UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
[X] |
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 |
For
the quarterly period ended October 31,
2020 |
|
|
[
] |
Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934 |
For
the transition period from __________ to__________ |
|
|
Commission
File Number: 000-55711 |

Cannagistics, Inc.
(Exact name of registrant as specified in its charter)
|
|
Nevada |
90-0338080 |
(State
or other jurisdiction of incorporation or organization) |
(IRS
Employer Identification No.) |
|
2480 Stanfield Road, Unit B
Mississauga, Ontario L4Y 1R6
|
(Address
of principal executive offices) |
|
631-676-7230 |
(Registrant’s
telephone number) |
|
(Former
name, former address and former fiscal year, if changed since last
report) |
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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post 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:
172,789,105 common
shares as of December 14, 2020.
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
Our financial statements included in this Form 10-Q are as
follows:
F-1 |
Consolidated
Interim Balance Sheets as of October 31, 2020 (unaudited) and July
31, 2020 (audited); |
F-2 |
Condensed
Consolidated Interim Statements of Operations for the three months
ended October 31, 2020 (unaudited) and 2019
(unaudited); |
F-3 |
Condensed
Consolidated Interim Statements of Cash Flows for the three months
ended October 31, 2020 (unaudited) and 2019 (unaudited);
and |
F-4 |
Notes
to Condensed Consolidated Interim Financial Statements.
(unaudited) |
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 October 31, 2020 are
not necessarily indicative of the results that can be expected for
the full year.
CANNAGISTICS INC.,
GLOBAL3PL, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
October
31, 2020 |
|
July
31, 2020 |
|
|
(Unaudited) |
|
(Audited) |
CURRENT
ASSETS: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
3,299 |
|
|
$ |
685 |
|
Right-to-use
asset |
|
|
23,033 |
|
|
|
23,033 |
|
Related
party receivables, less allowance for doubtful accounts of
$1,015,234 |
|
|
0 |
|
|
|
0 |
|
TOTAL
CURRENT ASSETS |
|
|
26,332 |
|
|
|
23,718 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS: |
|
|
|
|
|
|
|
|
Right-to-use
asset, net of current portion |
|
|
26,635 |
|
|
|
31,442 |
|
Security
deposits |
|
|
3,634 |
|
|
|
3,634 |
|
TOTAL
OTHER ASSETS |
|
|
30,269 |
|
|
|
35,076 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
56,601 |
|
|
$ |
58,794 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
747,229 |
|
|
$ |
607,961 |
|
Lease
liability, current portion |
|
|
18,505 |
|
|
|
18,505 |
|
Promissory
notes |
|
|
170,000 |
|
|
|
170,000 |
|
Convertible
notes payable, net of discount of $122,863 and $58,087 |
|
|
|
|
|
|
|
|
October
31, 2020 and July 31, 2020, respectively |
|
|
2,393,706 |
|
|
|
2,426,254 |
|
Derivative
liabilities |
|
|
755,223 |
|
|
|
205,796 |
|
Common
stock payable |
|
|
0 |
|
|
|
24,998 |
|
Related
party payables |
|
|
386,404 |
|
|
|
388,094 |
|
TOTAL
CURRENT LIABILITIES |
|
|
4,471,067 |
|
|
|
3,841,608 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES |
|
|
|
|
|
|
|
|
Lease
liability, net of current portion |
|
|
33,752 |
|
|
|
38,559 |
|
TOTAL
LONG-TERM LIABILITIES |
|
|
33,752 |
|
|
|
38,559 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
OF DISCONTINUED OPERATIONS |
|
|
837,778 |
|
|
|
839,646 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
5,342,597 |
|
|
|
4,719,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT: |
|
|
|
|
|
|
|
|
Preferred
Stock; $0.001 par value; 20,000,000 shares authorized, 10,000,000
and 8,000,000 shares issued and outstanding as of October 31, 2020
and July 31, 2020, respectively |
|
|
10,000 |
|
|
|
10,000 |
|
Common
stock; $0.001 par value; 250,000,000 shares authorized; 158,789,105
and 105,099,277 outstanding and issued as of October 31, 2020 and
July 31, 2020, respectively |
|
|
158,789 |
|
|
|
105,099 |
|
Additional
paid-in capital |
|
|
9,098,230 |
|
|
|
8,490,720 |
|
Treasury
stock |
|
|
(45,000 |
) |
|
|
(45,000 |
) |
Accumulated
deficit |
|
|
(14,508,015 |
) |
|
|
(13,221,838 |
) |
TOTAL
STOCKHOLDERS' DEFICIT |
|
|
(5,285,995 |
) |
|
|
(4,661,019 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES & STOCKHOLDERS' DEFICIT |
|
$ |
56,601 |
|
|
$ |
58,794 |
|
See accompanying notes to the consolidated financial
statements
CANNAGISTICS
INC.,
GLOBAL3PL, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE
THREE MONTHS ENDED OCTOBER 31, 2019
(UNAUDITED)
|
|
For the
Three |
|
|
Months
Ended |
|
|
October 31,
2020 |
|
October 31,
2019 |
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
37,575 |
|
|
|
(5,892 |
) |
Rent |
|
|
7,486 |
|
|
|
10,676 |
|
Consulting |
|
|
28,500 |
|
|
|
28,600 |
|
Professional fees |
|
|
82,884 |
|
|
|
59,168 |
|
Total
operating expenses |
|
|
156,445 |
|
|
|
92,552 |
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(156,445 |
) |
|
|
(92,552 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest
Income |
|
|
21,759 |
|
|
|
21,759 |
|
Interest
expense |
|
|
(147,634 |
) |
|
|
(98,901 |
) |
Settlement
Fees |
|
|
(25,000 |
) |
|
|
— |
|
Loss on
derivative liabilities |
|
|
(936,075 |
) |
|
|
— |
|
Change in fair value of derivative liabilities |
|
|
(42,782 |
) |
|
|
— |
|
Total other expense |
|
|
(1,129,732 |
) |
|
|
(77,142 |
) |
|
|
|
|
|
|
|
|
|
Loss from
continuing operations |
|
|
(1,286,177 |
) |
|
|
(169,694 |
) |
|
|
|
|
|
|
|
|
|
Discontinued operations, including loss on disposal
|
|
|
— |
|
|
|
(119,081 |
) |
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(1,286,177 |
) |
|
|
(288,775 |
) |
|
|
|
|
|
|
|
|
|
Net loss per
common share: basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
Basic and diluted weighted average
common |
|
|
|
|
|
|
|
|
shares
outstanding |
|
|
102,834,619 |
|
|
|
93,117,423 |
|
See accompanying notes to the consolidated financial statements
CANNAGISTICS INC.
GLOBAL3PL, INC. AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
|
Common
Stock |
|
Preferred
Stock C |
|
Preferred
Stock D |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Additional
Paid-in Capital |
|
Treasury
Stock |
|
Noncontrolling Interest |
|
Accumulated
Deficit |
|
Total
Stockholders' Deficit |
Balance, July 31,
2019 |
|
|
93,118,077 |
|
|
$ |
93,030 |
|
|
|
— |
|
|
$ |
— |
|
|
|
8,000,000 |
|
|
$ |
8,000 |
|
|
$ |
7,382,579 |
|
|
$ |
(45,000 |
) |
|
$ |
— |
|
|
$ |
(10,539,338 |
) |
|
$ |
(3,100,729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,351 |
|
|
|
1,351 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(288,775 |
) |
|
|
(288,775 |
) |
Balance, October 31, 2019 |
|
|
93,118,077 |
|
|
$ |
93,030 |
|
|
|
— |
|
|
$ |
— |
|
|
|
8,000,000 |
|
|
$ |
8,000 |
|
|
$ |
7,382,579 |
|
|
$ |
(45,000 |
) |
|
$ |
— |
|
|
$ |
(10,826,762 |
) |
|
$ |
(3,388,153 |
) |
|
|
Common
Stock |
|
Preferred
Stock C |
|
Preferred
Stock D |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Additional
Paid-in Capital |
|
Treasury
Stock |
|
Noncontrolling Interest |
|
Accumulated
Deficit |
|
Total
Stockholders' Deficit |
Balance, July
31, 2020 |
|
|
105,099,277 |
|
|
$ |
105,099 |
|
|
|
— |
|
|
$ |
— |
|
|
|
10,000,000 |
|
|
$ |
10,000 |
|
|
$ |
8,490,720 |
|
|
$ |
(45,000 |
) |
|
$ |
— |
|
|
$ |
(13,221,838 |
) |
|
$ |
(4,661,019 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for conversion of
convertible debt |
|
|
51,190,000 |
|
|
|
51,190 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
585,012 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
636,202 |
|
Shares issued for settlement of
payables |
|
|
2,499,828 |
|
|
|
2,500 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,498 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
24,998 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,286,177 |
) |
|
|
(1,286,177 |
) |
Balance, October 31, 2020 |
|
|
158,789,105 |
|
|
$ |
158,789 |
|
|
|
— |
|
|
$ |
— |
|
|
|
10,000,000 |
|
|
$ |
10,000 |
|
|
$ |
9,098,230 |
|
|
$ |
(45,000 |
) |
|
$ |
— |
|
|
$ |
(14,508,015 |
) |
|
$ |
(5,285,996 |
) |
See
accompanying notes to the consolidated financial statements
CANNAGISTICS INC.
GLOBAL3PL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
THREE MONTHS ENDED OCTOBER 31, 2020
(UNAUDITED)
|
|
For The
Three Months Ended |
|
|
October 31,
2020 |
|
October 31,
2019 |
Cash Flows from Operating
Activities |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(1,286,177 |
) |
|
$ |
(288,775 |
) |
Loss from
discontinued operations |
|
|
— |
|
|
|
119,081 |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Foreign currency
adjustment |
|
|
— |
|
|
|
1,351 |
|
Settlement Fees on
conversion of stock |
|
|
13,000 |
|
|
|
|
|
Penalty on
convertible note payable |
|
|
25,000 |
|
|
|
— |
|
Loss on derivative
liabilities |
|
|
452,944 |
|
|
|
— |
|
Change in fair
value of derivative liabilities |
|
|
525,913 |
|
|
|
— |
|
Amortization of
debt discount |
|
|
40,224 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
Accounts
receivable and other receivables |
|
|
— |
|
|
|
24,135 |
|
Prepaid
expense |
|
|
— |
|
|
|
(5,267 |
) |
Accounts payable and accrued expenses |
|
|
139,278 |
|
|
|
159,536 |
|
Net cash used in
operating activities of continuing operations |
|
|
(89,818 |
) |
|
|
10,061 |
|
Net
cash used in operating activities discontinued operations |
|
|
(1,868 |
) |
|
|
(119,081 |
) |
Net
cash used in operating activities |
|
$ |
(91,686 |
) |
|
$ |
(109,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities |
|
|
|
|
|
|
|
|
(Increase) decrease in restricted cash |
|
|
— |
|
|
|
(52 |
) |
Net
cash used in financing activities |
|
|
— |
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities |
|
|
|
|
|
|
|
|
Proceeds from
convertible notes, net of amortization of $9,000 |
|
|
96,000 |
|
|
|
— |
|
Proceeds from line
of credit |
|
|
— |
|
|
|
276,037 |
|
Proceeds from
loans |
|
|
— |
|
|
|
71,800 |
|
Proceeds from
related parties |
|
|
32,900 |
|
|
|
21,839 |
|
Payments on
loans |
|
|
— |
|
|
|
(12,176 |
) |
Payments on line
of credit |
|
|
— |
|
|
|
(245,787 |
) |
Payments to related parties |
|
|
(34,600 |
) |
|
|
— |
|
Net cash provided
by financing activities |
|
|
94,300 |
|
|
|
111,713 |
|
|
|
|
|
|
|
|
|
|
Net increase in
cash |
|
|
2,614 |
|
|
|
2,641 |
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
685 |
|
|
|
630 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
|
3,299 |
|
|
|
3,271 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
|
— |
|
|
|
5,227 |
|
Cash
paid for tax |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
transactions |
|
|
|
|
|
|
|
|
Original issuance discount on convertible notes payable |
|
$ |
9,000 |
|
|
$ |
11,000 |
|
Conversion of notes payable, fees, and derivative liabilities |
|
$ |
636,202 |
|
|
$ |
— |
|
See
accompanying notes to the consolidated financial statements
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
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
October 31, 2020
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).
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
Malta Project
Cannagistics Lab Malta, is an emerging biotech lab with an
intrinsic knowledge in the medicinal cannabis industry. With a
solid team of a multidisciplinary professionals in the
pharmaceutical industry, complex supply chain and logistics
management, unique technology and intellectual
property, Cannagistics Lab purpose is to add value
and offer a progress proposal to Malta medicinal cannabis industry,
based on its interest to support, educate, take advantage of and
focus on the development of breakthrough medicinal cannabis
products with different therapeutic uses in patients around the
world to whom science and traditional medicine simply could not
reach; our vision and knowledge allows us to 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.
Manufacturing areas description:
The factory will have the following areas for the production
process, which will implement the safety protocols and the project
will be developed.
Area of receipt: Area of the property that has been destined for
the receipt of the raw material and supplies that arrives for the
manufacturing process.
Raw material area: Warehouse equipped with the security measures
required for the storage of the raw material.
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
Production and manufacturing area: Sector where the manufacturing
process will be carried out in which the transforming plant will be
in order to obtain the final product.
Reagents and supplies area: Warehouse equipped with the security
measures required for the storage of reagents and supplies.
Solid waste area: Sector destined for the storage of solid waste
produced during the manufacturing process.
Finished product area: Warehouse equipped with the security
measures required for the storage of the finished product.
Dispatch area: Sector from where the process of dispatch and
delivery of the finished product to its final recipient will take
place
Administrative area: Sector of the factory where administrative,
accounting and security activities will be developed.
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.
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.
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
COVID-19 Pandemic Update
In March 2020, the World Health Organization declared a global
health pandemic related to the outbreak of a novel coronavirus. The
COVID-19 pandemic adversely affected the company's financial
performance in the third and fourth quarters of fiscal year 2020
and could have an impact throughout fiscal year 2021. In response
to the COVID-19 pandemic, government health officials have
recommended and mandated precautions to mitigate the spread of the
virus, including shelter-in-place orders, prohibitions on public
gatherings and other similar measures. As a result, the company and
certain of the company's customers and suppliers temporarily closed
locations beginning late in the second quarter of fiscal year 2020,
continuing into the third quarter of fiscal year 2020. There is
uncertainty around the duration and breadth of the COVID-19
pandemic, as well as the impact it will have on the company's
operations, supply chain and demand for its products. As a result,
the ultimate impact on the company's business, financial condition
or operating results cannot be reasonably estimated at this
time.
Income Taxes
The Company accounts for income taxes under ASC 740 "Income Taxes,"
which codified SFAS 109, "Accounting for Income Taxes" and FIN 48
“Accounting for Uncertainty in Income Taxes – an Interpretation of
FASB Statement No. 109.” Under the asset and liability method of
ASC 740, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under ASC 740, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period the enactment occurs. A
valuation allowance is provided for certain deferred tax assets if
it is more likely than not that the Company will not realize tax
assets through future operations.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks.
The Company reviews the terms of convertible loans, equity
instruments and other financing arrangements to determine whether
there are embedded derivative instruments, including embedded
conversion options that are required to be bifurcated and accounted
for separately as a derivative financial instrument. Also, in
connection with the issuance of financing instruments, the Company
may issue freestanding options or warrants to employees and
non-employees in connection with consulting or other services.
These options or warrants may, depending on their terms, be
accounted for as derivative instrument liabilities, rather than as
equity.
Derivative financial instruments are initially measured at their
fair value. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded
at fair value and then re-valued at each reporting date, with
changes in the fair value reported as charges or credits to income.
To the extent that the initial fair values of the freestanding
and/or bifurcated derivative instrument liabilities exceed the
total proceeds received an
immediate charge to income is recognized in order to initially
record the derivative instrument liabilities at their fair
value.
The discount from the face value of the convertible debt
instruments resulting from allocating some or all of the proceeds
to the derivative instruments, together with the stated rate of
interest on the instrument, is amortized over the life of the
instrument through periodic charges to income, using the effective
interest method.
The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is
reassessed at the end of each reporting period. If reclassification
is required, the fair value of the derivative instrument, as of the
determination date, is reclassified. Any previous charges or
credits to income for changes in the
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
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.
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 of financial instruments
The Company’s financial instruments consist of its liabilities. The
carrying amount of payables and the loan payable – related party
approximate fair value because of the short-term nature of these
items. The promissory notes, and convertible notes payables are
measured at amortized cost using the effective interest method,
which approximates fair value due to the relationship between the
interest rate on long-term debt and the Company’s incremental risk
adjusted borrowing rate.
Fair value is defined under FASB ASC Topic 820 as the exchange
price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or the most advantageous
market for an asset or liability in an orderly transaction between
participants on the measurement date. Valuation techniques used to
measure fair value must maximize the use of observable inputs and
minimize the use of unobservable inputs. The standard describes a
fair value hierarchy based on the levels of inputs, of which the
first two are considered observable and the last unobservable, that
may be used to measure fair value. The levels are as follows:
|
· |
Level
1 - Quoted prices in active markets for identical assets or
liabilities |
|
· |
Level
2 - Inputs other than Level 1 that are observable, either directly
or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or corroborated by observable market
data for substantially the full term of the assets or
liabilities |
|
· |
Level
3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the value of the assets or
liabilities |
The following is a listing of the Company’s liabilities required to
be measured at fair value on a recurring basis and where they are
classified within the fair value hierarchy as of October 31, 2020
and July 31, 2020:
|
|
October 31, 2020 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Derivative liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
755,223 |
|
|
$ |
755,223 |
|
|
|
July 31, 2020 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Derivative liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
205,796 |
|
|
$ |
205,796 |
|
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
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 October 31, 2020, and 2019 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
October 31, 2020
NOTE 3 – GOING CONCERN
Management does not expect existing cash as of October 31, 2020 to
be sufficient to fund the Company’s operations for at least twelve
months from the issuance date of these October 31, 2020 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 October 31, 2020, the Company has an
accumulated deficit of $14,508,015, 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
October 31, 2020, and July 31, 2020, the summaries of liabilities
pertaining to discontinued operations were as follows:
|
|
October 31, |
|
July 31, |
|
|
2020 |
|
2020 |
Accounts payable |
|
$ |
460,262 |
|
|
$ |
462,130 |
|
Royal Bank line of credit |
|
|
289,242 |
|
|
|
289,242 |
|
Unearned revenue |
|
|
14,833 |
|
|
|
14,833 |
|
Accrued liabilities |
|
|
64,663 |
|
|
|
64,663 |
|
Custom duties & GST payable |
|
|
6,019 |
|
|
|
6,01
9 |
|
HST |
|
|
2,759 |
|
|
|
2,759 |
|
Liabilities of discontinued operations |
|
$ |
837,778 |
|
|
$ |
839,646 |
|
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
NOTE 5 – PROMISSORY NOTES
Promissory notes payable as of October 31, 2020 and July 31, 2020
consisted of the following:
Description |
|
October 31, 2020 |
|
July 31, 2020 |
Note payable dated March
8, 2018, matured March 8, 2019, bearing interest at 10% per
annum. |
|
$ |
30,000 |
|
|
$ |
30,000 |
|
Note payable dated July 18, 2018,
matured July 18, 2019, bearing interest at 8% per annum. |
|
$ |
135,000 |
|
|
$ |
135,000 |
|
Note
payable dated February 4, 2020, matured February 4, 2021, bearing
interest at 18% per annum. |
|
$ |
5,000 |
|
|
$ |
5,000 |
|
Total |
|
$ |
170,000 |
|
|
$ |
170,000 |
|
Less current
portion of long-term debt |
|
$ |
170,000 |
|
|
$ |
170,000 |
|
Total long-term
debt |
|
|
— |
|
|
|
— |
|
Interest expense for the three months ended October 31, 2020 and
2019 was $3,705 and $4,285, respectively.
NOTE 6 - CONVERTIBLE DEBT
Convertible debt as of October 31, 2020 and July 31, 2020 consisted
of the following:
Description |
|
October 31, 2020 |
|
July 31, 2020 |
|
|
|
|
|
Convertible note agreement
dated November 1, 2013 in the amount of $30,000 payable and due on
demand bearing interest at 12% per annum. Principal and accrued
interest is convertible at $.002250 per share. |
|
$ |
11,041 |
|
|
$ |
11,041 |
|
Convertible note agreement dated
February 20, 2018 in the amount of $1,034,000 payable and due on
demand bearing interest at 10% per annum. Principal and accrued
interest is convertible at $.028712 per share. |
|
$ |
1,034,000 |
|
|
$ |
1,034,000 |
|
Convertible note agreement dated March
13, 2019 in the amount of $800,000 payable and due on March 20,
2020 bearing interest at 24% per annum. |
|
$ |
800,000 |
|
|
$ |
800,000 |
|
Convertible note agreement dated
June 28, 2019 in the amount of $300,000 payable and due on June 28,
2020 bearing interest at 20% per annum. |
|
$ |
300,000 |
|
|
$ |
300,000 |
|
Convertible note agreement dated
August 6, 2019 in the amount of $31,500 payable and due on August
6, 2020 bearing interest at 20% per annum. |
|
$ |
31,500 |
|
|
$ |
31,500 |
|
Convertible note agreement dated
August 19, 2019 in the amount of $3,800 payable and due on August
19, 2020 bearing interest at 24% per annum. |
|
$ |
3,800 |
|
|
$ |
3,800 |
|
Convertible note agreement dated
September 4, 2019 in the amount of $36,500 payable and due on
September 4, 2020 bearing interest at 20% per annum. |
|
$ |
36,500 |
|
|
$ |
36,500 |
|
Convertible note agreement dated
December 4, 2019 in the amount of $95,000 payable and due on
December 4, 2020 bearing interest at 12% per annum. |
|
$ |
95,000 |
|
|
$ |
95,000 |
|
Convertible note agreement dated
February 10, 2020 in the amount of $15,000 payable at February 10,
2021 bearing interest at 12% per annum.. |
|
$ |
15,000 |
|
|
$ |
15,000 |
|
Convertible note agreement dated
February 21, 2020 in the amount of $47,500 payable at February 21,
2021 bearing interest at 12% per annum. |
|
$ |
47,500 |
|
|
$ |
47,500 |
|
Convertible note agreement dated
February 28, 2020 in the amount of $67.500 payable at February 28,
2021 bearing interest at 12% per annum. |
|
$ |
21,341 |
|
|
$ |
67,500 |
|
Convertible note agreement dated April
15, 2020 in the amount of $31,500 payable at April 15, 2021 bearing
interest at 10% per annum, net of discount. |
|
$ |
15,887 |
|
|
$ |
31,500 |
|
Convertible note agreement dated
September 29, 2020 in the amount of $34.000 payable and due on
September 29, 2021 bearing interest at 12% per annum. |
|
$ |
34,000 |
|
|
$ |
— |
|
Convertible note agreement dated
October 9, 2020 in the amount of $33,000 payable and due on October
9, 2021 bearing interest at 12% per annum. |
|
$ |
33,000 |
|
|
$ |
— |
|
Convertible note
agreement dated October 19, 2020 in the amount of $38.000 payable
and due on October 19, 2020 bearing interest at 12% per annum. |
|
$ |
38,000 |
|
|
$ |
— |
|
Convertible
notes, net of discount |
|
$ |
2,516.569 |
|
|
$ |
2,475,341 |
|
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
The Company recognized $0 of debt discount accretion expense on the
above notes. Interest expense related to these notes for the three
months ended October 31, 2020 and 2019 was $100,457 and
$92,016.
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 three months ended October 31, 2020, three 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 $548,944. 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 $452,944 was recorded during the three months ended
October 31, 2020. 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 $0.008 to $0.034, an expected dividend yield
of 0%, expected volatilities ranging from 219%-251%, 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 three months ended October 31, 2020, $97,772 in principle of
these convertible notes along with fees of $13,000 were converted
into 51,190,000 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 three months ended October
31, 2020, the Company recorded $525,430 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 $0.0018 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 262%, risk-free interest rates
ranging from 0.12% to 0.15%, and expected terms ranging from 0.09
to 0.48 years.
On October 31, 2020, the derivative liabilities on these
convertible notes were revalued at $755,223 resulting in a loss of
$525,913 for the three months ended October 31, 2020 related to the
change in fair value of the derivative liabilities. The derivative
liabilities were revalued using the Black-Scholes option pricing
model with the following assumptions:
conversion prices ranging from $0.0020 to $0.0029, the closing
stock price of the Company's common stock on the date of valuation
of $0.015, an expected dividend yield of 0%, expected volatility of
269%, risk-free interest rate of 0.13%, and an expected term
ranging from 0.08 to 0.97 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 three
months ended October 31, 2020, the Company amortized $40,224 to
interest expense. As of October 31, 2020, discounts of $122,363
remained for which will be amortized through October 2021.
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
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 $0 and $19,490 during the three
months ended October 31, 2020 and 2019, respectively. As of October
31, 2020, and 2019, there were $386,404 and $375,344 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 three months ended October 31, 2020 and
2019 consulting fees paid were $48,484 and $44,769 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 President 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 $21,759 and $26,062 for the three months
ended October 31, 2020 and 2019, 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 10,000,000 shares of Preferred stock. As
of October 31, 2020, and July 31, 2020, there were 93,118,077
shares, of common stock outstanding. There were 10,000,000 shares
of Series D Preferred stock outstanding as of October 31, 2020 and
8,000,000 shares of Series D Preferred Stock outstanding as of July
31, 2020.
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.
On November 7, 2017, the Company designated 1,000,000 shares of
Preferred Stock as Series C Preferred stock, par value $0.001 per
share (the “Series C Preferred Stock”). Each share of Series C
Preferred Stock is convertible into 72.5 common shares and has
voting rights based on this ratio. As of January 31, 2018, there
were 1,000,000 shares of
Preferred C shares issued and outstanding. On May 15, 2019, the
1,000,000 shares were converted to 72,500,000 shares of common
stock.
On April 29, 2019, the Company designated 10,000,000 shares of
Preferred Stock as Series D Preferred stock, par value $0.001 per
share (the “Series D Preferred Stock”). Each share of Series D
Preferred Stock is convertible into 72.5 common shares and has
voting rights based on this ratio. There were 10,000,000 shares of
Series D Preferred stock outstanding as of October 31, 2020 and
8,000,000 shares of Series D Preferred Stock outstanding as of July
31, 2019.
On
May 6, 2020, the Company filed an Offering Statement under
Regulation A on form 1-A for a Tier II Offering of 43,000,000
shares .
NOTE 9 – WARRANT
On April 15, 2020, the Company issued a five-year Common Stock
Purchase Warrant in connection with a $31,500 convertible
promissory note. The warrant is convertible into 437,500 shares of
the Company’s common stock at $.12 per share.
On April 23, 2020, the Company issued a three-year Common Stock
Purchase Warrant in connection with a $75,000 investment in the
Company’s common stock. The warrant has a conversion price of $.15
per share of the Company’s common stock.
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
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.
Operating Leases
The Company in February 2019 assumed a lease agreement for a
facility site and entered into a lease agreement for office space.
The facility site lease has a term of twenty-three months expiring
on December 31, 2020 and the office space lease has a five-year
term and begins April 1, 2019 and ends March 31, 2024.
Effective October 1, 2019, the Company suspended operations of its
subsidiary Global3pl, Inc., (an Ontario corporation, formerly known
as KRG Logistics, Inc.), 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 has not yet been completed.
The Company on July 31, 2019 entered into a lease agreement for
additional office space. The lease has a commencement date of June
1, 2019 and has a lease term of five years expiring on May 31,
2024.
Future minimum lease payments, as set forth in the lease, are
below:
Year |
|
Amount |
|
2019-2020 |
|
|
$ |
3,363 |
|
|
2020-2021 |
|
|
$ |
22,737 |
|
|
2021-2022 |
|
|
$ |
23,415 |
|
|
2022-2023 |
|
|
$ |
24,122 |
|
|
2023-2024 |
|
|
$ |
14,314 |
|
Cannagistics, Inc., and Subsidiaries
Notes to Financial Statements
October 31, 2020
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 November 16, 2020, the Company issued 6,000,000 shares of its
common stock at $0.0011 for the conversion of notes payable.
On November 23, 2020, the Company issued 8,000,000 shares of its
common stock at $0.0018 for the conversion of notes payable.
On December 2, 2020 the Company established NOVI Biosciences, Inc.
(a New York corporation as a new wholly owned subsidiary.
On December 4, 2020, the Company issued 5,307,100 shares of its
common stock at $0.0022 for the conversion of notes payable.
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
On
November 16, 2017, we 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”), our
newly formed wholly owned Nevada subsidiary. In connection with the
closing of this merger transaction, Shipzooka Sub merged with and
into American Freight (the “Merger”) on November 16, 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.
In
addition, pursuant to the terms and conditions of the Merger
Agreement:
Each
share of American Freight common stock issued and outstanding
immediately prior to the closing of the Merger was converted into
the right to receive 73,000,000 shares of our Series C Preferred
Stock. As a result, the shareholders of American Freight received
1,000,000 newly issued shares of our Series C Preferred Stock.
The
Series C preferred stock were converted into common stock on or
about May 15, 2019.
American Freight provided customary representations and warranties
and closing conditions, including approval of the Merger by a
unanimous vote of its board of directors and voting
stockholders.
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 UrtbanX
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).
On
September 18, 2019, the Company announced, with a press release,
the signing of a Letter of Intent (the “LOI”) with Unified Cannabis
of Calgary, Canada (“Unified”) whereby Unified will merge qualified
assets into the Company in an all-stock transaction. The Company
will then raise the capital necessary to effectuate the merger of
the assets and acquisition targets of Unified and for the explosive
organic growth strategy of Cannagistics and Unified, combined, thus
creating the first CBD/Hemp/Cannabis International Vertically
Optimized Company (CIVOC).
On
February 24, 2020, and in light of our expansion of our global
supply chain efforts, the Company has determined that in accordance
with this continued direction of supply chain management, we have
determined not to pursue any “plant touching” assets in the United
States at this time, until regulations have changed, and have
determined not to pursue any transaction with Unified Cannabis as
previously announced.
Effective October 1, 2019, the Company suspended operations of its
subsidiary Global3pl, Inc., (an Ontario corporation, formerly known
as KRG Logistics, Inc.), 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 has not yet completed.
Our Industry
Trucking companies provide transportation services to virtually
every industry operating in the United States and Canada, and
around the world. The trucking industry is comprised principally of
two types of motor carriers: LTL and truckload. LTL freight
carriers typically pick-up multiple shipments from multiple
customers on a single truck. The LTL freight is then routed through
a network of service centers where the freight may be transferred
to other trucks with similar destinations. LTL motor carriers
generally require a more expansive network of local P&D service
centers, as well as larger breakbulk, or hub, facilities. In
contrast, truckload carriers generally dedicate an entire truck to
one customer from origin to destination. According to the American
Trucking Associations, the trucking industry accounted for 79.8% of
the $847.6 billion total U.S. transportation revenue in 2016. In
2016, the entire LTL sector had revenue of approximately $54.7
billion. This represented 6.5% of the total U.S. transportation
revenue for the year.
3PL
provides logistics and
supply chain management for other companies. It is used to
outsource elements of the company’s distribution and
fulfillment services. The global 3PL market reached $750 billion in
2014 and grew to $157 billion in the US. Furthermore, demand growth
for 3PL services in the US outpaced the growth of the US economy in
2014. As of 2014, 80 percent of all Fortune 500 companies and
96 of the Fortune 100 used some form of 3PL
services.
Competition
The
transportation and logistics industry overall is extremely
competitive and highly fragmented. We compete with many regional,
inter-regional and national LTL carriers and 3PL provider, and, to
a lesser extent, with truckload carriers, small package carriers,
airfreight carriers and railroads.
We
utilize flexible scheduling and train our employees to perform
multiple tasks, which we believe allows us to achieve greater
productivity and higher levels of customer service than our
competitors. We believe our focus on employee communication,
continued education, development and motivation strengthens the
relationships and trust among our employees.
Both
the LTL and 3PL industry is highly competitive on the basis of
service and price and has consolidated significantly since the
industry was deregulated in 1980. Based on 2016 revenue as reported
in Transport Topics, the largest 10 and 25 LTL motor
carriers accounted for approximately 51% and 62%, respectively, of
the total LTL market.
We
believe we are able to gain market share by expanding our capacity
and providing high-quality service at a fair price.
We
are also positioning out operations to become a supplier of
logistics to the Cannabis, Hemp and CDB industries.
Current Projects in Development
Malta Project
Cannagistics Lab Malta, is an emerging biotech lab with an
intrinsic knowledge in the medicinal cannabis industry. With a
solid team of a multidisciplinary professionals in the
pharmaceutical industry, complex supply chain and logistics
management, unique technology and intellectual property,
Cannagistics Lab purpose is to add value and offer a
progress proposal to Malta medicinal cannabis industry, based on
its interest to support, educate, take advantage of and focus on
the development of breakthrough medicinal cannabis products with
different therapeutic uses in patients around the world to whom
science and traditional medicine simply could not reach; our vision
and knowledge allows us to 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.
Manufacturing areas description:
The factory will have the following areas for the production
process, which will implement the safety protocols and the project
will be developed.
Area of receipt: Area of the property that has been destined for
the receipt of the raw material and supplies that arrives for the
manufacturing process.
Raw material area: Warehouse equipped with the security measures
required for the storage of the raw material.
Production and manufacturing area: Sector where the manufacturing
process will be carried out in which the transforming plant will be
in order to obtain the final product.
Reagents and supplies area: Warehouse equipped with the security
measures required for the storage of reagents and supplies.
Solid waste area: Sector destined for the storage of solid waste
produced during the manufacturing process.
Finished product area: Warehouse equipped with the security
measures required for the storage of the finished product.
Dispatch area: Sector from where the process of dispatch and
delivery of the finished product to its final recipient will take
place
Administrative area: Sector of the factory where administrative,
accounting and security activities will be developed.
Global3pl, Inc (New York Corporation)
Global 3PL, Inc. (NY) is a logistics subsidiary with a
seasoned industry team focused on the development of a SaaS
platform serving the just-in-time warehouse inventory &
distribution industry, as well as general and special commodities
segment of the North American freight industry. It intends to
operate three integrated brands: AFX, G3PL, and Urban X.
Results of Operation for Three Months Ended October 31, 2020 and
2019
Revenues
No
revenue was generated for the three months ended October 31, 2020
and October 31, 2019.
Our
cost of revenues was $0 for the three months ended October 31,
2020, as compared with cost of revenue of $0 for the same period
ended October 31, 2019.
Operating Expenses
Total operating expenses increased $63,893 for the three months
ended October 31, 2020 from $92,552 at October 31, 2019 to $156,445
at October 31, 2020. This increase was mainly due mainly to an
increase in General and administration expenses.
Operating expenses for the three months ended October 31, 2020
consisted of general and administrative expenses of $37,575,
professional fees of $82,884, rent of $7,486, and consulting fees
of $28,500. Our operating expenses for the three months ended
October 31, 2019 consisted of general and administrative expenses
of $(5,892), professional fees of $59,168, rent of $10,676, and
consulting fees of $28,600.
Other Income and Expenses
We
had interest income of $21,759 for the three months ended October
31, 2020, and for the three months ended October 31, 2019. We had
interest expense of $147,634 for the three months ended October 31,
2020 as compared to $98,901 for the three months ended October 31,
2019. We had Settlement Fees of $25,000 for the three months ended
October 31, 2020 as compared to $0.0 for the three months ended
October 31, 2019. We had a Loss on derivative liabilities of
$936,075 for the three months ended October 31, 2020 as compared to
$0.0 for the three months ended October 31, 2019. We had a Change
in fair value of derivative labilities of $42,782 for the three
months ended October 31, 2020 as compared to $0.0 for the three
months ended October 31, 2019.
Loss from Discontinued Operations
Net
loss from discontinued operations for the three months ended
October 31, 2020 was $0.0 compared $119,081 for the three months
ended October 31, 2019.
Net Loss
Net
loss for the three months ended October 31, 2020 was $1,286,177
compared to net loss of $288,775 for the three months ended October
31, 2019.
Liquidity and Capital Resources
As
of October 31, 2020, we had total current assets of $26,332 and
total current liabilities of $4,471,067 as of October 31, 2019. We
had a negative working capital of $4,444,735 as of October 31,
2020.
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 October 31, 2020, 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, 2018, 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 October 31, 2020, we had an accumulated deficit of $14,478,014.
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 October 31,
2020, 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 October 31, 2020, 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
October 31, 2020, 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.
We are 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 a year.
Furthermore, COVID-19 has caused most, if not all Courts to
postpone matters indefinitely. The Company’s position with respect
to the Plaintiff’s claims has not changed.
II.
KRG
Logistics, Inc., now known as Global3pl, Inc., (an Ontario
corporation), a now discontinued operational subsidiary of the
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.
III.
On
February 4, 2020, Jeffrey Gates commenced an action in the Supreme
Court of the State of New York, County of Suffolk against the
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.
The
Company continues to have every intention of resolving this matter
prior to the Court rendering a decision.
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 October 23, 2019, the Company issued 4,500,000 shares of its
common stock for the settlement of debt.
On March 25, 2020, the Company issued 3,000,000 shares of its
common stock in a private placement for $75,000.
On August 4, 2020, the Company issued 2,499,828 shares of its
common stock at $0.001 for settlement of a claim.
On September 11, 2020, the Company issued 600,000 shares of its
common stock at $0.0066 for the conversion of notes payable.
On September 17, 2020, the Company issued 750,000 shares of its
common stock at $0.0048 for the conversion of notes payable.
On September 28, 2020, the Company issued 1,200,000 shares of its
common stock at $0.0034 for the conversion of notes payable.
On October 5, 2020, the Company issued 2,000,000 shares of its
common stock at $0.00248 for the conversion of notes payable.
On October 9, 2020, the Company issued 3,000,000 shares of its
common stock at $0.00212 for the conversion of notes payable.
On October 13, 2020, the Company issued 5,000,000 shares of its
common stock at $0.00212 for the conversion of notes payable.
On October 19, 2020, the Company issued 5,990,000 shares of its
common stock at $0.00208 for the conversion of notes payable.
On October 20, 2020, the Company issued 5,990,000 shares of its
common stock at $0.00182 for the conversion of notes payable.
On October 20, 2020, the Company issued 6,200,000 shares of its
common stock at $0.00208 for the conversion of notes payable.
On October 22, 2020, the Company issued 6,800,000 shares of its
common stock at $0.00208 for the conversion of notes payable.
On October 23, 2020, the Company issued 6,250,000 shares of its
common stock at $0.00182 for the conversion of notes payable.
On October 26, 2020, the Company issued 7,500,000 shares of its
common stock at $0.00208 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
|
|
Exhibit Number |
Description of Exhibit
|
31.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
31.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
32.1 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
101** |
The
following materials from the Company’s Quarterly Report on Form
10-Q for the quarter ended October 31, 2020 formatted in Extensible
Business Reporting Language (XBRL). |
|
**Provided herewith
|
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.
|
|
|
Cannagistics Inc.
|
Date: |
December 15, 2020
|
By: |
/s/ Rob Gietl |
|
Rob Gietl |
Title: |
President, Chief Executive Officer, and Director |
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