventory and reserves.
Cash and Cash Equivalents
We maintain the majority of our cash accounts at a commercial bank. The total cash balance is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per commercial bank, at times we may exceed the FDIC limits. For purposes of the statement of cash flows we consider all cash and highly liquid investments with initial maturities of one year or less to be cash equivalents.
Accounts Receivable
We grant credit to our customers and do not require collateral. Our ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by us. Reserves for un-collectable amounts are provided, based on past experience and a specific analysis of the accounts. Although we expect to collect amounts due, actual collections may differ from the estimated amounts. As of December 31, 2020, and December 31, 2019, we had a reserve for potentially un-collectable accounts of $0 and $0 respectively. Historically, our bad debt write-offs related to these trade accounts have been insignificant.
Inventory
Inventories are valued at the lower of weighted average cost or market value. Our industry experiences changes in technology, changes in market value and availability of raw materials, as well as changing customer demand. We make provisions for estimated excess and obsolete inventories based on regular audits and cycle counts of our on-hand inventory levels and forecasted customer demands and at times additional provisions are made. Any inventory write offs are charged to the reserve account. As of December 31, 2020, and 2019, we had a reserve for potentially obsolete inventory of $0.
Property and Equipment
Property and equipment are recorded at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. The cost of ordinary maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:
Furniture and fixtures
|
|
3 to 7 years
|
Equipment
|
|
7 to 10 years
|
Leasehold Improvements
|
|
7 years
|
Long –Lived Assets
Our management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment if any, is measured based on fair value and is charged to operations in the period in which long-lived assets impairment is determined by management. There can be no assurance however, that market conditions will not change or demand for our services will continue, which could result in impairment of long-lived assets in the future.
Revenue Recognition
The Company recognizes revenue under ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASC 606”).
Performance Obligations Satisfied Over Time
FASB ASC 606-10-25-27 through 25-29, 25-36 through 25-37, 55-5 through 55-10
An entity transfers control of a good or service over time and satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met:
a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs (as described in FASB ASC 606-10-55-5 through 55-6).
b. The entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced (as described in FASB ASC 606-10-55-7).
c. The entity’s performance does not create an asset with an alternative use to the entity (see FASB ASC 606-10-25-28), and the entity has an enforceable right to payment for performance completed to date (as described in FASB ASC 606-10-25-29).
Performance Obligations Satisfied at a Point in Time
FASB ASC 606-10-25-30
If a performance obligation is not satisfied over time, the performance obligation is satisfied at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity should consider the guidance on control in FASB ASC 606-10-25-23 through 25-26. In addition, it should consider indicators of the transfer of control, which include, but are not limited to, the following:
a. The entity has a present right to payment for the asset
b. The customer has legal title to the asset
c. The entity has transferred physical possession of the asset
d. The customer has the significant risks and rewards of ownership of the asset
e. The customer has accepted the asset
The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. In addition a) the company also does not have an alternative use for the asset if the customer were to cancel the contract, and b.) has a fully enforceable right to receive payment for work performed (i.e., customers are required to pay as various milestones and/or timeframes are met)
Also from time to time we require deposits from our customers. As of December 31, 2020, and 2019 we had $149,966 and $0 of deferred revenue.
Fair Value of Financial Instruments
The Financial Accounting Standards Board issued ASC (Accounting Standards Codification) 820-10 (SFAS No. 157), “Fair Value Measurements and Disclosures” for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
|
·
|
Level 1: Quoted prices in active markets for identical assets or liabilities.
|
|
|
|
|
·
|
Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
|
|
|
|
|
·
|
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
The Company’s financial instruments consist of cash, prepaid expenses, inventory, accounts payable, convertible notes payable, and advances from related parties. The estimated fair value of cash, prepaid expenses, investments, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
The carrying amounts of accounts payable and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of these financial instruments.
Other Comprehensive Income
We have no material components of other comprehensive income (loss) and accordingly, net loss is equal to comprehensive loss in all periods.
Net Profit (Loss) per Common Share
Basic profit / (loss) per share is computed on the basis of the weighted average number of common shares outstanding. At December 31, 2020, we had outstanding common shares of 12,508,011 used in the calculation of basic earnings per share. Basic Weighted average common shares and equivalents for the years ended December 31, 2020 and 2019 were 12,508,011. As of December 31, 2020, we had convertible notes to potentially convert into approximately 1,011,500 of additional common shares and 390,000 common stock warrants convertible into an additional 390,000 common shares. Fully diluted weighted average common shares and equivalents were withheld from the calculation as they were considered anti-dilutive.
Research and Development
We had no amounts of research and development R&D expense during the three and nine months ended December 31, 2020 and 2019.
Share-Based Compensation
The Company has adopted the use of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (SFAS No. 123R) (now contained in FASB Codification Topic 718, Compensation-Stock Compensation), which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. This Statement requires an entity to measure the cost of employee services received in exchange for an award of an equity instruments, which includes grants of stock options and stock warrants, based on the fair value of the award, measured at the grant date (with limited exceptions). Under this standard, the fair value of each award is estimated on the grant date, using an option-pricing model that meets certain requirements. We use the Black-Scholes option-pricing model to estimate the fair value of our equity awards, including stock options and warrants. The Black-Scholes model meets the requirements of SFAS No. 123R; however, the fair values generated may not reflect their actual fair values, as it does not consider certain factors, such as vesting requirements, employee attrition and transferability limitations. The Black-Scholes model valuation is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We estimate the expected volatility and estimated life of our stock options at grant date based on historical volatility. For the “risk-free interest rate,” we use the Constant Maturity Treasury rate on 90-day government securities. The term is equal to the time until the option expires. The dividend yield is not applicable, as the Company has not paid any dividends, nor do we anticipate paying them in the foreseeable future. The fair value of our restricted stock is based on the market value of our free trading common stock, on the grant date calculated using a 20-trading-day average. At the time of grant, the share-based compensation expense is recognized in our financial statements based on awards that are ultimately expected to vest using historical employee attrition rates and the expense is reduced accordingly. It is also adjusted to account for the restricted and thinly traded nature of the shares. The expense is reviewed and adjusted in subsequent periods if actual attrition differs from those estimates.
We re-evaluate the assumptions used to value our share-based awards on a quarterly basis and, if changes warrant different assumptions, the share-based compensation expense could vary significantly from the amount expensed in the past. We may be required to adjust any remaining share-based compensation expense, based on any additions, cancellations or adjustments to the share-based awards. The expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For the years ended December 31, 2020 and 2019, the company had no share-based expense.
Income Taxes
Federal Income taxes are not currently due since we have had losses since inception.
On December 22, 2018 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax expense for the months ended September 30, 2020 using a Federal Tax Rate of 21%.
Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.
Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
As of December 31, 2020, we had a net operating loss carry-forward of approximately $(4,324,061) and a deferred tax asset of $908,053 using the statutory rate of 21%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(908,053). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 31, 2020, the Company had not taken any tax positions that would require disclosure under FASB ASC 740.
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Deferred Tax Asset
|
|
$
|
908,053
|
|
|
$
|
662,213
|
|
Valuation Allowance
|
|
|
(908,053
|
)
|
|
|
(662,213
|
)
|
Deferred Tax Asset (Net)
|
|
$
|
-
|
|
|
$
|
-
|
|
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income, total assets, total liabilities or stockholders’ equity as previously reported.
Recently Issued Accounting Standards
The Company is reviewing the effects of following recent updates. The Company has no expectation that any of these items will have a material effect upon the financial statements.
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses [codified as Accounting Standards Codification Topic (ASC) 326]. ASC 326 adds to US generally accepted accounting principles (US GAAP) the current expected credit loss (CECL) model, a measurement model based on expected losses rather than incurred losses. Under this new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. This will become effective in January 2023 and the impact on the company is under evaluation.
Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This was issued in August of 2020 and will become effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We are in the process of evaluating the impact to the company.
NOTE 4 -WRITE-OFF OF PAYABLES, RELATED PARTY TRANSACTIONS AND ACCRUED INTEREST OCCURRING PRIOR TO THE COMPANY ABANDONMENT
The last debts incurred by the Company was in 2007, 13 years ago. No new loans have been identified since the last filing and since the new owner has acquired the Company.
The new management of the Company takes the position that the statute of limitations with respect to the Related Party Loans has expired and the lenders are barred from pursuing a claim against us for repayment of the amount loaned. Nevada law relating to the statute of limitations is found in Chapter 11 of the Nevada Revised Statutes (“NRS”), titled “Limitations of Actions” (https://www.leg.state.nv.us/NRS/NRS-011.html#NRS011Sec190). NRS 11.010 titled “Commencement of civil actions” provides that “Civil actions can only be commenced within the periods prescribed in this chapter, after the cause of action shall have accrued, except where a different limitation is prescribed by statute.”
Given the foregoing, all existing liabilities would be time barred by the statute of limitations:
|
|
Last 10-Q
|
|
|
Last 10-K
|
|
|
|
10/31/07
|
|
|
1/31/07
|
|
Accounts payable
|
|
|
94,888
|
|
|
|
85,225
|
|
Accrued liabilities
|
|
|
25,347
|
|
|
|
18,935
|
|
Due to related parties
|
|
|
293,931
|
|
|
|
248,636
|
|
Loans payable
|
|
|
409,000
|
|
|
|
397,000
|
|
Total Liabilities
|
|
|
823,166
|
|
|
|
749,796
|
|
Therefore, the Company made the decision to write-off the Related Party Loans, Accrued Interest and Other Payables totaling $823,160 as of January 31, 2017. The debts were written off against Additional Paid in Capital—per ASC Section 470-50-40. ASC Section 470-50-40 (Debt Modification and Extinguishments), considers Related Party Transactions to be capital transactions and the extinguishment of the debt is in effect a capital transaction and it is not a gain or loss recognition event and should be excluded from the determination of net income.
NOTE 5 - EQUITY
The Company is authorized to issue 950,000,000 Common Shares at $.00001 par value per share.
On November 30, 2018, the Company’s board of directors and custodian appointed, Bryan Glass as the Company’s President, Secretary and Treasurer and authorized the issuance of 12,000,000 shares of stock to Mr. Glass for an aggregate price of $120.
Total issued and outstanding shares as of December 31, 2020 is 12,508,011.
NOTE 6 - MATERIAL EVENTS
In October 2007, prior management of the Company discontinued filing reports required under the Exchange Act, at which time current management considers the prior business of the Company to have been abandoned. In February 2009, the Company filed a Form 15 with the SEC terminating the registration of its class of common stock under Section 12(g) of the Exchange Act and its duty to file periodic and other reports with the SEC.
Current management assumed control of the Company in November 2018. This Registration Statement is being filed to register the Company’s class of common stock under Section 12 of the Exchange Act on a voluntary basis.
On November 29, 2018, the Eight Judicial District Court of Nevada entered an order appointing Bryan Glass as custodian of the Company, authorizing and directing him to, among other things, take any action reasonable, prudent and for the benefit of the Company, including reinstating the Company under Nevada law, appointing officers and convening an annual meeting of stockholders (the “Order”).
On November 30, 2018, Bryan Glass, as custodian, appointed himself to serve as an interim director of the Company until the next meeting of stockholders, as permitted by the Order. Also, on November 30, 2018, the board of directors and the custodian appointed Bryan Glass as our President, Secretary and Treasurer and authorized the issuance of 12,000,000 shares of stock to Mr. Glass for an aggregate price of $120.
On December 6, 2018, the Company filed a Certificate of Reinstatement with the state of Nevada to reestablish the Company’s existence.
On January 16, 2019, the Company held a stockholder’s meeting at which Mr. Glass was elected as the sole director of the Company.
On November 30, 2020, Mr. Bryan Glass, our President and a sole director of the Company, resigned from both positions as part of his departure from the Company. Mr. Glass served as the President, Secretary and Treasurer and a member of our Board since November 30, 2018. This resignation is not the result of any disagreement with the Company on any matter related to the Company’s operations, policies, or practices.
On November 30, 2020, the board of directors appointed Mr. Michael Hill, as the sole director of the Company, and as interim Chief Executive Officer and Chief Financial Officer of the Company. The board of directors has agreed to compensate Mr. Hill at a rate of $25,000 per month during his interim service to the Company.
NOTE 7 - NOTES PAYABLE
On February 19, 2019 the company entered into a promissory note with a related party in the amount of $17,000, with an interest due at the rates of 8% per annum and a due date of February 19, 2020.
On March 31, 2019 the company entered into a promissory note with a related party in the amount of $9,300, with an interest due at the rates of 8% per annum and a due date of March 31, 2020.
On March 31, 2019 the company entered into a promissory note with a related party in the amount of $14,500, with an interest due at the rates of 8% per annum and a due date of March 30, 2020.
On February 29, 2020 the company entered into a promissory note in the amount of $531,000, with an interest due at the rates of 9.9% per annum and a due date of January 1, 2021.
On February 29, 2020 the company entered into a promissory note with a related party in the amount of $60,000, with an interest due at the rates of 8% per annum and a due date of February 29, 2021.
On May 5, 2020 the company entered into a promissory note under the payroll protection program in the amount of $310,000, with an interest due at the rates of 1% per annum and a due date of August 15, 2022.
On July 8, 2020 the company entered into an SBA promissory note in the amount of $150,000, with an interest due at the rates of 3.75% per annum and a due date of August 15, 2022.
On June 4, 2020 the company entered into a promissory note with a in the amount of $20,000, with an interest due at the rates of 8% per annum and a due date of September 5, 2020. This note was offset against an account receivable in the fourth quarter of 2020 and the balance due as of December 31, 2020 was $0.
On June 5, 2020 the company entered into a promissory note with a in the amount of $10,000, with an interest due at the rates of 8% per annum and a due date of March 31, 2020. This note was offset against an account receivable in the fourth quarter of 2020 and the balance due as of December 31, 2020 was $0.
On June 8, 2020 the company entered into a promissory note with a related party in the amount of $10,000, with an interest due at the rates of 8% per annum and a due date of September 8, 2020.
On June 11, 2020 the company entered into a promissory note with a related party in the amount of $10,000, with an interest due at the rates of 8% per annum and a due date of September 11, 2020.
On July 27, 2020 the company entered into a promissory note in the amount of $300,000, with an interest due at the rates of 9% per annum and a due date of August 15, 2022.
On November 30, 2020 the company entered into a secured convertible promissory note for $202,300, with an interest rate of 6% per annum. The note is convertible at $.20 per share.
To date, the prior majority shareholder, Bryan Glass contributed $26,864 for expenses and fees to reinstate the Company. This money was booked as a capital contribution.
NOTE 8 - SUBSEQUENT EVENTS
On February 11, 2021, the Company entered into a non-binding Letter of (the “LOI”) with CBD Brand Partners, LLC., a Wyoming limited liability company (“CBDBP”). Under the terms of the LOI, the Company agreed to acquire CBDBP as its wholly owned subsidiary by merging CBDBP with and into a subsidiary, such that the Company would acquire all of the outstanding equity of CBDBP and the holders of the shares of CBDBP immediately prior to the Merger would receive 10,000 shares of Series A Preferred Stock, 800 shares of Series B Preferred Stock and 3,000,000 shares of Series C Preferred Stock.
On April 12, 2021, XLR Medical Corp (the “Company”), acquired CBD Brand Partners, LLC (“CBDBP”), a wholly owned subsidiary of Mammoth Crest Capital, LLC. XLR issued 10,000 shares of its Series A Preferred Stock and 800 shares of its Series B Preferred Stock as the purchase price.