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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
January 31, 2022 |
|
|
☐ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
|
For
the transition period from __________ to__________ |
|
|
Commission
File Number:
000-55711 |

Cannagistics, Inc.
(Exact name of registrant as specified in its charter)
|
|
Delaware |
86-3911779 |
(State
or other jurisdiction of incorporation or organization) |
(IRS
Employer Identification No.) |
|
150 Motor Parkway
Suite 401
Hauppauge,
NY
11788
|
(Address
of principal executive offices) |
|
631-787-8455 |
(Registrant’s
telephone number) |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
[ ]
Yes [X]
No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
☐
Large
accelerated Filer |
☐
Accelerated
Filer |
☒
Non-accelerated Filer |
☒ Smaller reporting
company |
|
☐ 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:
266,424,608 common shares as of March 15, 2022.
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 January 31, 2022 (unaudited) and July
31, 2021 (audited); |
F-2 |
Condensed
Consolidated Interim Statements of Operations for the three and six
months ended January 31, 2022 (unaudited) and 2021
(unaudited); |
F-3 |
Condensed
Consolidated Interim Statements of Cash Flows for the three and six
months ended January 31, 2022 (unaudited) and 2021 (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 January 31, 2022,
are not necessarily indicative of the results that can be expected
for the full year.
CANNAGISTICS,
INC. AND SUBSIDIARIES |
|
CONSOLIDATED
BALANCE SHEETS |
(UNAUDITED)
|
|
January
31, 2022 |
|
July
31, 2021 |
|
|
(Unaudited) |
|
(Audited) |
ASSETS |
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
562 |
|
|
$ |
30,007 |
|
Loan
receivable |
|
|
32,500 |
|
|
|
— |
|
Prepaid
expenses |
|
|
25,000 |
|
|
|
15,000 |
|
Related
party receivables, less allowance for doubtful accounts of
$1,124,029 |
|
|
— |
|
|
|
— |
|
TOTAL
CURRENT ASSETS |
|
|
58,062 |
|
|
|
45,007 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
58,062 |
|
|
$ |
45,007 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
1,277,589 |
|
|
$ |
1,058,606 |
|
Promissory
notes, net of discount of
$39,231 January 31, 2022 and July 31, 2021,
respectively |
|
|
520,000 |
|
|
|
520,000 |
|
Convertible
notes payable, net of discount of
$306,678 and
$301,537 January 31, 2022 and July 31, 2021,
respectively |
|
|
3,109,298 |
|
|
|
2,329,996 |
|
Derivative
liabilities |
|
|
123,908 |
|
|
|
529,171 |
|
Related
party payables |
|
|
493,854 |
|
|
|
416,159 |
|
Liabilities
of discontinued operations |
|
|
837,778 |
|
|
|
837,778 |
|
TOTAL
CURRENT LIABILITIES |
|
|
6,362,697 |
|
|
|
5,691,710 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
6,362,697 |
|
|
|
5,691,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock: |
|
|
|
|
|
|
|
|
Series
E Preferred Stock;
$0.001 par
value;
3,600,000 shares
authorized,
900,000 and
900,000 shares
issued and outstanding as of October 31, 2021 and July 31,
2021, respectively |
|
|
900 |
|
|
|
900 |
|
Series
F Preferred Stock;
$0.001 par
value;
4,400,000 shares
authorized,
4,400,000 and
4,400,000 shares
issued and outstanding as of October 31, 2021 and July 31,
2021, respectively |
|
|
4,400 |
|
|
|
4,400 |
|
Common
stock;
$0.001 par value;
500,000,000 and
250,000,000 shares authorized as of January 31, 2022 and
July 31, 2021, respectively;
266,424,608 and
189,561,572 outstanding and issued as of January 31, 2022
and July 31, 2021, respectively |
|
|
266,424 |
|
|
|
189,561 |
|
Common
stock issuable |
|
|
290,000 |
|
|
|
290,000 |
|
Additional
paid-in capital |
|
|
25,212,259 |
|
|
|
24,485,627 |
|
Treasury
stock |
|
|
(45,000 |
) |
|
|
(45,000 |
) |
Accumulated
deficit |
|
|
(32,033,618 |
) |
|
|
(30,572,191 |
) |
TOTAL
STOCKHOLDERS' DEFICIT |
|
|
(6,304,635 |
) |
|
|
(5,646,703 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES & STOCKHOLDERS' DEFICIT |
|
$ |
58,062 |
|
|
$ |
45,007 |
|
See
accompanying notes to the consolidated financial
statements
CANNAGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
The Three Months Ended |
|
For The Six
Months Ended |
|
|
January 31,
2022 |
|
January 31,
2021 |
|
January 31,
2022 |
|
January 31,
2021 |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
16,152 |
|
|
|
20,717 |
|
|
|
43,278 |
|
|
|
36,533 |
|
Bad
debt |
|
|
21,759 |
|
|
|
21,759 |
|
|
|
43,518 |
|
|
|
43,518 |
|
Rent |
|
|
4,987 |
|
|
|
3,025 |
|
|
|
9,915 |
|
|
|
10,511 |
|
Consulting |
|
|
99,000 |
|
|
|
9,625 |
|
|
|
683,979 |
|
|
|
38,125 |
|
Professional fees |
|
|
27,612 |
|
|
|
64,766 |
|
|
|
214,727 |
|
|
|
147,650 |
|
Total
operating expenses |
|
|
169,510 |
|
|
|
119,892 |
|
|
|
995,418 |
|
|
|
276,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
|
(169,510 |
) |
|
|
(119,892 |
) |
|
|
(995,418 |
) |
|
|
(276,337 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income |
|
|
21,759 |
|
|
|
21,759 |
|
|
|
43,518 |
|
|
|
43,518 |
|
Interest
expense |
|
|
(339,711 |
) |
|
|
(164,337 |
) |
|
|
(691,629 |
) |
|
|
(311,971 |
) |
Settlement
Fees |
|
|
21,875 |
|
|
|
— |
|
|
|
(48,000 |
) |
|
|
(25,000 |
) |
Gain (loss)
on derivative liabilities |
|
|
(7,087 |
) |
|
|
(241,835 |
) |
|
|
123,822 |
|
|
|
(1,177,910 |
) |
Change in fair value of derivative liabilities |
|
|
(22,262 |
) |
|
|
122,167 |
|
|
|
106,279 |
|
|
|
79,385 |
|
Total other expense |
|
|
(494,936 |
) |
|
|
(262,246 |
) |
|
|
(466,010 |
) |
|
|
(1,391,978 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(577,068 |
) |
|
|
(382,138 |
) |
|
|
(1,461,427 |
) |
|
|
(1,668,315 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
common share: basic and diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding |
|
|
254,709,099 |
|
|
|
160,806,048 |
|
|
|
226,022,283 |
|
|
|
131,902,229 |
|
See accompanying notes to the
consolidated financial statements
CANNAGISTICS,
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
Common Stock to be Issued |
|
|
|
Preferred Stock D |
|
|
|
Preferred Stock E |
|
|
|
Preferred Stock F |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
Amount |
|
|
|
Shares |
|
|
|
Amount |
|
|
|
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 |
|
|
81,962,467 |
|
|
|
81,962 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,297,709 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,379,671 |
|
Shares issued for settlement of
payables |
|
|
2,499,828 |
|
|
|
2,500 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,498 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
24,998 |
|
Acquistion of Integrity Wellness |
|
|
— |
|
|
|
— |
|
|
|
290,000,000 |
|
|
|
290,000 |
|
|
|
(10,000,000 |
) |
|
|
(10,000 |
) |
|
|
900,000 |
|
|
|
900 |
|
|
|
4,400,000 |
|
|
|
4,400 |
|
|
|
14,674,700 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,960,000 |
|
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,350,353 |
) |
|
|
(17,350,353 |
) |
Balance, July 31, 2021 |
|
|
189,561,572 |
|
|
$ |
189,561 |
|
|
|
290,000,000 |
|
|
$ |
290,000 |
|
|
|
— |
|
|
$ |
— |
|
|
|
900,000 |
|
|
$ |
900 |
|
|
|
4,400,000 |
|
|
$ |
4,400 |
|
|
$ |
24,485,627 |
|
|
$ |
(45,000 |
) |
|
$ |
— |
|
|
$ |
(30,572,191 |
) |
|
$ |
(5,646,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for conversion of
convertible debt |
|
|
67,422,926 |
|
|
|
67,423 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
358,468 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
425,891 |
|
Shares issued for services |
|
|
9,440,110 |
|
|
|
9,440 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
368,164 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
377,604 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,461,427 |
) |
|
|
(1,461,427 |
) |
Balance, January 31, 2022 |
|
|
266,424,608 |
|
|
$ |
266,424 |
|
|
|
290,000,000 |
|
|
$ |
290,000 |
|
|
|
— |
|
|
$ |
— |
|
|
|
900,000 |
|
|
$ |
900 |
|
|
|
4,400,000 |
|
|
$ |
4,400 |
|
|
$ |
25,212,259 |
|
|
$ |
(45,000 |
) |
|
$ |
— |
|
|
$ |
(32,033,618 |
) |
|
$ |
(6,304,635 |
) |
See accompanying notes to the consolidated financial statements
CANNAGISTICS, INC.
AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
For The Six
Months Ended |
|
|
|
January 31,
2022 |
|
January 31,
2021 |
Cash Flows from Operating
Activities |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(1,461,427 |
) |
|
$ |
(1,668,315 |
) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to
net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Settlement Fees on
conversion of stock |
|
|
— |
|
|
|
13,000 |
|
Penalty on
convertible note payable |
|
|
48,000 |
|
|
|
25,000 |
|
Loss (gain) on
derivative liabilities |
|
|
(123,822 |
) |
|
|
513,750 |
|
Change in fair
value of derivative liabilities |
|
|
(106,279 |
) |
|
|
584,775 |
|
Amortization of
debt discount |
|
|
— |
|
|
|
83,176 |
|
Accrued
interest |
|
|
691,629 |
|
|
|
— |
|
Shares issued for
services |
|
|
377,604 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
Accounts
receivable and other receivables |
|
|
(32,500 |
) |
|
|
— |
|
Prepaid
expense |
|
|
(10,000 |
) |
|
|
— |
|
Accounts payable
and accrued expenses |
|
|
219,253 |
|
|
|
253,387 |
|
Accounts payable - related parties |
|
|
77,695 |
|
|
|
— |
|
Net
cash used in operating activities |
|
$ |
(319,848 |
) |
|
$ |
(195,227 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities |
|
|
|
|
|
|
|
|
Proceeds from
convertible notes, net of amortization of
$557,500 |
|
|
557,500 |
|
|
|
133,000 |
|
Proceeds from
related parties |
|
|
18,530 |
|
|
|
96,789 |
|
Payments on
convertible notes |
|
|
(225,322 |
) |
|
|
— |
|
Payments to related parties |
|
|
(60,305 |
) |
|
|
(34,600 |
) |
Net cash provided
by financing activities |
|
|
290,403 |
|
|
|
195,189 |
|
|
|
|
|
|
|
|
|
|
Net decrease in
cash |
|
|
(29,445 |
) |
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
30,007 |
|
|
|
685 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
|
562 |
|
|
|
647 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
|
— |
|
|
|
— |
|
Cash
paid for tax |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
transactions |
|
|
|
|
|
|
|
|
Original issuance discount on convertible notes payable |
|
$ |
306,678 |
|
|
$ |
12,000 |
|
Original issuance discount on promissory notes payable |
|
$ |
39,231 |
|
|
$ |
— |
|
Conversion of notes payable, fees and derivative liabilities |
|
$ |
234,330 |
|
|
$ |
802,731 |
|
Conversion of common stock payable |
|
$ |
— |
|
|
$ |
— |
|
See accompanying notes to the consolidated financial statements
CANNAGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2022
(UNAUDITED)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF
BUSINESS
Organization and
Description of Business
Cannagistics, Inc. (Formerly FIGO Ventures, Inc., formerly Precious
Investments, Inc.) (‘The Company’) was incorporated under the laws
of the State of Nevada on May 26, 2004. The Company was an
Exploration Stage Company with the principal business being the
acquisition and exploration of resource properties.
The Company had allowed its charter with the state of Nevada to be
revoked by the Secretary of State for failure to file the required
annual lists and pay the required annual fees. Its last known
officers and directors reflected in the records of the Secretary of
State were unresponsive or stated they were no longer involved with
the Company. The purported replacement officers and directors were
unresponsive.
On September 14, 2012, NPNC Management, LLC filed a petition in the
Eighth Judicial District Court in Clark County, Nevada and was
appointed custodian of the Company on January 15, 2012.
On October 24, 2012, the interim board authorized the sale of
55,000,000 (2,200,000
split adjusted) shares of common stock for
$6,000 to NPNC Management, LLC, in a private placement
transaction exempt from the Securities Act of 1933, as amended,
pursuant to section 4(2) thereof and the rules and regulations
promulgated there under.
On March 1, 2017, the Company then entered into a joint venture
agreement with Eddeb Management (“Eddeb”). The purpose of the joint
venture is to build a fund for the purpose of trading in precious
gems, notably, colored diamonds.
On November 16, 2017, the Company entered into an Agreement
of Merger and Plan of Reorganization (the “Merger Agreement”) with
American Freight Xchange, Inc., a privately held New York
corporation (“American Freight”), and Shipzooka Acquisition Corp.
(“Shipzooka Sub”), a newly formed wholly owned Nevada subsidiary of
Precious Investments, Inc. In connection with the closing of this
merger transaction, Shipzooka Sub merged with and into American
Freight (the “Merger”) on December 5, 2017, with the filing of
Articles of Merger with the Nevada Secretary of State and
Certificate of Merger with the New York Division of
Corporations.
The transaction resulted in the Company acquiring Subsidiary by the
exchange of all of the outstanding shares of Subsidiary for
1,000,000 newly issued Series C Preferred shares of stock,
$0.001 par value (the “Preferred Stock”) of Parent which
have
conversion and voting rights of 72.5 votes for each share,
representing approximately 90.2% of the voting rights.
For accounting purposes, the transaction was treated as a reverse
merger since the acquired entity now forms the basis for operations
and the transaction resulted in a change in control, with the
acquired company electing to become the successor issuer for
reporting purposes. The accompanying financial statements have been
prepared to reflect the assets, liabilities and operations of
American Freight Xchange, Inc. exclusive of Precious Investments,
Inc since all predecessor operations were discontinued.
As part of the transaction, amounts due to former officers were
forgiven, with the balances recorded as Contributed Capital. For
equity purposes, accumulated deficit shown are those American
Freight Xchange, Inc. Shipzooka Acquisition Corp. is a dormant
corporation.
On July 23, 2018, the Company amended the name of its subsidiary,
KRG Logistics, Inc., to Global3pl, Inc. (an Ontario
corporation).
On September 4, 2018, the Company incorporated Cannagistics, Inc.,
in the province of Ontario, Canada. This is intended to be a
possible new line of business for the Company but is dormant at
this time.
On April 17, 2019, we filed Articles of Merger with the Secretary
of State of Nevada in order to effectuate a merger with our wholly
owned subsidiary, Cannagistics, Inc. Shareholder approval was not
required under Section 92A.180 of the Nevada Revised Statutes. As
part of the merger, our board of directors authorized a change in
our name to “Cannagistics, Inc.” and our Articles of Incorporation
have been amended to reflect this name change.
On September 26, 2019, the Board of Directors approved the
registered spinout of its Global3pl, Inc., (a New York corporation)
(“Global3pl”) subsidiary. Global3pl is to be a logistics technology
provider, along with the American Freight Xchange and UrbanX
Platforms that have been under development by the Company.
The Board of Directors also declared a stock dividend for all
shareholders, with a record date of October 10, 2019. For every 50
shares of common stock of the Company, all shareholders of record
on the record date will receive one share of common stock in
Global3pl. Global3pl will also file a registration statement as
part of its raise of capital to complete the development of
American Freight Xchange, a North American freight broker-driven
3pl network to handle the management of long haul LTL (less than
truckload), and specialty freight (white glove) services and
Urbanx, a North American network of rush-messenger local trucking
services for forward and reverse last mile delivery (including
white glove service).
However, the Company has carefully reconsidered its position with
respect to the previously announced and subsequently amended spin
off of Global3pl, Inc., (a New York corporation). Due to the
current situation resulting from the COVID-19 pandemic and
especially in light of the development of the supply chain
management strategy of the Company, it has been determined that the
finalization of the development of the Global3pl platform will be
integral and serve as the “engine” for the supply chain management
of the Company. Therefore, at this time the “spin-off” has been
indefinitely postponed until such time and it may make sense from a
business standpoint. The Company has not issued any shares in the
Global3pl, Inc (New York) subsidiary.
Effective October 1, 2019, the Company
suspended operations of its subsidiary Global3pl, Inc., formerly
known as KRG Logistics, Inc., (an Ontario corporation), suspended future
operations related to the operations in Mississauga, Ontario. It is
in the process of collecting accounts receivables still due and
working on a plan to pay its payables. It has entered into an
agreement with 10451029 Canada Inc., d/b/a Reliable Logistics, for
the assignment and of the assets of Global3pl, Inc., (an Ontario
Corporation). The transaction was completed on November 6, 2019.
The Company anticipates formally liquidating and dissolving the
subsidiary in the next fiscal Quarter. This is a separate
corporation from Global3pl, Inc. (A New York
corporation).
On May 6, 2021, the issuer (having been renamed, immediately prior
to this Holding Company Reorganization, from “Cannagistics, Inc.”
to “Global Transition Corporation”) completed a corporate
reorganization (the “Holding Company Reorganization”) pursuant to
which Global Transition Corporation, as previously constituted (the
“Predecessor”) merged with a company which became a direct,
wholly-owned subsidiary of a newly formed Delaware Corporation,
Cannagistics, Inc. (in this capacity referred to as the “Holding
Company”), which became the successor issuer. In other words, the
Holding Company is now the public entity, albeit with the same name
as the original issue or the Predecessor. The Holding Company
Reorganization was effected by a merger conducted pursuant to
Delaware General Corporation Law (the “DGCL”), which provides for
the formation of a holding company without a vote of the
stockholders of the constituent corporations (such constituent
corporations being the Predecessor, as renamed to Global Transition
Corporation and the newly formed Cannagistics, Inc.).
In accordance with the DGCL, Global3pl, Inc. (“Merger Sub”),
another newly formed Delaware Corporation and, prior to the Holding
Company Reorganization, was an indirect, wholly owned subsidiary of
the Holding Company, merged with and into the Predecessor, with
Merger Sub surviving the merger as a direct, wholly owned
subsidiary of the Holding Company (the “Merger”). The Merger was
completed pursuant to the terms of an Agreement and Plan of Merger
among the Predecessor, the Holding Company and Merger Sub, dated
May 6, 2021 (the “Merger Agreement”).
As of the effective time of the Merger and in connection with the
Holding Company Reorganization, all outstanding shares of common
stock and preferred stock of the Predecessor were automatically
converted into identical shares of common stock or preferred stock,
as applicable, of the Holding Company on a one-for-one basis, and
the Predecessor’s existing stockholders and other holders of equity
instruments, became stockholders and holders of equity instruments,
as applicable, of the Holding Company in the same amounts and
percentages as they were in the Predecessor immediately prior to
the Holding Company Reorganization.
The executive officers and board of directors of the Holding
Company are the same as those of the Predecessor in effect
immediately prior to the Holding Company Reorganization.
For purposes of Rule 12g-3(a), the Holding Company is the successor
issuer to the Predecessor, now as the sole shareholder of the
Predecessor. Accordingly, upon consummation of the Merger, the
Holding Company’s common stock was deemed to be registered under
Section 12(b) of the Securities Exchange Act of 1934, as
amended, pursuant to Rule 12g-3(a) promulgated thereunder.
On May 21, 2021, the Company
incorporated Global3pl Logistical Technologies, Inc., (a Delaware
corporation) On May 21, 2021. It is a wholly owned subsidiary of
Cannagistics, Inc.
The previously executed Letter of Intent with Recommerce Group,
Inc. has expired, although the Company has continued discussions
with Recommerce Group, Inc. about a potential business
combination.
On July 1, 2021, Cannagistics, Inc. (the “Company”) entered into a
Reorganization and Stock Purchase Agreement (the “Agreement”) with
Availa Bio, Inc. (“Availa”) and The Integrity Wellness Group, Inc.,
formerly known as Cannaworx Holdings, Inc. (“Integrity Wellness”).
Pursuant to the Agreement, the Company purchased 100% of the
outstanding capital stock of Integrity Wellness from Availa in
exchange for
4,400,000 shares of the Company’s Series F Convertible
Preferred Stock (the “Series F”).
The Agreement provides for certain post-closing actions to be taken
by the Company, including (i) effecting a 1-for-100 reverse stock
split of the Company’s common stock (later modified to be 1-for-40
reverse stock split), (ii) the Company using its best efforts to
consummate a $5,000,000 financing, some of the proceeds of which to
be used to pay the Note as defined below, (iii) the Company
effecting a name change, (iv) the officers and directors of the
Company consisting of Rob Gietl, President and Director and James
W. Zimbler, Vice-President and Director, and (v) the holders of the
Company’s 10,000,000 outstanding shares of Series D Convertible
Preferred Stock converting their shares into a total of 745,000,000
shares of the Company’s common stock pursuant to conversion
agreements with such holders.
In connection with the Agreement, the Company borrowed
$175,000 from Cimarron Capital, Inc. (“Cimarron”) and issued
Cimarron two separate Promissory Notes for
$150,000 and
$200,000, respectively, both dated July 6, 2021 (the
“Notes”). The Notes bears
0% interest and is payable upon the earlier of the closing
of a securities offering or July 6, 2022.
In addition, pursuant to the Agreement the Company, either directly
or through Integrity Wellness which as a result of the share
exchange became a wholly owned subsidiary of the Company, entered
into the following employment and consulting agreements:
The Company previously entered into a Consulting Agreement with Rob
Geitl dated July 1, 2020, for an initial term of three years. Under
this Consulting Agreement, Mr. Geitl will serve as the Chief
Executive Officer of the Company and will be compensated as
follows: (i) (A) for the first year of the initial term,
$15,000 per month, (B) for the second year of the initial
term,
$17,500 per month, and (C) for the third year of the initial
term,
$20,000 per month; and (ii)
a number of shares of restricted common stock equal to 5% of the
Company’s issued and outstanding common stock, or 9,158,333 shares,
with one-half of such shares vesting in 18 months and the other
half vesting of such shares at the end of the initial
term.
The Company entered into a Consulting Agreement with Emerging
Growth Advisors, Inc., wholly owned by James W. Zimbler, dated July
1, 2021, for an initial term of three years. Under this Consulting
Agreement, Emerging Growth Advisors, Inc. will be compensated
12,500 per month and a Health Insurance Allowance of up to
$1,500 per month. The Agreement also provides that Emerging
Growth Advisors, Inc., shall receive
900,000 shares of Series E Preferred Stock in exchange for
the cancellation of
6,000,000 shares of Series D Preferred Stock in the name of
Emerging Growth Advisors, Inc.
The Company entered into a Consulting Agreement with Cimarron dated
July 1, 2021, for an initial term of 30 months. Under this
Consulting Agreement, Cimarron will provide the Company certain
strategic and business development services in exchange for (i)
900,000 shares of its Series E Convertible Preferred Stock
(the “Series E”), (ii) a monthly fee of
$5,000, and (iii)
10% of the net proceeds of any business generated for the
Company by Cimarron.
The Company entered into a Consulting Agreement with Leonard Tucker
LLC (“LT LLC”) dated July 1, 2021, for an initial term of 30
months. Under this Consulting Agreement, LT LLC will provide the
Company with certain business and compliance services in exchange
for (i)
1,800,000 shares of its Series E, (ii) a monthly fee of
$12,500, and (iii)
10% of the net proceeds of any business generated for the
Company by LT LLC.
The Agreement also contains customary indemnification obligations
in the event of a material breach of any representation, warranty,
agreement, or covenant contained in the Agreement.
On
September 15, 2021, the Company filed a DEF14C Information
Statement. The DEF14C Information Statement set out the plan of the
Company to amend its name to The Integrity Wellness Group, Inc., or
some other similar name, and to effectuate a reverse stock split of
its common stock of one (1) new share of common stock for each
forty (40) old shares of common stock . The
corporate action change has been submitted to FINRA on October 29,
2021, and the Company is awaiting a response.
Current Projects in Development
Integrity Wellness
Our
Products
Through Integrity Wellness we
currently have 4 developed products, the majority of which we offer
at retail prices ranging from approximately $30 to $60 (excluding
our veterinary and agricultural product offerings). [Our current
developed products are either backlogged, in the process of being
produced or are ready for production.] We have received approval
from the U.S. Food and Drug Administration (the “FDA”) for 4 of our
products’ claims, and we have FDA applications in process for 15
products’ claims, as indicated below. We have patents issued for
six of our products, and 15 patent applications pending, as
indicated below. However, we presently lack the capital to produce
sufficient inventory and, accordingly, will be reliant upon raising
additional funds in this offering to further commercialize these
products If we are unable to raise sufficient funds in this
offering or through other means, the production and distribution of
these products may be delayed or discontinued. Further, some of the
patent rights and licenses for the below products are subject to
uncertainty due to potential procedural and documentation issues in
connection with the July 2021 Integrity Wellness acquisition. See
the risk titled “If we cannot obtain or protect intellectual
property rights related to our products, including due to
uncertainties surrounding our acquisition of Integrity Wellness and
its purported product portfolio, we may not be able to compete
effectively in our markets” for more information. The following is
a brief description our current products portfolio:
Products with Issued Patents
Canagel - (Anhydrous Hydrogel Composition and delivery
system)
Canagel ®,- (Anhydrous Hydrogel Composition and
delivery system)
Patented Full Spectrum
Phytocannabinoid delivery with FDA approved pain claim. The one and
only FDA-approved pain claim in the market for an oral CBD
product.
We have Exclusive World-wide
access to Patent No. US 10,143,755
Patent Issued: December 4,
2018
Patent Expires: December 8,
2037
Comments: Please note this
patent is owned by Acupac Packaging Inc., however an exclusive
worldwide license agreement has been granted to SkinScience labs,
Inc.
Silverpro ®, - (FDA Cleared)
Patented Compression Fabric
in the marketplace with FDA pain clearance
Patent No. US 9,878,175
(European Patent has been allowed)
Patent Issued: January 30,
2018
Patent Expires: June
2036
Thin Film Toothpaste
Strip
Product Name:
KidzStrips ®,
Patented Fluoride
doses-controlled children’s toothpaste strip
(2 Patents issued) Patent No.
US 9,656,102
Patent Issued: May 23,
2017
Patent Expires: December 21,
2033
Patent No. US
10,105,296
Patent Issued: October 23,
2018
Patent Expires:
December 31, 2034
ImmuniZin TM (Immune Booster)
Some ImmunaZin Ingredients and Expectations
● Pepsin -- the main
ingredient now famous for rapid recovery. We take pepsin and break
it down into fragmented particles that are better absorbed into the
digestive tract. These pepsin fragments directly modulate immune
system activity by inducing potent T-cell response resulting in
boosted immunity.
● Hemp seed oil helps balance
healthy cholesterol levels, fights depression and anxiety, improves
eye health, promotes brain health, reduces metabolic syndrome,
reduces inflammation, fights autoimmune disease and mental
disorders, reduces fatty liver, promotes bone and joint health and
improves sleep and skin.
Irreversibly-inactivated
pepsinogen fragments for modulating immune function (Immune
Booster- FDA Cleared)
Patent No. US
8,309,072
Patent Issued: November 13,
2012
Patent Expires: June 18,
2029
Patent Expires: June 18,
2029
Novel
Fertilizer
Patent No. US
9,981,886
Patent Issued: May 29,
2018
Patent Expires: August 12,
2036
Pending Patent
Applications
Cannabinoid, Menthol and
Caffeine Dissolvable Film Composition, Devices and
Methods
US Application No.
16/558,872; International Application PCT/US2019/049309
Cannabinoid and Menthol
Gum and Lozenge Compositions and Methods
US Application No. 16/555,022
(US Application No. 62/869,121 is a provisional US application for
this US application); International Application
PCT/US2019/048740
Cannabinoid and Anesthetic
Gum and Lozenge Compositions and Methods
US Application No. 16/554,930
(US Application No. 62/869,118 is a provisional US application for
this US application); International Application
PCT/US2019/048728
Cannabinoid and Anesthetic
Compositions and Methods
US Application No.
16/419,274; International Application PCT/US2019/048690
C-Biscuit TM
Hemp rich suppository for
racehorse industry for rapid recovery from injury Veterinary
Cannabinoid, Menthol and Anesthetic Compositions and
Methods
Application No. 16/555,241;
International Application PCT/US2019/048789
Veterinary Cannabinoid and
Menthol Compositions and Methods
Application No. 16/419,392;
International Application PCT/US2019/048695
Cannabinoid and Menthol
Gel Compositions, Patches and Methods
US Application No.
16/558,780; International Application PCT/US2019/049294
Cannabinoid and Menthol
Compositions and Methods
US Application No.
16/419,336; International Application PCT/US2019/048691
Thin Film Toothpaste
Strip, European Application
Product Name:
KidzStrips ®
Application No.
14876319.6
Thin Film Toothpaste
Strip, Eurasian Application
Product Name:
KidzStrips ®
Application No.
201600502/28.
U.S. Application No.
17/412442
Fertilizer
Product Name:
HydroSoil ®,
Water retaining Hemp enhanced
fertilizer, water plant once every two weeks
U.S. Application No.
15/986,111
Inactivated Pepsin
Fragment (IPF) and Full Spectrum Cannabidiol (CBD) Compositions and
Methods
U.S. Provisional Patent
Application No. 62/859,422
Skin Cream
Relates to compositions and
methods for the prevention and treatment of skin disorders and for
the rejuvenation of the skin. In particular, the application
describes topical compositions and methods of treatments comprising
the combined use of one or more cannabinoids and one or more
hydroxy acids in a suitable carrier.
U.S. Application No.
Application 15/233,251
Other Products
IcyEase
Adhesive Ice Pack for
muscle/joint pain to cool surface and address pain.
Patent-pending, FDA pain
claim in progress
Slim-D
Appetite-suppressant oral
strip with 50 mg Hoodia & 10 mg Full Spectrum
Phytocannabinoid
Energy Lighting
Strips
High caffeine fast dissolving
oral energy strip with Matcha Green Tea and Hemp/Full Spectrum
Phytocannabinoid
Micro Voltage Trans Derm
C
for pain with unique and
superior absorbing features due to wearer‘s movement generated
Micro Voltage
CBD 600
Hemp Rich oral tincture with
FDA cleared legal pain claim. One and only with FDA
clearance.
Global3PL Inc. (NY)
During the past 2 plus years,
Global3PL Inc. (a New York Corporation) has consulted with
logistics and technology experts to design and begin the
development of a best-of-breed, first-of-kind information
technology system. To date, about eighteen (18) months’ worth of
custom coding by our contractor has been completed with an
expectation of an additional 2-3 months of work still
required for it to be ready for
testing. Upon completion, it is intended that clients shall be able
to login to the system to communicate and transact business with
the Company in real-time, as it relates to aspects of the client’s
supply chain. This can include the tracking of inbound raw material
from various vendors, the manufacturing schedule of finished goods,
inventory tracking of raw materials and finished goods,
international compliance documentation, and the contacting and
tracking of the shipping of the finished goods to their delivery
destination(s). Though the Company has high expectations for the
functionality of the new system, it does not make any assurances
that the system will be completed, shall work as planned if
completed, nor be embraced by potential clients as
intended.
Therefore Global3pl, Inc. (NY) will be
a logistics subsidiary serving the just-in-time inventory &
distribution industry, as well as the special and general
commodities sector of the North American freight industry.
“Just-in-time” is an industry word for delivery a product or other
item to an end user right before it is needed. It is used in place
of an end user storing a large quantity of inventory. Shippers will
be able to sync to our system for a real-time 360 views of their
product shipments, including, location updates, verification, and
risk mitigation. The customer will be able to Geolocation GPS
tracking of freight movement; create automated notifications with
consolidated and automated notifications, payments, and
reporting. The Shipper interface will also allow customers to push
or post freight orders. The software system will also allow for
lead-generation, data analysis, collaboration among shippers,
Automated billing and collections, and automated payments. The
SAAS-based platform ecosystem will fully integrate all aspects of
the Company’s operations, from receiving raw materials for clients,
through product manufacturing, document compliance, distribution,
and shelf-life batch tracking. It had been expected to be
operational in the third or fourth quarter of 2020, however due to
economic conditions from the COVID-19 Pandemic, and the need for
funding related to this Offering, to complete the process, we have
been delayed and hope to be operational by the end of the second
quarter of 2021.
The SaaS-based platform ecosystem will fully integrate all aspects
of the Cannagistics operations, from receiving raw materials for
clients, through product manufacturing, document compliance,
distribution, and shelf-life batch tracking. It is intended to
operate with four separate brands or identities, that being
Global3pl, AFX (the acronym for American Freight Xchange) UrbanX
and Cannagistics.
Our targeted client markets (OTC, pharmaceutical, nutraceutical,
cosmetics, and Hemp/CBD-related products) are heavily regulated,
and highly fragmented from state to state, and country to country.
Every country has their own certified product standards, such as
the FDA in the U.S. Target client markets require batch product
tracking throughout shelf life and GMP certified standards in
manufacturing. There is currently, we believe, a lack of seamless
automation across the supply chain.
Our solution offers a fully automated and scalable service for
end-to-end information, manufacturing, sales, and tracking. We
believe the benefits achieved from our logistics services for
clients are as follows:
|
§ |
Ability
to track products from ingredient stage all the way to
sale; |
|
§ |
Provides
24/7 visibility; |
|
§ |
Provide
a single point of access: |
|
§ |
Incorporates
big data and client behavior statistics; |
|
§ |
Increases
productivity; |
|
§ |
Offers
a subscription-based model; and |
|
§ |
Capable
of supporting multiple client usage. |
Competition
The Global Supply Chain management area has many different
entities, all competing. Some are very large. However, our model is
significantly different from most of the providers already
operating.
To be successful in the global supply chain management area, a
company must be involved in planning the function of the entire
process, from start to finish, or end to end. We intend to
concentrate our model on the cannabis, nutraceutical,
pharmaceutical and cosmetic areas. We believe this makes our
approach unique and distinguishable at this time.
There is no guarantee that a larger, more fully funded, company
will determine to seek to gain access to the same business.
Intellectual Property
Our Global3pl SAAS Platform is a proprietary software developed by
the Company. The SaaS-based platform ecosystem will fully integrate
all aspects of the Cannagistics operations, from receiving raw
materials for clients, through product manufacturing, document
compliance, distribution, and shelf-life batch tracking.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of
consolidation
The consolidated financial statements include the accounts of
Cannagistics, Inc. and its wholly owned subsidiaries American
Freight Xchange, Inc and Global3pl, Inc. (Ontario), formerly known
as KRG Logistics, Inc. All significant inter-company transactions
and balances have been eliminated.
Basis of
Presentation
We have summarized our most significant accounting policies for the
fiscal years ended July 31, 2020, and July 31, 2020
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date the financial statements and the reported
amount of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
COVID-19 Pandemic
Update
In March 2020, the World Health Organization declared a global
health pandemic related to the outbreak of a novel coronavirus. The
COVID-19 pandemic adversely affected the company's financial
performance in the third and fourth quarters of fiscal year 2020
and could have an impact throughout fiscal year 2021. In response
to the COVID-19 pandemic, government health officials have
recommended and mandated precautions to mitigate the spread of the
virus, including shelter-in-place orders, prohibitions on public
gatherings and other similar measures. As a result, the company and
certain of the company's customers and suppliers temporarily closed
locations beginning late in the second quarter of fiscal year 2020,
continuing into the third quarter of fiscal year 2020. There is
uncertainty around the duration and breadth of the COVID-19
pandemic, as well as the impact it will have on the company's
operations, supply chain and demand for its products. As a result,
the ultimate impact on the company's business, financial condition
or operating results cannot be reasonably estimated at this
time.
Income Taxes
The Company accounts for income taxes under ASC 740 “Income Taxes,”
which codified SFAS 109, "Accounting for Income Taxes" and FIN 48
“Accounting for Uncertainty in Income Taxes – an Interpretation of
FASB Statement No. 109.” Under the asset and liability method of
ASC 740, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under ASC 740, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period the enactment occurs. A
valuation allowance is provided for certain deferred tax assets if
it is more likely than not that the Company will not realize tax
assets through future operations.
Derivative Financial
Instruments
The Company does not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks.
The Company reviews the terms of convertible loans, equity
instruments and other financing arrangements to determine whether
there are embedded derivative instruments, including embedded
conversion options that are required to be bifurcated and accounted
for separately as a derivative financial instrument. Also, in
connection with the issuance of financing instruments, the Company
may issue freestanding options or warrants to employees and
non-employees in connection with consulting or other services.
These options or warrants may, depending on their terms, be
accounted for as derivative instrument liabilities, rather than as
equity.
Derivative financial instruments are initially measured at their
fair value. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded
at fair value and then re-valued at each reporting date, with
changes in the fair value reported as charges or credits to income.
To the extent that the initial fair values of the freestanding
and/or bifurcated derivative instrument liabilities exceed the
total proceeds received an immediate charge to income is recognized
in order to initially record the derivative instrument liabilities
at their fair value.
The discount from the face value of the convertible debt
instruments resulting from allocating some or all of the proceeds
to the derivative instruments, together with the stated rate of
interest on the instrument, is amortized over the life of the
instrument through periodic charges to income, using the effective
interest method.
The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is
reassessed at the end of each reporting period. If reclassification
is required, the fair value of the derivative instrument, as of the
determination date, is reclassified. Any previous charges or
credits to income for changes in the fair value of the derivative
instruments is not reversed. Derivative instrument liabilities are
classified in the balance sheet as current or non-current based on
whether or not net-cash settlement of the derivative instrument
could be required within twelve months of the balance sheet
date.
Fair value of financial
instruments
The Company’s financial instruments consist of its liabilities. The
carrying amount of payables and the loan payable – related party
approximate fair value because of the short-term nature of these
items. The promissory notes, and convertible notes payables are
measured at amortized cost using the effective interest method,
which approximates fair value due to the relationship between the
interest rate on long-term debt and the Company’s incremental risk
adjusted borrowing rate.
Fair value is defined under FASB ASC Topic 820 as the exchange
price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or the most advantageous
market for an asset or liability in an orderly transaction between
participants on the measurement date. Valuation techniques used to
measure fair value must maximize the use of observable inputs and
minimize the use of unobservable inputs. The standard describes a
fair value hierarchy based on the levels of inputs, of which the
first two are considered observable and the last unobservable, that
may be used to measure fair value. The levels are as follows:
|
· |
Level
1 - Quoted prices in active markets for identical assets or
liabilities |
|
· |
Level
2 - Inputs other than Level 1 that are observable, either directly
or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or corroborated by observable market
data for substantially the full term of the assets or
liabilities |
|
· |
Level
3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the value of the assets or
liabilities |
The
following is a listing of the Company’s liabilities required to be
measured at fair value on a recurring basis and where they are
classified within the fair value hierarchy as of January 31, 2022,
and July 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2022 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Derivative liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
123,908 |
|
|
$ |
123,908 |
|
|
|
July 31, 2021 |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Derivative liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
529,171 |
|
|
$ |
529,171 |
|
Accounts receivable and
allowance for doubtful accounts
Accounts receivables are stated at the amount management expects to
collect. The Company generally does not require collateral to
support customer receivables. The Company provides an allowance for
doubtful accounts based upon a review of the outstanding accounts
receivable, historical collection information and existing economic
conditions. As of January 31, 2022, and July 31, 2021, the
allowance for doubtful accounts was
$0 and
$0, respectively.
Revenue
Recognition
The Company recognizes revenue related to transaction from its
third-party logistics sales by performing the following five steps:
(i) identify the contract(s) with a customer, (ii) identify the
performance obligations in the contract, (iii) determine the
transaction price, (i) allocate the transaction price to the
performance obligations in the contract, and (v) recognize revenue
when (or as) the entity satisfies a performance obligation. The
Company applies the five-step model to arrangements that meet the
definition of a contract under Topic 606, including when it is
probable that the entity will collect the consideration it is
entitled to in exchange for the goods or services it transfers to
the customer. At contract inception, once the contract is
determined to be within the scope of Topic 606, the Company
evaluates the goods or services promised within each contract
related performance obligation and assesses whether each promised
good or service is distinct. The Company recognizes as revenue, the
amount of the transaction price that is allocated to the respective
performance obligation when (or as) the performance obligation is
satisfied. Amounts invoiced or collected in advance of product
delivery or providing services are recorded as unearned revenue or
customer deposits. The company accrues for sales returns, bad
debts, and other allowances based on its historical experience.
Foreign
Currency
FASB ASC Topic 830, Foreign Currency Matters (formerly FASB
Statement No. 52, Foreign Currency Translation) provides accounting
guidance for transactions denominated in a foreign currency, and
for operations undertaken in a foreign currency environment. To
prepare consolidated financial statements, an entity translates all
functional currency financial statements into a single reporting
currency. The same applies if an entity uses different currencies
for reporting purposes and for its functional currency. The company
reports its currency in US dollars.
Stock-Based
Compensation
The Company measures expenses associated with all employee
stock-based compensation awards using a fair-value method and
record such expense in our consolidated financial statements on a
straight-line basis over the requisite service period.
Leases
In
February 2016, FASB issued ASU-2016-02 (Topic 842) “Leases”,
provides accounting guidance for leases, recognizing lease assets
and lease liabilities on the balance sheet and disclosing key
information about leasing arrangements. ASU 2016-02 is effective
for annual reporting periods beginning after December 15, 2018.
Effective August 1, 2019, the Company implemented ASU 2016-02 under
the modified retrospective method. As a result, the Company
recognized right of use assets of
$54,475 and lease liabilities of
$57,064. During the year ended July 31, 2021, the Company
terminated its’ existing lease and entered a new lease on a
month-to-month basis. As such, the Company no longer has a right of
use asset or lease liability at July 31, 2021.
Recent Accounting
Pronouncements
In June 2016, the FASB issued ASU
2016-13, Financial Instruments (Topic 326): Measurement of
Credit Losses on Financial Instruments, which modifies the
measurement of expected credit losses of certain financial
instruments, including trade receivables, contract assets, and
lease receivables. This standard will be effective for the Company
beginning August 1, 2020. The Company does not believe that this
standard will have a material impact on its’ consolidated financial
statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, which simplifies the guidance on the issuer’s
accounting for convertible debt instruments by removing the
separation models for convertible debt with a cash conversion
feature and convertible instruments with a beneficial conversion
feature. As a result, entities will not separately present in
equity an embedded conversion feature in such debt and will account
for a convertible debt instrument wholly as debt, unless certain
other conditions are met. The elimination of these models will
reduce reported interest expense and increase reported net income
for entities that have issued a convertible instrument that is
within the scope of ASU 2020-06. ASU 2020-06 is applicable for
fiscal years beginning after December 15, 2021, with early adoption
permitted no earlier than fiscal years beginning after December 15,
2020. The Company has elected to early adopt this ASU and the
adoption of this ASU did not have a material impact on the
Company’s consolidated financial statements and related
disclosures. See Note 6 for convertible notes issued during the
three months ended October 31, 2021 to which this ASU applies.
NOTE 3 – GOING CONCERN
Management
does not expect existing cash as of January 31, 2022, to be
sufficient to fund the Company’s operations for at least twelve
months from the issuance date of these January 31, 2022, financial
statements. These financial statements have been prepared on a
going concern basis which assumes the Company will continue to
realize its assets and discharge its liabilities in the normal
course of business. As of January 31, 2022, the Company has an
accumulated deficit of
$32,033,618 , and
has not yet generated material revenue from operations, and will
require additional funds to maintain its operations. These factors
raise substantial doubt regarding the Company’s ability to continue
as a going concern within one year after the consolidated financial
statements are issued. The Company’s ability to continue as a going
concern is dependent upon its ability to generate future profitable
operations and obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business
operations when they become due. The Company intends to finance
operating costs over the next twelve months through its existing
financial resources and we may also raise additional capital
through equity offerings, debt financings, collaborations and/or
licensing arrangements. If adequate funds are not available on
acceptable terms, we may be required to delay, reduce the scope of,
or curtail, our operations. The accompanying consolidated financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
NOTE 4 – DISCONTINUED OPERATIONS
On November 6, 2019, the Company discontinued its operations of
subsidiary Global3pl, Inc., formerly known as KRG Logistics, Inc.,
(an Ontario corporation) and sold the assets of
$54,296 for
$10 dollars. As such, the assets of KRG Logistics, Inc. were
removed from the accounts, and all remaining liabilities were
classified as Discontinued Operations in the accompanying Balance
Sheets. As of January 31, 2022, and July 31, 2021, the summaries of
liabilities pertaining to discontinued operations were as
follows:
|
|
|
|
|
|
|
|
|
|
|
January 31, 2022 |
|
July 31, 2021 |
Accounts payable |
|
$ |
460,262 |
|
|
$ |
460,262 |
|
Royal Bank line of credit |
|
|
289,242 |
|
|
|
289,242 |
|
Unearned revenue |
|
|
14,833 |
|
|
|
14,833 |
|
Accrued liabilities |
|
|
64,663 |
|
|
|
64,663 |
|
Custom duties & GST payable |
|
|
6,019 |
|
|
|
6,019 |
|
HST |
|
|
2,759 |
|
|
|
2,759 |
|
Liabilities of discontinued operations |
|
$ |
837,778 |
|
|
$ |
837,778 |
|
NOTE 5 – PROMISSORY NOTES
Promissory notes payable as of January 31, 2022, and July 31, 2021,
consisted of the following:
Description |
|
January 31, 2022 |
|
July 31, 2021 |
Note payable dated March 8, 2018, matured
March 8, 2019, bearing interest at
10% per annum. |
|
$ |
30,000 |
|
|
$ |
30,000 |
Note
payable dated July 18, 2018, matured
July 18, 2019, bearing interest at
8% per annum. |
|
$ |
135,000 |
|
|
$ |
135,000 |
Note
payable dated February 4, 2020, matured
February 4, 2021, bearing interest at
18% per annum. |
|
$ |
5,000 |
|
|
$ |
5,000 |
Note
payable dated June 6, 2021, matured
June 6, 2022, bearing interest at
8% per annum. |
|
$ |
200,000 |
|
|
$ |
200,000 |
Note
payable dated June 6, 2021, matured
June 6, 2022, bearing interest at
8% per annum. |
|
$ |
150,000 |
|
|
$ |
150,000 |
Total |
|
$ |
520,000 |
|
|
$ |
520,000 |
Less current portion of long-term
debt |
|
$ |
520,000 |
|
|
$ |
520,000 |
Total long-term
debt |
|
|
— |
|
|
|
— |
Interest expense for the six months ended January 31, 2022 and
2021, was
$7,410 and
$7,410, respectively.
NOTE 6 - CONVERTIBLE DEBT
Convertible debt as of January 31, 2022, and July 31, 2021,
consisted of the following:
Description |
|
October 31, 2021 |
|
July 31, 2021 |
|
|
|
|
|
Convertible note agreement
dated November 1, 2013, in the amount of
$30,000 payable and due on demand bearing interest at
12% per annum. Principal and accrued interest is convertible
at
$.002250 per share. |
|
$ |
11,041 |
|
|
$ |
11,041 |
Convertible note agreement dated
February 20, 2018, in the amount of
$1,034,000 payable and due on demand bearing interest at
10% per annum. Principal and accrued interest is convertible
at
$.028712 per share. |
|
$ |
1,034,000 |
|
|
$ |
1,034,000 |
Convertible note agreement dated March
13, 2019, in the amount of
$800,000 payable and due on
March 20, 2020, bearing interest at
24% per annum. |
|
$ |
800,000 |
|
|
$ |
800,000 |
Convertible note agreement dated
June 28, 2019, in the amount of
$300,000 payable and due on
June 28, 2020, bearing interest at
20% per annum. |
|
$ |
300,000 |
|
|
$ |
300,000 |
Convertible note agreement dated
August 6, 2019, in the amount of
$31,500 payable and due on
August 6, 2020, bearing interest at
20% per annum. |
|
$ |
31,500 |
|
|
$ |
31,500 |
Convertible note agreement dated
August 19, 2019, in the amount of
$3,800 payable and due on
August 19, 2020, bearing interest at
24% per annum. |
|
$ |
3,800 |
|
|
$ |
3,800 |
Convertible note agreement dated
September 4, 2019, in the amount of
$36,500 payable and due on
September 4, 2020, bearing interest at
20% per annum. |
|
$ |
36,500 |
|
|
$ |
36,500 |
Convertible note agreement dated
December 4, 2019, in the amount of
$95,000 payable and due on
December 4, 2020, bearing interest at
12% per annum. |
|
$ |
147,500 |
|
|
$ |
147,500 |
Convertible note agreement dated April
15, 2020, in the amount of
$31,500 payable at
April 15, 2021, bearing interest at
10% per annum, net of discount. |
|
$ |
15,887 |
|
|
$ |
15,877 |
Convertible note agreement dated
December 2, 2020, in the amount of
$40,000 payable and due on
December 2, 2021, bearing interest at
12% per annum. |
|
$ |
40,000 |
|
|
$ |
40,000 |
Convertible note agreement dated
April 6, 2021, in the amount of
$53,000 payable and due on
April 6, 2022, bearing interest at
12% per annum. |
|
$ |
— |
|
|
$ |
53,000 |
Convertible note agreement dated April
7, 2021, in the amount of
$111,555 payable and due on
April 7, 2022, bearing interest at
10% per annum. |
|
$ |
111,555 |
|
|
$ |
111,555 |
Convertible note agreement dated April
12, 2021, in the amount of
$43,000 payable and due on
April 12, 2022, bearing interest at
12% per annum. |
|
$ |
29,500 |
|
|
$ |
43,000 |
Convertible note
agreement dated April 20, 2021, in the amount of
$43,750 payable and due on
April 7, 2022, bearing interest at
12% per annum. |
|
$ |
65,625 |
|
|
$ |
43,750 |
Convertible note agreement dated
August 5, 2021, in the amount of
$500,000 payable and due on
August 5, 2022, non-interest bearing. |
|
$ |
500,000 |
|
|
$ |
— |
Convertible note agreement dated
August 10, 2021, in the amount of
$150,000 payable and due on
August 10, 2022, non-interest bearing. |
|
$ |
150,000 |
|
|
$ |
— |
Convertible
note agreement dated August 23, 2021, in the amount of
$200,000 payable and due on
August 23, 2022, bearing interest at
12% per annum . |
|
$ |
200,000 |
|
|
$ |
— |
Convertible
note agreement dated December 14, 2021, in the amount of
$78,750 payable and due on
December 14, 2022, bearing interest at
12% per annum. |
|
$ |
78,750 |
|
|
$ |
— |
Convertible
note agreement dated December 30, 2021, in the amount of
$53,750 payable and due on
December 30, 2022, bearing interest at
12% per annum . |
|
$ |
53,750 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
Convertible notes total:
|
|
$ |
3,051,233 |
|
|
$ |
2,631,533 |
The Company amortizes the discounts arising from on-issuance
discounts and derivative liabilities (see discussion below) over
the term of the convertible promissory notes using the
straight-line method which is similar to the effective interest
method. During the six months ended January 31, 2022, the Company
amortized
$187,875 to interest expense. As of January 31, 2022,
discounts of
$551,038 remained for which will be amortized through
December 2022.
Derivative
liabilities
Certain of the Company’s convertible notes are convertible into a
variable number of shares of common stock for which there is not a
floor to the number of common shares the Company might be required
to issue. Based on the requirements of ASC 815 Derivatives and
Hedging, the conversion feature represented an embedded derivative
that is required to be bifurcated and accounted for as a separate
derivative liability. The derivative liability is originally
recorded at its estimated fair value and is required to be revalued
at each conversion event and reporting period. Changes in the
derivative liability fair value are reported in operating results
each reporting period. The Company uses the Black-Scholes option
pricing model for the valuation of its derivative liabilities as
further discussed below. There are no material differences between
using the Black-Scholes option pricing model for these estimates as
compared to the Binomial Lattice model.
As of July 31, 2021, the Company had existing derivative
liabilities of
$529,171 related to four convertible notes. During the six
months ended January 31, 2022, approximately
$192,000 in principal and accrued interest of the
outstanding convertible notes were converted into
67,422,926 shares of common stock. At each conversion date,
the Company recalculated the value of the derivative liability
associated with the convertible note recording a gain (loss) in
connection with the change in fair market value. In addition, the
pro-rata portion of the derivative liability as compared to the
portion of the convertible note converted was reclassed to
additional paid-in capital. During the six months ended January 31,
2022, the Company recorded
$234,330 to additional paid-in capital for the relief of the
derivative liabilities.
The derivative liabilities were revalued using the Black-Scholes
option pricing model with the following assumptions: conversion
prices ranging from $0.0007 to $0.0062, the closing stock price of
the Company's common stock on the dates of valuation ranging
from $0.001 to $0.012, an expected dividend yield of 0%, expected
volatility ranging from 219% to 285%, risk-free interest rates
ranging from 0.1% to 0.27%, and expected terms ranging from 0.38 to
0.5 years.
During the six months ended January 31, 2022, two new notes with a
variable-rate conversion feature were issued. The Company valued
the conversion features on the date of issuance resulting in
initial liabilities totaling
$71,111. Since the fair value of the derivative was in
excess of the proceeds received for one of these notes, a full
discount to the convertible notes payable and a day one loss on
derivative liabilities of
$11,942 was recorded during the six months ended January 31,
2022.
The Company valued the conversion feature using the Black-Scholes
option pricing model with the following assumptions: conversion
prices of $0.01 to $0.01, the closing stock price of the Company's
common stock on the dates of valuation ranging from $0.002 to
$0.013, an expected dividend yield of 0%, expected volatilities
ranging from 222%-290%, risk-free interest rate ranging from 0.26%
to 0.38%, and expected terms of one year.
On January 31, 2022, the derivative liabilities on these
convertible notes were revalued at
$123,910 resulting in a gain of
$242,042 for the six months ended January 31, 2022 related
to the change in fair value of the derivative liabilities.
The derivative liabilities were revalued using the Black-Scholes
option pricing model with the following assumptions: conversion
prices ranging from $0.0008 to $0.01, the closing stock price of
the Company's common stock on the date of valuation of $0.004, an
expected dividend yield of 0%, expected volatility of 297%,
risk-free interest rate of 0.78%, and an expected term ranging from
0.21 to 0.91 years.
NOTE 7 – RELATED PARTY TRANSACTIONS
A shareholder of the Company has paid certain expenses of the
Company. These amounts are reflected as a loan payable to related
party. The shareholder advanced
$3,806 and
$0 during the six months ended January 31, 2022, and January
31, 2021, respectively. As of January 31, 2022, and January 31,
2021, there were
$493,854 and
$443,359 due to related parties, and a shareholder,
respectively.
The Company has consulting agreements with two of its shareholders
to provide management and financial services that commenced on
December 1, 2017. For the six months ended January31, 2022, and
January 31, 2021, and consulting fees paid were
$177,295 and
$96,635 respectively. The consulting fees are included as
part of professional fees on the Company’s consolidated statements
of operations.
The Company on February 20, 2018, entered into a related
party (that being Recommerce Group, Inc. and our former President
and current Vice-President of Corporate Finance and a Director, is
a principal in Recommerce Group, Inc.) note receivable in the
amount of
$1,034,000. The Company made an additional advance in the
amount of
$175,000 that is non-interest bearing. The note is payable
and due on demand and bears interest at the rate of
10%. A total of
$153,217 has been applied as payments against this Note.
Interest expense in the amount of
$43,518 and
$43,518 for the six months ended January 31, 2022 and
January 31, 2021, respectively, has been recorded in the financial
statements.
NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)
The Company is authorized to issue
500,000,000 shares of its
$0.001 par value common stock and
20,000,000 shares of Preferred stock. As of January 31,
2022, and July 31, 2021, there were
266,424,608 and
189,561,572 shares of common stock outstanding,
respectively. There were 900,000 shares
of Series E Preferred stock and 4,400,000 shares
of Series F Preferred stock outstanding as of January 31, 2022, and
July 31, 2021, respectively. The Company had 290,000,000 shares
of common stock issuable at January 31, 2022, and July 31, 2021,
respectively.
During the six months ended January 31, 2022, the Company issued
67,422,926 for the conversion of convertible debt and 9,440,110 for
services.
Series E Preferred
Stock
The Company has
3,600,000 of Series E convertible preferred stock
authorized.
Each share is non-voting and convertible into 100 shares of common
stock. Each share is treated pari passu with common stock, adjusted
for conversion, in relation to dividends and liquidation
preferences.
The holders of the Series E convertible preferred stock shall have
anti-dilution rights during the two-year period after the Series E
convertible preferred converted into shares of Common Stock at its
then effective conversion rate. The anti-dilution rights shall be
pro-rata to the holder's ownership of the Series E convertible
preferred stock. The Company agrees to assure that the holders of
the Series E convertible preferred stock shall have and maintain at
all times, full Ratchet anti-dilution protection rights as to the
total number of issued and outstanding shares of common stock and
preferred stock of the Company from time to time, at the rate of
36%,calculated on a fully diluted basis.
Series F Preferred
Stock
The Company has
4,400,000 of Series E convertible preferred stock
authorized.
Each share is non-voting and convertible into 100 shares of common
stock. Each share is treated pari passu with common stock, adjusted
for conversion, in relation to dividends and liquidation
preferences.
The holders of the Series F convertible preferred stock shall have
anti-dilution rights during the two-year period after the Series F
convertible preferred converted into shares of Common Stock at its
then effective conversion rate. The anti-dilution rights shall be
pro-rata to the holder's ownership of the Series F convertible
preferred stock. The Company agrees to assure that the holders of
the Series E convertible preferred stock shall have and maintain at
all times, full Ratchet anti-dilution protection rights as to the
total number of issued and outstanding shares of common stock and
preferred stock of the Company from time to time, at the rate of
44%,calculated on a fully diluted basis.
NOTE
9 – WARRANT
On April 15, 2020, the Company issued a
five year Common Stock Purchase Warrant in connection with a
$31,500 convertible promissory note. The warrant is
convertible into
437,500 shares of the Company’s common stock at
$.12 per share.
On April 23, 2020, the Company issued a
three year Common Stock Purchase Warrant in connection with
a
$75,000 investment in the Company’s common stock. The
warrant has a conversion price of
$.15 per share of the Company’s common
stock.
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Litigations, Claims and Assessments
The Company may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise that may harm
its business. The Company is currently not aware of any such legal
proceedings or claims that they believe will have, individually or
in the aggregate, a material adverse effect on its business,
financial condition or operating results.
The Company has been made aware of potential litigation from a
creditor of the Company, Sanguine Group, LLC and Garden State
Holdings LLC, which are controlled by the same individual. While
the Company does not have actual notice of such potential
litigation, the Company was made aware of the statement from the
Sanguine Group, LLC, in a separate litigation involving Availa Bio,
Inc., the now controlling shareholder of the Company, and a party
unrelated to the Company.
Other
Effective September 1, 2021, the Company leased office space
through Regus at Hauppauge Center, 150 Motor Parkway, Suite 401,
Hauppauge, NY 11788. The term is for
6 months at a base rent of
$1,200. The space is sufficient for the Company needs.
NOTE
11 – SUBSEQUENT EVENTS
Management of the Company has evaluated the subsequent events that
have occurred through the date of the report and determined there
are no subsequent events require disclosure:
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.
Cannagistics, Inc. (Formerly FIGO Ventures, Inc., formerly
Precious Investments, Inc.) (‘The Company’) was incorporated under
the laws of the State of Nevada on May 26, 2004. The Company was an
Exploration Stage Company with the principal business being the
acquisition and exploration of resource properties.
The Company had allowed its charter with the state of Nevada to be
revoked by the Secretary of State for failure to file the required
annual lists and pay the required annual fees. Its last known
officers and directors reflected in the records of the Secretary of
State were unresponsive or stated they were no longer involved with
the Company. The purported replacement officers and directors were
unresponsive.
On September 14, 2012, NPNC Management, LLC filed a petition in the
Eighth Judicial District Court in Clark County, Nevada and was
appointed custodian of the Company on January 15, 2012.
On October 24, 2012, the interim board authorized the sale of
55,000,000 (2,200,000 split adjusted) shares of common stock for
$6,000 to NPNC Management, LLC, in a private placement transaction
exempt from the Securities Act of 1933, as amended, pursuant to
section 4(2) thereof and the rules and regulations promulgated
there under.
On March 1, 2017, the Company then entered into a joint venture
agreement with Eddeb Management (“Eddeb”). The purpose of the joint
venture is to build a fund for the purpose of trading in precious
gems, notably, colored diamonds.
On November 16, 2017, the Company entered into an Agreement
of Merger and Plan of Reorganization (the “Merger Agreement”) with
American Freight Xchange, Inc., a privately held New York
corporation (“American Freight”), and Shipzooka Acquisition Corp.
(“Shipzooka Sub”), a newly formed wholly owned Nevada subsidiary of
Precious Investments, Inc. In connection with the closing of this
merger transaction, Shipzooka Sub merged with and into American
Freight (the “Merger”) on December 5, 2017, with the filing of
Articles of Merger with the Nevada Secretary of State and
Certificate of Merger with the New York Division of
Corporations.
The transaction resulted in the Company acquiring Subsidiary by the
exchange of all of the outstanding shares of Subsidiary for
1,000,000 newly issued Series C Preferred shares of stock, $0.001
par value (the “Preferred Stock”) of Parent which have conversion
and voting rights of 72.5 votes for each share, representing
approximately 90.2% of the voting rights.
For accounting purposes, the transaction was treated as a reverse
merger since the acquired entity now forms the basis for operations
and the transaction resulted in a change in control, with the
acquired company electing to become the successor issuer for
reporting purposes. The accompanying financial statements have been
prepared to reflect the assets, liabilities and operations of
American Freight Xchange, Inc. exclusive of Precious Investments,
Inc since all predecessor operations were discontinued.
As part of the transaction, amounts due to former officers were
forgiven, with the balances recorded as Contributed Capital. For
equity purposes, accumulated deficit shown are those American
Freight Xchange, Inc. Shipzooka Acquisition Corp. is a dormant
corporation.
On July 23, 2018, the Company amended the name of its subsidiary,
KRG Logistics, Inc., to Global3pl, Inc. (an Ontario
corporation).
On April 17, 2019, we filed Articles of Merger with the Secretary
of State of Nevada in order to effectuate a merger with our wholly
owned subsidiary, Cannagistics, Inc. Shareholder approval was not
required under Section 92A.180 of the Nevada Revised Statutes. As
part of the merger, our board of directors authorized a change in
our name to “Cannagistics, Inc.” and our Articles of Incorporation
have been amended to reflect this name change.
On September 26, 2019, the Board of Directors approved the
registered spinout of its Global3pl, Inc., (a New York corporation)
(“Global3pl”) subsidiary. Global3pl is to be a logistics technology
provider, along with the American Freight Xchange and UrbanX
Platforms that have been under development by the Company.
The Board of Directors also declared a stock dividend for all
shareholders, with a record date of October 10, 2019. For every 50
shares of common stock of the Company, all shareholders of record
on the record date will receive one share of common stock in
Global3pl. Global3pl will also file a registration statement as
part of its raise of capital to complete the development of
American Freight Xchange, a North American freight broker-driven
3pl network to handle the management of long haul LTL (less than
truckload), and specialty freight (white glove) services and
Urbanx, a North American network of rush-messenger local trucking
services for forward and reverse last mile delivery (including
white glove service).
However, the Company has carefully reconsidered its position with
respect to the previously announced and subsequently amended spin
off of Global3pl, Inc., (a New York corporation). Due to the
current situation resulting from the COVID-19 pandemic and
especially in light of the development of the supply chain
management strategy of the Company, it has been determined that the
finalization of the development of the Global3pl platform will be
integral and serve as the “engine” for the supply chain management
of the Company. Therefore, at this time the “spin-off” has been
indefinitely postponed until such time and it may make sense from a
business standpoint. The Company has not issued any shares in the
Global3pl, Inc (New York) subsidiary.
Effective October 1, 2019, the Company suspended operations of its
subsidiary Global3pl, Inc., formerly known as KRG Logistics, Inc.,
(an Ontario corporation), suspended future operations related to
the operations in Mississauga, Ontario. It is in the process of
collecting accounts receivables still due and working on a plan to
pay its payables. It has entered into an agreement with 10451029
Canada Inc., d/b/a Reliable Logistics, for the assignment and of
the assets of Global3pl, Inc., (an Ontario Corporation). The
transaction was completed on November 6, 2019. The Company
anticipates formally liquidating and dissolving the subsidiary in
the next fiscal Quarter. This is a separate corporation from
Global3pl, Inc. (A New York corporation).
On May 6, 2021, the issuer (having been renamed, immediately prior
to this Holding Company Reorganization, from “Cannagistics, Inc.”
to “Global Transition Corporation”) completed a corporate
reorganization (the “Holding Company Reorganization”) pursuant to
which Global Transition Corporation, as previously constituted (the
“Predecessor”) merged with a company which became a direct,
wholly-owned subsidiary of a newly formed Delaware Corporation,
Cannagistics, Inc. (in this capacity referred to as the “Holding
Company”), which became the successor issuer. In other words, the
Holding Company is now the public entity, albeit with the same name
as the original issue or the Predecessor. The Holding Company
Reorganization was effected by a merger conducted pursuant to
Delaware General Corporation Law (the “DGCL”), which provides for
the formation of a holding company without a vote of the
stockholders of the constituent corporations (such constituent
corporations being the Predecessor, as renamed to Global Transition
Corporation formerly Cannagistics, Inc. (formerly Precious
Investments, Inc.), a Nevada corporation, now called Global3pl,
Inc., a Delaware corporation, which is a subsidiary of the Company
and the newly formed Cannagistics, Inc a Delaware corporation).
In accordance with the DGCL, Global3pl, Inc. (“Merger Sub”),
another newly formed Delaware Corporation and, prior to the Holding
Company Reorganization, was an indirect, wholly owned subsidiary of
the Holding Company, merged with and into the Predecessor, with
Merger Sub surviving the merger as a direct, wholly owned
subsidiary of the Holding Company (the “Merger”). The Merger was
completed pursuant to the terms of an Agreement and Plan of Merger
among the Predecessor, the Holding Company and Merger Sub, dated
May 6, 2021 (the “Merger Agreement”).
As of the effective time of the Merger and in connection with the
Holding Company Reorganization, all outstanding shares of common
stock and preferred stock of the Predecessor were automatically
converted into identical shares of common stock or preferred stock,
as applicable, of the Holding Company on a one-for-one basis, and
the Predecessor’s existing stockholders and other holders of equity
instruments, became stockholders and holders of equity instruments,
as applicable, of the Holding Company in the same amounts and
percentages as they were in the Predecessor immediately prior to
the Holding Company Reorganization.
The executive officers and board of directors of the Holding
Company are the same as those of the Predecessor in effect
immediately prior to the Holding Company Reorganization.
For purposes of Rule 12g-3(a), the Holding Company is the successor
issuer to the Predecessor, now as the sole shareholder of the
Predecessor. Accordingly, upon consummation of the Merger, the
Holding Company’s common stock was deemed to be registered under
Section 12(b) of the Securities Exchange Act of 1934, as
amended, pursuant to Rule 12g-3(a) promulgated thereunder.
The previously executed Letter of Intent with Recommerce Group,
Inc. has expired, although the Company has continued discussions
with Recommerce Group, Inc. about a potential business
combination.
On July 1, 2021, we entered
into a Reorganization and Stock Purchase Agreement with Availa Bio,
Inc. and Cannaworx Holdings, Inc. (now known as “The Integrity
Wellness Group, Inc.” hereinafter “Integrity Wellness”) pursuant to
which we acquired Integrity Wellness in exchange for 4,400,000
shares of the Company’s Series F Convertible Preferred Stock. We
also changed our state of incorporation to Delaware. A significant
majority of our operations are now operated through Integrity
Wellness which because of the transaction became a wholly owned
subsidiary of the Company. We expect to change our name to The
Integrity Wellness Group, Inc. subject to regulatory
compliance.
Following our acquisition of
Integrity Wellness, we shifted to our current business plan and
focus which is the development, marketing and sale of OTC,
pharmaceutical, nutraceutical, cosmetic and health and wellness
products with a focus on products infused with phytocannabinnoid,
which we refer to as “CBD.” We now have a portfolio of products
designed for the treatment of ailments and symptoms and/or general
improvement of health and wellbeing by topical or oral
administration. These product offerings, which are described more
fully below, are designed to provide a variety of treatments,
benefits and uses including pain relief, anti-aging, hygiene,
energy, and immune system and biochemical support. We also have
products designed for veterinary and agricultural uses. We have six
patents and 15 patent applications pending for our products, as
well as a number of trademarks. Our mission is to alleviate
suffering and adverse consequences caused by certain health and
biological conditions and enhance users’ quality of life through
the use of inventions and science including through the use of
CBD.
On September 15, 2021, the Company filed a Def14C Information
Statement. The Def14C Information Statement set out the plan of the
Company to amend its name to The Integrity Wellness Group, Inc., or
some other similar name, and to effectuate a reverse stock split of
its common stock of one (1) new share of common stock for each
forty (40) old shares of common stock. The Company is in the
process of filing with FINRA to make these changes effective.
Through Integrity Wellness
we currently have four developed products, the majority of
which we offer at retail prices ranging from approximately $30 to
$60 (excluding our veterinary and agricultural product offerings).
Our currently
developed products are at the stage where they are ready for
production, awaiting funding for the final steps of production,
such as sourcing the manufacturing, procuring the necessary
ingredients, determining the quantity of each item for packaging,
and setting up distribution channels. All these steps require
capital. Many distributors have already expressed interest once we
have begun production. We have received approval from the
U.S. Food and Drug Administration (the “FDA”) for our Silverpro
product’s claim, and we currently have no FDA applications in
process for any of our other products, but may apply at some point
in the future, likely no earlier than the later part of 2022. We
anticipate that we may require FDA approval for our other products
which are under development to the extent they qualify as “drugs”
under the FCPA. Further, one of our products, namely Canagel may
qualify for exemption from FDA pre-approval in reliance in part
upon FDA monograms indicating that the ingredients contained in
these products are permitted and/or approved by the FDA for
marketing and consumption. We believe most of our products
described below qualify as a potential “drug” under the FCPA and
FDA rules, although other definitions may also apply to some of our
products. See “Government Regulations” below.
With respect to intellectual property rights, we have patents
issued for six of our products, and 15 patent applications pending,
as indicated below. However, we presently lack the capital to
produce sufficient inventory and, accordingly, will be reliant upon
raising additional funds in this Offering to further commercialize
these products. If we are unable to raise sufficient funds in this
Offering or through other means, the production and distribution of these products may be
delayed or discontinued. See the risk titled “If we cannot obtain
or protect intellectual property rights related to our products,
including due to uncertainties surrounding our acquisition of
Integrity Wellness and its purported product portfolio, we may not
be able to compete effectively in our markets” for more
information. The following is a brief description our current
products portfolio:
Products with Issued
Patents
Immuniain TM (Immune Booster)
Some ImmunaZin Ingredients and Expectations
● Pepsin -- the main
ingredient now famous for rapid recovery. We take pepsin and break
it down into fragmented particles that are better absorbed into the
digestive tract. These pepsin fragments directly modulate immune
system activity by inducing potent T-cell response resulting in
boosted immunity.
● Hemp seed oil helps balance
healthy cholesterol levels, fights depression and anxiety, improves
eye health, promotes brain health, reduces metabolic syndrome,
reduces inflammation, fights autoimmune disease and mental
disorders, reduces fatty liver, promotes bone and joint health and
improves sleep and skin.
Irreversibly-inactivated
pepsinogen fragments for modulating immune function (Immune
Booster- FDA Cleared)
ImmunaZin contains an FDA
approved New Dietary Ingredient (NDI), and the NDI # is
1140
Patent No. US
8,309,072
Patent Issued: November 13,
2012
Patent Expires: June 18,
2029
Canagel ® - (Anhydrous Hydrogel Composition and
delivery system)
Patented Full Spectrum
Phytocannabinoid delivery with FDA approved pain claim. The one and
only FDA-approved pain claim in the market for an oral CBD product.
Using an FDA approved monogram by including menthol. Because this
product contains CBD, we do not currently market and sell this
product at this time.
We have Exclusive World-wide
access to Patent No. US 9839693 B2
Patent Issued: December 4,
2018
Patent Expires: December 8,
2037
Pending Patent
Applications
Veterinary Cannabinoid and
Menthol Compositions and Methods
Application No. 16/419,392;
International Application PCT/US2019/048695
Cannabinoid and Menthol
Compositions and Methods
US Application No.
16/419,336; International Application PCT/US2019/048691
Thin Film Toothpaste
Strip, European Application
Product Name:
KidzStrips ®
Thin Film Toothpaste
Strip, Eurasian Application
Product Name:
KidzStrips ®
Fertilizer
Product Name:
HydroSoil ®,
Water retaining Hemp enhanced
fertilizer, water plant once every two weeks
Inactivated Pepsin
Fragment (IPF) and Full Spectrum Cannabidiol (CBD) Compositions and
Methods
Skin Cream
Relates to compositions and
methods for the prevention and treatment of skin disorders and for
the rejuvenation of the skin. In particular, the application
describes topical compositions and methods of treatments comprising
the combined use of one or more cannabinoids and one or more
hydroxy acids in a suitable carrier. Because this product contains
CBD, we do not currently market and sell this product at this
time.
Other Products
IcyEase
Adhesive Ice Pack for
muscle/joint pain to cool surface and address pain.
Patent-pending, FDA pain
claim in progress. IcyEase contains
menthol, menthol is an approved pain relief ingredient in the FDA’s
monograph for topical pain relief
Slim-D
Appetite-suppressant oral
strip with 50 mg Hoodia & 10 mg Full Spectrum Phytocannabinoid.
Because this product contains CBD, we do not currently market and
sell this product at this time.
Energy Lighting
Strips
High caffeine fast dissolving
oral energy strip with Matcha Green Tea and Hemp/Full Spectrum
Phytocannabinoid. Because this product contains CBD, we do not
currently market and sell this product at this time.
Micro Voltage Trans Derm
C
patent application in progress for pain with unique and superior
absorbing features due to wearer‘s movement generated Micro
Voltage
Silverpro – our only FDA approved medical device for the
treatment of pain. Revolutionary technology combining genuine
silver yarn with low-static carbon fibers, to create the world’s
most advanced-compression pain relief fabric.
Research & Development
and Product Manufacturing
Our products are produced
using third party manufacturers who are responsible for sourcing
the raw materials and ingredients and adhering to applicable
specifications and regulatory requirements including the FDA’s good
manufacturing practices (GMP) certification. We also use some of
these same third parties for research and development and testing
functions as and when the need arises. We rely on a limited number
of these manufacturers to develop and produce our product
offerings.
The availability and
production capability of our manufacturers depends on the raw
material supplies and sources, as well as other projects on which
our manufacturers may be engaged at a given time. Because of these
contingencies, the lead times on production and delivery schedules
can fluctuate, which may cause us to fail to meet internal or
contractual deadlines. As we grow, we hope to be able to accurately
forecast and manage these processes to try and ensure we have
adequate inventory on hand to meet demand. A primary raw material
utilized in the production process for our products is Hemp Oil
isolate from cannabis which can only be produced in certain states.
While we believe there are sufficient sources for Hemp Oil isolate
from cannabis and other raw materials necessary to meet our
production needs, shortages and delays can occur, which could harm
us by prolonging or suspending expected deliveries or increasing
production costs.
COVID-19
The COVID-19 pandemic has
resulted in a global slowdown of economic activity which is likely
to continue to reduce the future demand for a broad variety of
goods and services, while also disrupting sales channels, marketing
activities and supply chains for an unknown period of time until
the virus is fully contained. Supply chain disruptions have been
increasingly common since the pandemic began, and such disruptions
may affect us in the future.
Sales and
Distribution
Our products will be sold both online on our website, and through
wholesale and retail establishments including both brick and mortar
stores and ecommerce platforms. We also intend to sell our products
in part using a direct selling model in which we contract with
independent contractors who are compensated by commissions from
their sales of our products. We intend to dedicate substantial
capital, including a portion of the proceeds from this offering, to
build a sales force consisting of a combination of employees of the
Company and independent contractors.
Planned Operations and Products Under Development
New and Planned
Products
In addition to our developed products, we are also in the process
of evaluating and developing new products. Our ability to develop
and launch these products within the timeframes intended or at all
depends in large part on the Company receiving sufficient proceeds
from this Offering. Our Interim Financial statements do not show
any research and development expenses, as all costs associated with
any new products are included in the compensation paid to
Independent Contractors. If we are unable to raise at least
$2,500,000 in this Offering or through other means, the
development, production and distribution of these products may be
delayed or discontinued. Even with the required capital, planned or
future projects may not come to fruition. Below is a brief summary
of the projects which are planned and/or under development.
Partnership with Medizone
Bio
We, through Integrity Wellness, have entered into a Partnership
Agreement with Medizone Bio, Inc., (“Medizone Bio”) which provides
for a 50/50 partnership for the production of biodegradable face
masks, and medical supplies, such as personal protective equipment
(PPE) and COVID-19 testing materials. The President and Control
Person of Medizone, Bio, Inc., is Dr. Ghalili, a Director of our
Company. Under the Partnership Agreement, Integrity Wellness is to
provide an initial funding of $300,000 in financing for Medizone
Bio to manufacture the first Medizone Bio products purchase order.
This $300,000 was advanced to Medizone Bio, Inc., by Dr. Ghalili,
but at the request of Dr, Ghalili is in fact an obligation of the
Company. The Company executed a Promissory Note to that effect.
This purchase order has a value of $1,200,000. See “Related Party
Transactions.” Integrity Wellness will provide the partnership with
financing, marketing, sales distribution in wholesale, retail and
direct-to-consumer (e.g., QVC, HSN, Amazon, etc.), financing for
general working capital and purchase order financing, while
Medizone Bio provides the partnership with a series of purchase
orders. The net profits, if any, will be distributed between the
partners in equal proportions.
Exosome Product Research
and Development
We are in the early stages of developing a new business which will
focus on a new line of products using naturally occurring nanosized
compounds (approximately 30-150 nanometers in diameter), referred
to as “exosomes,” which are derived from stem cells and cause
growth and regeneration by acting as biologic messengers at the
cellular level of the human body. Exosomes work by delivering
chemical signals to the cells they permeate, instigating the
production of regenerative proteins and other compounds while also
inhibiting destructive inflammatory cytokines. We will not
manufacture the exosome products, but rather we intend to
distribute exosome products manufactured by FDA-certified
manufacturing facilities. The exosome products are being developed
for skin care and topical use only. The products are being
developed by Independent Contractors of the Company, specifically
7X Enterprises, Inc., (controlled by Dr. Ghalili, one of our
Directors) and John Borja, as part of the compensation paid to them
by the Company. There is no specific timeline or milestone for any
of the potentially new products being developed by them. As part of
their efforts, we are working with exosome manufacturers to further
research and develop these products, which includes developing a
plan to file any necessary applications and documentation with the
FDA to obtain FDA approval, if required, and intend to have such
application submitted in 2022. These applications, once we make the
determination to proceed, will be developed by the Company
internally. We intend to explore the potential use of exosome
science to develop products designed to serve regenerative and
health and wellness functions such as hair and skin regeneration.
However, we are still in the very early development of this
project, and no assurances can be given that we will be able to
proceed with our planned exosome product operations as intended or
at all. We do not expect to own or acquire intellectual property
rights or participate directly in the development and manufacturing
efforts for exosome products, and instead intend to license the
intellectual property rights of third parties in order to market
and sell the finished products.
SaaS Logistics
Platform
Prior to the acquisition of Integrity Wellness, we were in the
process of developing a SaaS platform intended to enable users to
monitor and manage numerous aspects of the supply chain as they
obtain raw materials, develop and produce products, and bring their
products to the marketplace. The intended focus of the platform and
services was on OTC, pharmaceutical, cosmetic, nutraceutical,
hemp/CBD and health and wellness products. The development efforts
to date have been conducted primarily by Corengine, Inc., a
third-party software development company. However, we have yet to
develop and commercialize the platform, which has been delayed in
part due to the COVID-19 pandemic. The platform’s intended function
is to assist users with the tracking, monitoring and management of
their respective manufacturing and distribution processes. The
SaaS-based platform will be designed to fully integrate the various
components of the supply chain, from obtaining raw materials
through product manufacturing and distribution and inventory and
shelf-life batch tracking. We had previously announced the spin-off
of the business which was subsequently suspended indefinitely due
to COVID-19.
Our
principal executive offices are located at 150 Motor Parkway, Suite
401, Hauppauge, NY 11787. Our telephone number is 631-787-8455.
Parent Holding Company Reorganization
On May 6, 2021, the issuer (having been renamed, immediately prior
to this Holding Company Reorganization, from “Cannagistics, Inc.”
to “Global Transition Corporation”) completed a corporate
reorganization (the “Holding Company Reorganization”) pursuant to
which Global Transition Corporation, as previously constituted (the
“Predecessor”) merged with a company which became a direct,
wholly-owned subsidiary of a newly formed Delaware Corporation,
Cannagistics, Inc. (in this capacity referred to as the “Holding
Company”), which became the successor issuer. In other words, the
Holding Company is now the public entity, albeit with the same name
as the original issue or the Predecessor. The Holding Company
Reorganization was effected by a merger conducted pursuant to
Delaware General Corporation Law (the “DGCL”), which provides for
the formation of a holding company without a vote of the
stockholders of the constituent corporations (such constituent
corporations being the Predecessor, as renamed to Global Transition
Corporation and the newly formed Cannagistics, Inc.).
In accordance with the DGCL, Global3pl, Inc. (“Merger Sub”),
another newly formed Delaware Corporation and, prior to the Holding
Company Reorganization, was an indirect, wholly owned subsidiary of
the Holding Company, merged with and into the Predecessor, with
Merger Sub surviving the merger as a direct, wholly owned
subsidiary of the Holding Company (the “Merger”). The Merger was
completed pursuant to the terms of an Agreement and Plan of Merger
among the Predecessor, the Holding Company and Merger Sub, dated
May 6, 2021 (the “Merger Agreement”).
As of the effective time of the Merger and in connection with the
Holding Company Reorganization, all outstanding shares of common
stock and preferred stock of the Predecessor were automatically
converted into identical shares of common stock or preferred stock,
as applicable, of the Holding Company on a one-for-one basis, and
the Predecessor’s existing stockholders and other holders of equity
instruments, became stockholders and holders of equity instruments,
as applicable, of the Holding Company in the same amounts and
percentages as they were in the Predecessor immediately prior to
the Holding Company Reorganization.
The executive officers and board of directors of the Holding
Company are the same as those of the Predecessor in effect
immediately prior to the Holding Company Reorganization.
For purposes of Rule 12g-3(a), the Holding Company is the successor
issuer to the Predecessor, now as the sole shareholder of the
Predecessor. Accordingly, upon consummation of the Merger, the
Holding Company’s common stock was deemed to be registered under
Section 12(b) of the Securities Exchange Act of 1934, as
amended, pursuant to Rule 12g-3(a) promulgated thereunder.
Results of Operation for Three months Ended January 31, 2022,
and 2021
Revenues
No
revenue was generated for the six months ended January 31, 2022,
and 2021.
Our
cost of revenues was $0 for the six months ended January 31, 2022,
as compared with cost of revenue of $0 for the same period ended
January 31, 2021.
Operating Expenses
Total operating expenses increased to $169,510 for the six months
ended January 31, 2022, from $119,892 at October 31, 2020. This
increase was mainly due mainly to an increase in Consulting Fees
and a decrease in Professional fees.
Operating expenses for the six months ended January 31, 2022,
consisted of general and administrative expenses of $43,278,
professional fees of $214,727, rent of $9,915, and consulting fees
of $683,979. The increase in Consulting Fees is a result of the
acquisition of Integrity Wellness and the obligations for the
payments of the Independent Contractors working on the development
of the Intellectual Property acquired in the acquisition, including
7X Enterprises, Inc., and John Borja. Our operating expenses for
the three months ended January 31, 2022, consisted of general and
administrative expenses of $16,152, professional fees of $27,612,
rent of $4,987, and consulting fees of $99,000.
Other Income and Expenses
We
had interest income of $21,759 for the three months ended January
31, 2022, and $21,759 for the six months ended January 31, 2021. We
had interest expense of $691,629 for the six months ended January
31, 2022, as compared to $311,971 for the six months ended January
31, 2021. We had Settlement Fees of $(48,000) for the six months
ended January 31, 2022, as compared to $(25,000) for the six months
ended January 31, 2021. We had a Loss on Derivative Liabilities of
$123,822 for the six months ended January 31, 2022, as compared to
$(1,177,910) for the six months ended January 31, 2021. We had a
Change in fair value of derivative labilities of $106,279 for the
six months ended January 31, 2022, as compared to $79,385 for six
months ended January 31, 2021.
Net Loss
Net
loss for the six months ended January 31, 2022 was $(1,461,427)
compared to net loss of $(1,668,315) for the six months ended
January 31, 2021
Liquidity and Capital Resources
As
of January 31, 2022, we had total current assets of $58,062 and
total current liabilities of $6,362,697 as of January 31, 2022. We
had a negative working capital of $6,304,635as of January 31,
2022.
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 January 31, 2022, there were no off-balance sheet
arrangements.
Critical Accounting Policies
In
December 2001, the SEC requested that all registrants list their
most “critical accounting polices” in the Management Discussion and
Analysis. The SEC indicated that a “critical accounting policy” is
one which is both important to the portrayal of a company’s
financial condition and results, and requires management’s most
difficult, subjective or complex judgments, often as a result of
the need to make estimates about the effect of matters that are
inherently uncertain.
Our
accounting policies are discussed in detail in the footnotes to our
financial statements included in our Annual Report on Form 10-K for
the year ended July 31, 2020, however we consider our critical
accounting policies to be those related to inventory, fair value of
financial instruments, derivative financial instruments and
long-lived assets
Going Concern
As
of October 31, 2021, we had an accumulated deficit of $31,538,682.
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,
2021, our disclosure controls and procedures were not effective at
the reasonable assurance level due to the material weaknesses
identified and described below.
Our
principal executive officers do not expect that our disclosure
controls or internal controls will prevent all error and all fraud.
Although our disclosure controls and procedures were designed to
provide reasonable assurance of achieving their objectives and our
principal executive officers have determined that our disclosure
controls and procedures are effective at doing so, a control
system, no matter how well conceived and operated, can provide only
reasonable, not absolute assurance that the objectives of the
system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company
have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be
circumvented if there exists in an individual a desire to do so.
There can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
Remediation Plan to Address the Material Weaknesses in Internal
Control over Financial Reporting
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. Management identified the following
three material weaknesses that have caused management to conclude
that, as of October 31, 2021, our disclosure controls and
procedures, and our internal control over financial reporting, were
not effective at the reasonable assurance level:
1. We do not have written
documentation of our internal control policies and procedures.
Written documentation of key internal controls over financial
reporting is a requirement of Section 404 of the Sarbanes-Oxley Act
as of the period ending January31, 2018. Management evaluated the
impact of our failure to have written documentation of our internal
controls and procedures on our assessment of our disclosure
controls and procedures and has concluded that the control
deficiency that resulted represented a material weakness.
2. We do not have sufficient
segregation of duties within accounting functions, which is a basic
internal control. Due to our size and nature, segregation of all
conflicting duties may not always be possible and may not be
economically feasible. However, to the extent possible, the
initiation of transactions, the custody of assets and the recording
of transactions should be performed by separate individuals.
Management evaluated the impact of our failure to have segregation
of duties on our assessment of our disclosure controls and
procedures and has concluded that the control deficiency that
resulted represented a material weakness.
3. Effective controls over the
control environment were not maintained. Specifically, a formally
adopted written code of business conduct and ethics that governs
our employees, officers, and directors was not in place.
Additionally, management has not developed and effectively
communicated to employees its accounting policies and procedures.
This has resulted in inconsistent practices. Further, our Board of
Directors does not currently have any independent members and no
director qualifies as an audit committee financial expert as
defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity
level programs have a pervasive effect across the organization,
management has determined that these circumstances constitute a
material weakness.
To
address these material weaknesses, management performed additional
analyses and other procedures to ensure that the financial
statements included herein fairly present, in all material
respects, our financial position, results of operations and cash
flows for the periods presented. Accordingly, we believe that the
financial statements included in this report fairly present, in all
material respects, our financial condition, results of operations
and cash flows for the periods presented.
To
remediate the material weakness in our documentation, evaluation
and testing of internal controls we plan to engage a third-party
firm to assist us in remedying this material weakness once
resources become available.
We
intend to remedy our material weakness with regard to insufficient
segregation of duties by hiring additional employees in order to
segregate duties in a manner that establishes effective internal
controls once resources become available.
Changes in Internal Control over Financial Reporting
No
change in our system of internal control over financial reporting
occurred during the period covered by this report, the period ended
October 31, 2021, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART II – OTHER INFORMATION
Item 1. Legal
Proceedings
I.
Our
wholly owned subsidiary against Cannagistics, Inc. (formerly
Precious Investments, Inc.), a Nevada corporation, now called
Global3pl, Inc., a Delaware corporation, which is a now a
subsidiary of the Company, is a party to a case titled William
Prusin v. Precious Investments Inc., and Kashif Khan. The
litigation was commenced in the Ontario Superior Court of Justice
(Commercial List) on July 20, 2016. The litigation stems from a
diamond purchase agreement entered into on April 1, 2016, between
Dr. William Prusin and Precious Investments Inc. By virtue of the
terms of the agreement, Precious Investments purchased Dr. Prusin’s
diamond portfolio, which was valued at $3.8 million (CDN) for the
purposes of the agreement. In exchange for the diamond portfolio,
Dr. Prusin was provided with 1,324,413 common shares of Precious
Investments.
In
the Statement of Claim, the plaintiff is alleging a breach of the
Ontario Securities Act and claims that documents provided to him
contain untrue statements of material fact or omissions. The
plaintiff has also alleged that Precious Investment and Mr. Khan
distributed securities in Ontario without issuing a prospectus and
obtaining the required prospectus exemption or a registration
exemption. In the alternative, the plaintiff has alleged that Mr.
Khan made fraudulent misrepresentations which induced Dr. Prusin to
enter into the diamond purchase agreement. The fraudulent
misrepresentation allegation involves the future value of
Cannagistics, Inc. (formerly Precious Investments, Inc.), a Nevada
corporation, now called Global3pl, Inc., a Delaware corporation,
which is a now a subsidiary of the Company 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.
As a
result of the actions taken pursuant to the Reorganization under
Section 251(g) of the Delaware Corporation Law, as described in the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 19, 2021, the Company believes that there would
be no material effect on the Company from this litigation.
II.
KRG
Logistics, Inc., now known as Global3pl, Inc., (an Ontario
corporation), a now discontinued operational subsidiary of Global
Transition Corporation (a Delaware corporation), formerly known as
Cannagistics, Inc., (a Nevada corporation, and formerly the public
entity and formerly the parent company), was named as the defendant
in an action in the Ontario Superior Court of Justice by Ron
Alvares, one of the original shareholders of KRG Logistics, Inc.,
when it was purchased by the Company in 2017. The action is for
breach of contract for monies due as a result of the Purchase
Agreement and for an amount due from a shareholder loan claimed by
Mr. Alvares to KRG Logistics on September 30, 2014. The Company
intended to defend against the breach of contract claim as the
amount claimed to be due is incorrect, based on payments already
made. It intended to also file counterclaims based on intentional
interference of contracts by Mr. Alvares and his son for stealing
clients of the Company and industrial sabotage of the Company’s
software systems. With respect to the claim of an outstanding
shareholder loan it is the position of the Company that said
shareholder loan was never disclosed to the Company at the time of
the purchase and based on information available, any such
shareholder loan was paid off with the down payment provided by the
Company for the purchase of KRG Logistics, Inc.
Procedurally the plaintiff has named the wrong parties and Counsel
in Ontario is waiting for an amended complaint to file an answer
and counterclaims. There has been no action on this matter in over
a year. In the interim, the subsidiary of the Company has ceased
operations. As a result, there would be no material effect on the
Company.
As a
result of the actions taken pursuant to the Reorganization under
Section 251(g) of the Delaware Corporation Law, as described in the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 19, 2021, the Company believes that there would
be no material effect on the Company from this litigation.
III.
On
February 4, 2020, Jeffrey Gates commenced an action in the Supreme
Court of the State of New York, County of Suffolk against Global
Transition Corporation (a Delaware corporation), at the time of
commencement of the action, known as Cannagistics, Inc., (a Nevada
corporation, and formerly the public entity and formerly the parent
company) and Mr. Zimbler for the non-payment of a Promissory Note,
of which the balance of $135,000, plus interest. The Company has
retained Counsel to appear and defend the action.
In
February 2021, the Supreme Court of the State of New York, County
of Suffolk entered an order granting summary judgment to Jeffrey
Gates, the plaintiff, against Cannagistics, Inc. (formerly Precious
Investments, Inc.), a Nevada corporation, now called Global3pl,
Inc., a Delaware corporation, which is a subsidiary of the Company,
and James Zimbler, our Vice President of Operations and former
director, against the defendants, for a total of $151,712. As a
result of our corporate reorganization under Section 251(g) of the
Delaware Corporation Law, completed in May 2021, such that a newly
formed corporation became the public company and the predecessor
issuer, with all its assets and liabilities became the subsidiary,
the obligation for this claim is now in said subsidiary of the
current holding company. Based on the reorganization, and while
relying on advice of counsel, the parent Company does not believe
it is liable for this judgment. In the event the plaintiff seeks to
hold the newly formed parent holding company responsible, a court
may conclude that we are liable, notwithstanding our corporate
restructuring in Delaware.
As a
result of the actions taken pursuant to the Reorganization under
Section 251(g) of the Delaware Corporation Law, as described in the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 19, 2021, the Company believes that there would
be no material effect on the Company from this litigation. However,
if we are found liable for the judgment, even though Delaware Law
expressly provides otherwise, we would be forced to pay such amount
in available cash, if any, and to satisfy the balance by selling
our assets which were only $45,007 as of July 31, 2021. Therefore,
such a development would have a material adverse effect on our
business and could force us to cease operations, in which case your
entire investment could become worthless.
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.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
N/A
Item 5. Other
Information
Related party Transactions
On January 18, 2022, the Company entered into a Partnership
Agreement with Medizone Bio, an entity with principal offices in
Naples, Florida. Dr. Babak Ghalili, a director of the Company, is
President of Medizone Bio. The Partnership Agreement provides for a
50/50 partnership for the production of biodegradable face masks,
and medical supplies, such as personal protective equipment (PPE)
and COVID-19 testing materials. Under the Partnership Agreement,
Integrity Wellness is to provide an initial funding of $300,000 in
financing for Medizone Bio to manufacture the first Medizone Bio
products purchase order. This purchase order has a value of
$1,200,000. The Company has borrowed the money for this purpose as
described below. Integrity Wellness will provide the partnership
with financing, marketing, sales distribution in wholesale, retail
and direct-to-consumer (e.g., QVC, HSN, Amazon, etc.), financing
for general working capital and purchase order financing, while
Medizone Bio provides the partnership with a series of purchase
orders. The net profits, if any, will be distributed between the
partners in equal proportions.
Integrity Wellness has issued a Promissory Note in the principal
amount of $300,000 to 7X Enterprises, Inc. (“7X”) in exchange for
7X advancing $300,000 to Integrity Wellness for the purchase order
financing for the initial purchase order of Medizone Bio. The
Promissory Note bears interest at a rate of 10% per annum and is
due upon demand from the holder. Dr. Babak Ghalili, a director of
the Company, is President of 7X.
Item 6. Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
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|
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Cannagistics Inc.
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Date: |
March 22, 2022
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By: |
/s/ Jim Morrison |
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Jim
Morrison |
Title: |
President,
Chief Executive Officer, and Director |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
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Cannagistics,
Inc. |
|
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By: |
Jim Morrison |
|
Jim
Morrison
President, Chief Executive Officer, Principal Executive
Officer,
Chief Financial Officer, Principal Financial Officer, Principal
Accounting Officer and Director
|
|
March
22, 2022 |
By: |
/s/ Dr. Babak Ghalili |
|
Dr.
Babak Ghalili |
|
Director |
|
March
22, 2022 |
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