Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains
forward-looking statements. The Securities and Exchange Commission (the "SEC")
encourages companies to disclose forward-looking information so that investors
can better understand a company's future prospects and make informed investment
decisions. This Quarterly Report and other written and oral statements that we
make from time to time contain such forward-looking statements that set out
anticipated results based on management's plans and assumptions regarding future
events or performance. We have tried, wherever possible, to identify such
statements by using words such as
"anticipate,""estimate,""expect,""project,""intend,""plan,""believe,""will" and
similar expressions in connection with any discussion of future operating or
financial performance. In particular, these include statements relating to
future actions, future performance or results of current and anticipated sales
efforts, expenses, the outcome of contingencies, such as legal proceedings, and
financial results.
We caution that the factors described herein, and other factors could cause our
actual results of operations and financial condition to differ materially from
those expressed in any forward-looking statements we make and that investors
should not place undue reliance on any such forward-looking statements. Further,
any forward-looking statement speaks only as of the date on which such statement
is made, and we undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which such statement is
made or to reflect the occurrence of anticipated or unanticipated events or
circumstances. New factors emerge from time to time, and it is not possible for
us to predict all of such factors. Further, we cannot assess the impact of each
such factor on our results of operations or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
General
The following discussion highlights Kid Castle results of operations and the
principal factors that have affected our financial condition as well as our
liquidity and capital resources for the periods described and provides
information that management believes is relevant for an assessment and
understanding of the statements of financial condition and results of operations
presented herein. The following discussion and analysis are based on our audited
Financial Report, which we have prepared in accordance with United States
generally accepted accounting principles. You should read this discussion and
analysis together with such financial statements and the related notes thereto.
Kid Castle Educational Corporation, a Delaware corporation, ("Kid Castle," "the
Company," "We," "KDCE," "Us" or "Our') operates and manages a portfolio of
biopharmaceutical, agricultural and "pure-play" CBD assets that are (or could
be) vertically integrated and "2018 Farm Bill" compliant in the United States of
America. Kid Castle engages in rollup and consolidation of CBD and Biopharma
assets and operations. The Company seeks to standardize the pharmaceuticals and
non-pharmaceutical CBD products formulation and applications across the CBD
market in the United States of America. The CBD market in the United States is
young and very fragmented, lack established process control and protocols, and
is yet to establish formulations standardization. Because the Company has
limited or no resources, and the legal CBD industry is still in its infancy
(following the 2018 Farm Bill), the Company lack of resources is likely to
affect its ability to bring an industry-wide reform as contemplated above. It
would be difficult for the Company to raise the necessary capital to achieve its
goals.
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As at the date of this filing, the Company does not currently, nor does it
intend, in the future to, maintain an ownership interest in any cannabis
growing, marijuana dispensaries or production facilities. The Company does not
grow, process, own, handle, transport, or sell cannabis or marijuana as the
Company is organized and directed to operate strictly in accordance with all
applicable state and federal laws.
Basis of Presentation
The consolidated financial statements of the Company therefore include
GiveMePower Corporation and its wholly owned subsidiaries of Alpharidge Capital
LLC. ("Alpharidge"), Community Economic Development Capital, LLC. ("CED
Capital"), and Cannabinoid Biosciences, Inc. ("CBDX"), and subsidiaries, in
which GiveMePower has a controlling voting interest and entities consolidated
under the variable interest entities ("VIE") provisions of ASC 810,
"Consolidation" ("ASC 810"), after elimination of intercompany transactions and
accounts.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, in which the Company has a controlling voting interest and
entities consolidated under the variable interest entities ("VIE") provisions of
ASC 810, "Consolidation" ("ASC 810"). Inter-company balances and transactions
have been eliminated upon consolidation.
ASC 810 requires that the investor with the controlling financial interest
should consolidate the investee/affiliate. ASC 810-10 requires that an equity
interest investor consolidates a VIE when it retains an investment in the
entity, is considered a variable interest investor in the entity, and is the
primary beneficiary of the entity. An investor in a VIE is a "variable interest
beneficiary" when, per an arrangement's governing documents, the investor will
absorb a portion of the VIE's expected losses or will receive a portion of the
entity's "residual returns." The variable interest beneficiary retaining a
controlling financial interest in the VIE is designated as its "primary
beneficiary" and must consolidate the VIE. A variable interest beneficiary
retains a "controlling financial interest" in a VIE when that beneficiary
retains the power to direct the activities of the VIE that have the greatest
influence over the VIE's economic performance and retains an obligation to
absorb the VIE's significant losses or the right to receive benefits from the
VIE that could potentially be significant to the VIE. Based on the ASC 810 test
above, Kid Castle Educational Corporation is the primary beneficiary of
GiveMePower Corporation (the "VIE") because Kid Castle retained a controlling
financial interest in the VIE and has the power to direct the activities of the
VIE, having the greatest influence over the VIE's economic performance and
retains an obligation to absorb the VIE's significant losses and the right to
determine and receive benefits from the VIE.
Because GiveMePower Corporation is 88% controlled by Kid Castle Educational
Corporation, the consolidation rule requires the Revenue, Assets and Liabilities
recognized and disclosed on the financial statements of GiveMePower Corporation
are also recognized and disclosed on the financial statements of Kid Castle
Educational Corporation pursuant to ASC 810.
Overview
The Company and Nature of Business
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Kid Castle Educational Corporation, a Delaware corporation, ("Kid Castle," "the
Company," "We," "KDCE," "Us" or "Our') operates and manages a portfolio of real
estate properties , biopharmaceutical, agricultural and "pure-play" CBD assets
that are (or could be) vertically integrated and "2018 Farm Bill" compliant in
the United States of America. Kid Castle engages in rollup and consolidation of
real estate, CBD and Biopharma assets and operations.
Kid Castle was the result of a share exchange transaction, commonly referred to
as a reverse merger, pursuant to which shareholders of an offshore operating
company take control of a U.S. company that has no operations (commonly referred
to as a shell company), and the offshore operating company becomes a subsidiary
of the U.S. company. In KDCE case, the offshore company was Higoal Developments
Ltd., which was the parent company of Kid Castle Internet Technologies Limited
and Kid Castle Education Software Development Co. Limited, KDCE's operating
companies that run our English language instruction business. The U.S. or shell
company, at the time of the share exchange, was King Ball International
Technology Corporation.
Kid Castle used to be a Florida corporation until the company voluntarily
dissolved its Florida registration with intention to simultaneously incorporate
in Delaware and convert into a Delaware corporation. Although the company
immediately finalized its registration effort to convert into a Delaware
Corporation, the company's registered agent who was supposed to submit the
registration package to the Delaware Secretary of State for certification,
failed to make a timely submission. Later in January 2019, when the company
realized that the Delaware incorporation/registration package/process was never
submitted to the Delaware Secretary of State nor completed in any other way or
form, the Company went ahead and resubmitted the required registration package
and was then formally re-incorporated in Delaware and convert into a Delaware
corporation. Thus, the company was formally incorporated in Delaware and
converted into a Delaware Corporation in January 2019.
The re-incorporation in Delaware, which occurred in January 2019, has placed at
risk, voidable and unenforceable, all and any liabilities that may have accrued,
including any material agreements the Company may have executed during the
period between March 22, 2011 and January 2019. To the best of our knowledge,
no such liabilities that were accrued and no material agreement were entered
into by the company during the period between March 22, 2011 and January 2019.
In addition, there could be penalties or legal liabilities that may have accrued
as a result of conducting business from 2011 to 2019 without properly
registering with any State. To the best of our knowledge, as at September 7,
2020, no such penalties or liabilities has accrued to the company accrued as a
result of conducting business from 2011 to 2019 without properly registering
with any State. However, there is no guarantee that such penalties or
liabilities would not accrue or arise in the future.
On October 21, 2019, pursuant to a stock purchase agreement dated October 2,
2019, Cannabinoid Biosciences, Inc., a California corporation, purchased one (1)
million shares of its preferred shares (one preferred share is convertible 1,000
share of common stocks) of the Company, representing 97.82% of our total issued
and outstanding voting shares of common stock and preferred stock.
Simultaneously with the purchase, the officers and directors of the Company
resigned. Frank I Igwealor, Chairman and CEO, Secretary, Treasurer, and
Director; Patience C Ogbozor, Director; and Dr. Solomon SK Mbagwu, MD, Director,
were elected to replace them. Following the share sales to Cannabinoid
Biosciences, Inc., the purchaser converted 900,000 of the preferred shares for
900,000,000 shares of the Company's current outstanding shares of common stock.
Cannabinoid Biosciences, Inc. ("CBDZ"), a California corporation was
incorporated on May 6, 2014, to operate as a biotechnology and specialty
pharmaceutical holding company that engages in the discovery, development, and
commercialization of cures and novel therapeutics from proprietary cannabinoid,
cannabidiol, endocannabinoids, phytocannabinoids, and synthetic cannabinoids
product platform suitable for specific treatments in a broad range of disease
areas. CBDZ engages in biopharmaceutical research and development operation with
aim of identifying viable drug candidates to go into clinical trials and if
successful, be submitted to the FDA for approval. Because the Company is young
and has limited or no resources, and the legal CBD industry is still in its
infancy (following the 2018 Farm Bill), the Company lack of resources is likely
to affect its ability to bring an industry-wide reform as contemplated above.
It would be difficult for the Company to raise the necessary capital to achieve
its goals.
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Following the consummation of the October 21, 2019 transactions, the Company
decided to restart filing important information immediately. The Company used
the Form 10-12(g) to register its common stock with the SEC.
Cannabinoid Biosciences, Inc.'s business model is focused on specialized real
estate operation, and the legal CBD business: (1) Ownership interest in certain
businesses that extract, purchase and distribute Bulk Pure CBD, Isolate, Hemp
Oil, THC-free CBD Distillate and Crude CBD Oil; (2) Partnerships with local
farmers to grow farm bill compliant hemp biomass; (3) Partnerships with extract
facilities across the U.S. who manufacture hemp-based ingredients to meet
specific medical needs. CBDZ process would entail steps that include (a)
ethanol extraction system, (b) winterization to remove fats; (c) multiple rounds
of rotary evaporation are used to remove plant material and other unnecessary
components; (d) extract decarboxylation to transform into a crystalline
structure with a proprietary post-processing technique; and (e) get the extract
tested by third-party laboratories, package it, and get it ready for shipment.
As at the date of this filing, the Company does not currently, nor does it
intend, in the future to, gain or maintain an ownership interest in any cannabis
growing, marijuana dispensaries or production facilities. The Company does not
grow, process, own, handle, transport, or sell cannabis or marijuana as the
Company is organized and directed to operate strictly in accordance with all
applicable state and federal laws.
In late 2019, the Company through its subsidiary CBDZ, acquired two CBD
marketplaces that it intends to further develop and monetize in the near
future. One of the two marketplaces, www.cbdhempextra.com is down and awaiting
updates, the second marketplace, www.cannabidiolhemp.net is up and running but
has not been monetized and is currently generating no revenue. We believe that
lots of development work is still needed before we could monetize the site.
While operating a CBD marketplace is important to our business plan, it is not a
deal breaker. In our acquisition plan, we intend to buy and consolidate viable
revenue-generating CBD websites with a goal of consolidating and growing them.
OnSeptember 15, 2020, Kid Castle Educational Corporation (the "Company") entered
into a stock purchase agreement with certain corporation related to our
President and CEO with respect to the private placement of 900,000 shares of its
preferred stock at a purchase price of $3 in cash and a transfer of 100%
interest in, and control of Community Economic Development Capital, LLC (a
California Limited Liability Company). The shares were issued to the investors
without registration under the Securities Act of 1933 based upon exemptions from
registration provided under Section 4(2) of the Act and Regulation D promulgated
thereunder. The issuances did not involve any public offering; no general
solicitation or general advertising was used in connection with the offering.
Community Economic Development Capital, is a specialty real estate holding
company for specialized assets including, affordable housing, opportunity zones
properties, medical real estate investments, hemp farms, CBD related commercial
facilities, industrial and commercial real estate, and other real estate related
services.
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Similarly, on September 16, 2020, as part of its purchase of unregistered
securities from certain corporation related to our President and CEO, the
Company, received $3.00 in cash and 1,000,000 shares of its preferred stock, and
in exchange transferred 100% interest in, and control of Community Economic
Development Capital, LLC ("CED Capital"), a California Limited Liability
Company, and 97% of the issued and outstanding shares of Cannabinoid
Biosciences, Inc. ("CBDX"), to GiveMePower Corporation, a Nevada corporation.
This transaction gave the Company 88% of the voting control of GiveMePower. As
at the time of this transaction, all four businesses involved in the transaction
were controlled by Mr. Frank I Igwealor. Because both the buyer and seller in
the above acquisitions were under the control of the same person, the
transaction was classified as "common control transaction and therefore fall
under "Transactions Between Entities Under Common Control" subsections of ASC
805-50. Under ASC 805-50, "assets transferred to the entity are generally not
stepped up to fair value. Instead, they are recorded at the ultimate parent's
historical cost basis. Whether the transaction should be retrospectively or
prospectively applied is dependent on the nature of the common control
transaction. Transfer of net assets or a business are reflected retrospectively,
whereas transfers of assets are prospective." "The financial statements of the
receiving entity should report results of operations for the period in which the
transfer occurs as though the transfer of net assets or exchange of equity
interests had occurred at the beginning of the period. Results of operations for
that period will thus comprise those of the previously separate entities
combined from the beginning of the period to the date the transfer is completed
and those of the combined operations from that date to the end of the period."
Strategy
The acquisition of control by the shareholders of Cannabinoid Biosciences, Inc.
and subsequent rollup of CBDZ into the Company transformed our business model by
incorporating the business plan of CBDZ whose stated intention was to merge into
Kid Castle in a transaction that would make CBDZ a subsidiary of Kid Castle.
This acquisition brought the Company into the following areas of the legal CBD
business: (1) Ownership interest in certain businesses that extract, purchase
and distribute Bulk Pure CBD, Isolate, Hemp Oil, THC-free CBD Distillate and
Crude CBD Oil; (2) Partnerships with local farmers to grow farm bill compliant
hemp biomass; (3) Partnerships with extract facilities across the U.S. who
manufacture hemp-based ingredients to meet specific medical.
The Company ("CBDZ and KDCE" or "KDCE" or "CBDZ") will prioritize establishment
of CBD process control, protocols, and formulations standardization. The
Company will step up and pioneer the process to standardize and reorganize this
market, establish process control (benchmarks and protocols), and create
formulation standards for the CBD industry. Through Kid Castle, CBDZ seeks to
control the production and distribution of verities of consumer cannabidiol
(CBD) formulation under private brands in the United States. Our process
standardization would entail steps that include (a) ethanol extraction system,
(b) winterization to remove fats; (c) multiple rounds of rotary evaporation are
used to remove plant material and other unnecessary components; (d) extract
decarboxylation to transform into a crystalline structure with a proprietary
post-processing technique; and (e) get the extract tested by third-party
laboratories, package it, and get it ready for shipment.
Plan of Operations for the Next Twelve Months
Kid Castle will need approximately $1,500,000 to sustain operations for the next
12 months. Our plan is to achieve meaningful revenue from acquisitions of
profitable CBD businesses to meet our operating needs. However, we may not be
able to increase our revenue sufficiently to meet these needs in time. It is
also unlikely that we will be able to generate $1,500,000 in net income to
satisfy all of our obligations and cover our operating cost for the next 12
months. Our ability to continue operations will be dependent upon the
successfully long-term or permanent capital in form of equity financing, the
support of creditors and shareholders, and, ultimately, the achievement of
profitable operations. There can be no assurances that we will be successful,
which would in turn significantly affect our ability to be successful in our new
business plan. If not, we will likely be required to reduce operations or
liquidate assets. We will continue to evaluate our projected expenditures
relative to our available cash and to seek additional means of financing in
order to satisfy our working capital and other cash requirements.
We intend to implement the following tasks within the next twelve months:
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1. Month 1-3: Phase 1 (1-3 months in duration; $600,000 to $1 million in
estimated fund receipt)
a. Hire the 2 biologist/scientists, hire 1 bookkeepers, business
development manager and officer manager to implement our business
plan.
b. Acquire and consolidate stakes in the operations of at least two
select biopharma businesses.
2. Month 3-6 Phase 2 (1-3 months in duration; cost control, process
improvements, admin & management.).
a. Integrate acquired business into the Company's model - consolidate the
operations of the businesses including integration of their accounting
and finance systems, synchronization of their operating systems, and
harmonization of their human resources functions.
b. Complete and file quarterly reports and other required filings for the
quarter
3. Month 6-9: Phase 3 (1-3 months in duration; $600,000 to $900,000 in
estimated fund receipt)
a. Identify and acquire complementary/similar businesses or assets in the
target market
4. Month 9-12: Phase 4 (1-3 months duration; use acquired businesses' free
cash flow for more acquisitions)
a. Run the businesses efficiently, giving employees a conducive and
friendly workplace and add value to investors and shareholders by
identifying and reducing excesses and also identifying and executing
growth strategies
b. Acquire more businesses that are below their book-value or undervalued
businesses, restructure the businesses, and sell the businesses for
profit or hold them for cash flow.
5. Operating expenses during the twelve months would be as follows:
a. For the seven months through December 31, 2021, we anticipate to incur
general and other operating expenses of $488,000.
b. For the four months through April 30, 2022 we anticipate to incur
additional general and other operating expenses of $378,000.
The execution of our current plan of operations requires us to raise significant
additional capital immediately. If we are successful in raising capital through
the sale of shares or borrowing, we believe that the Company will have
sufficient cash resources to fund its plan of operations for the next twelve
months. If we are unable to do so, our ability to continue as a going concern
will be in jeopardy, likely causing us to curtail and possibly cease operations.
We continually evaluate our plan of operations discussed above to determine the
manner in which we can most effectively utilize our limited cash resources. The
timing of completion of any aspect of our plan of operations is highly dependent
upon the availability of cash to implement that aspect of the plan and other
factors beyond our control. There is no assurance that we will successfully
obtain the required capital or revenues, or, if obtained, that the amounts will
be sufficient to fund our ongoing operations. The inability to secure additional
capital would have a material adverse effect on us, including the possibility
that we would have to sell or forego a portion or all of our assets or cease
operations. If we discontinue our operations, we will not have sufficient funds
to pay any amounts to our stockholders.
Even if we raise additional capital in the near future, if our current business
plan is not successfully executed, our ability to fund our biopharmaceutical
research and development, or our financial product deployment and services
efforts would likely be seriously impaired. The ability of a biopharmaceutical
research and development business and continuing operations is conditioned upon
moving the development of products and services toward commercialization. If in
the future we are not able to demonstrate adequate progress in the development
and commercialization of our product, we will not be able to raise the capital
we need to continue our business operations and business activities, and we will
likely not have sufficient liquidity or cash resources to continue operating.
Because our working capital requirements depend upon numerous factors there can
be no assurance that our current cash resources will be sufficient to fund our
operations. At present, we have no committed external sources of capital, and do
not expect any significant product revenues for the foreseeable future. Thus, we
will require immediate additional financing to fund future operations. There can
be no assurance, however, that we will be able to obtain funds on acceptable
terms, if at all.
Competition
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Our business is highly competitive. We are in direct competition with more
established biopharmaceutical companies, private equity firms, private investors
and management companies. Many management companies offer similar products and
services for business rollups and consolidations. We may be at a substantial
disadvantage to our competitors who have more capital than we do to carry out
acquisition, operations and restructuring efforts. These competitors may have
competitive advantages, such as greater name recognition, larger capital-base,
marketing, research and acquisition resources, access to larger customer bases
and channel partners, a longer operating history and lower labor and development
costs, which may enable them to respond more quickly to new or emerging
opportunities and changes in customer requirements or devote greater resources
to the development, acquisition and promotion.
Increased competition could result in us failing to attract significant capital
or maintaining them. If we are unable to compete successfully against current
and future competitors, our business and financial condition may be harmed.
We hope to maintain our competitive advantage by keeping abreast of market
dynamism that is face by our industry, and by utilizing the experience,
knowledge, and expertise of our management team. Moreover, we believe that we
distinguish ourselves in the ways our model envisaged transformation of
businesses.
Government Regulation
Our activities currently are subject to no particular regulation by governmental
agencies other than that routinely imposed on corporate businesses. However, we
may be subject to the rules governing acquisition and disposition of businesses,
real estates and personal properties in each of the state where we have our
operations. We may also be subject to various state laws designed to protect
buyers and sellers of businesses. We cannot predict the impact of future
regulations on either us or our business model. Once we commence our
biopharmaceutical operations, we would be subject to many regulations that apply
to pharmaceutical and medical industry participants.
Intellectual Property
We currently have no patents, trademarks or other registered intellectual
property. We do not consider the grant of patents, trademarks or other
registered intellectual property essential to the success of our business.
Employees
We do not have a W-2 employee at the present. Frank Ikechukwu Igwealor, our
President, Chief Executive Officer and Chief Financial Officer, is our only
full-time staff As of March 31, 2021, pending when we could formalize an
employment contract for him. In addition to Mr. Igwealor, we have three
part-time unpaid staff who helps with bookkeeping and administrative chores.
Most of our part-time staff, officers, and directors will devote their time as
needed to our business and are expect to devote at least 15 hours per week to
our business operations. We plan on formalizing employment contract for those
staff currently helping us without pay. Furthermore, in the immediate future,
we intend to use independent contractors and consultants to assist in many
aspects of our business on an as needed basis pending financial resources being
available. We may use independent contractors and consultants once we receive
sufficient funding to hire additional employees. Even then, we will principally
rely on independent contractors for substantially all of our technical and
marketing needs.
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The Company has no written employment contract or agreement with any person.
Currently, we are not actively seeking additional employees or engaging any
consultants through a formal written agreement or contract. Services are
provided on an as-needed basis to date. This may change in the event that we are
able to secure financing through equity or loans to the Company. As our company
grows, we expect to hire more full-time employees.
Results of Operations
Three Months ended March 31, 2021, as Compared to Three Months Ended March 31,
2020
Revenues - The Company recorded $665,667 in revenue for the three months ended
March 31, 2021 as compared to $0.00 for the same period of March 31, 2020.
Operating Expenses - Total operating expenses for the three months ended March
31, 2021 was $76,693 as compared to $50,772 in the same period in, 2020, due to
increased operating activities, namely, consultants and financial audit cost,
during the period ended March 31, 2021.
Net Income - Net income for three months ended March 31, 2021 was $429,055 as
compared to Net loss of $50,772 for the three months ended March 31, 2020.
Gross income from operation was $505,641; which include unrealized gain of
$44,467.
OCI - Unrealized Gain or Other Comprehensive Income for three months ended March
31, 2021 was $44,467, as compared to Unrealized gain of $0.00, for the three
months ended March 31, 2020. The other comprehensive income of $44,467 was a
result of mark-to-market/fair value adjustment to Trading Securities for the
period.
Financial Condition, Liquidity and Capital Resources
As of March 31, 2021, the Company had a working capital of $433,267, consisting
of $89,021 in cash, $387,376 in Trading Securities, and $43,130 in short-term
liabilities.
For the three months period ended March 31, 2020, the Company generated $141,277
from operating activities, used cash of $19,935 on investing activities, and
used cash of $33,950 on financing activities, resulting in an increase in total
cash of $87,392 and a cash balance of $89,018 for the period. For the three
months period ended March 31, 2020, the Company used cash of $50,653 in
operating activities, obtained cash of $41,579 from investing activities and
used cash of $6,946 on financing activities, resulting in a decrease in cash of
$2,128 and a cash balance of $8,750 at the end of that period.
As of March 31, 2021, total stockholders' equity increased to $432,196 from
$3,141 as of December 31, 2020.
As of March 31, 2021, the Company had a cash balance of $89,021 (i.e. cash is
used to fund operations). The Company does believe our current cash balances
will be sufficient to allow us to fund our operating plan for the next twelve
months. However, our ability to continue as a going concern is still dependent
on us obtaining adequate capital to fund operation or maintaining consecutive
quarterly profitability. If we are unable to obtain adequate capital, or
maintaining consecutive quarterly profitability, we could be forced to cease
operations or substantially curtail its drug development activities. These
conditions could raise substantial doubt as to our ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts and classification of liabilities should we be unable to continue as a
going concern.
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Our principal sources of liquidity are: (1) Crypto Currency Mining, (2) Real
Estate Sales, and (3) Trading Securities. In the past, we have been generating
cash from loans to us by our major shareholder. In order to be able to achieve
our strategic goals, we need to further expand our business and implement our
business plan. To continue to develop our business plan and generate sales,
significant capital has been and will continue to be required. Management
intends to fund future operations through private or public equity and/or debt
offerings. We continue to engage in preliminary discussions with potential
investors and broker-dealers, but no terms have been agreed upon. There can be
no assurances, however, that additional funding will be available on terms
acceptable to us, or at all. Any equity financing may be dilutive to existing
shareholders. We do not currently have any contractual restrictions on our
ability to incur debt and, accordingly we could incur significant amounts of
indebtedness to finance operations. Any such indebtedness could contain
covenants which would restrict our operations.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("U.S. GAAP") requires
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities in the consolidated financial statements and accompanying notes.
The SEC has defined a company's critical accounting policies as the ones that
are most important to the portrayal of the company's financial condition and
results of operations, and which require the company to make its most difficult
and subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain.
Based on this definition, we have identified the critical accounting policies
and judgments addressed which are described in Note 2 to our condensed
consolidated financial statements included elsewhere in this Quarterly Report.
Although we believe that our estimates, assumptions and judgments are
reasonable, they are based upon information presently available. Actual results
may differ significantly from these estimates under different assumptions,
judgments or conditions.
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