The following information should be read in conjunction with our financial
statements and related notes thereto included in Part I, Item 1, above.
Forward Looking Statements
Certain matters discussed herein are forward-looking statements. Such
forward-looking statements contained in this Form 10-Q involve risks and
uncertainties, including statements as to:
·our future strategic plans
·our future operating results;
·our business prospects;
·our contractual arrangements and relationships with third parties;
·the dependence of our future success on the general economy;
·our possible future financings; and
·the adequacy of our cash resources and working capital.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as we "believe," "anticipate,"
"expect," "estimate" or words of similar meaning. Similarly, statements that
describe our future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks and
uncertainties which are described in close proximity to such statements and
which could cause actual results to differ materially from those anticipated.
Shareholders, potential investors and other readers are urged to consider these
factors in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The forward-looking
statements included herein are only made as of the date of this Form 10-Q, and
we undertake no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
Executive Overview
CannAssist International Corporation ("CannAssist" or the "Company") was
incorporated on May 17, 2017 under the laws of the State of Delaware.
CannAssist produces and sells its cannabidiol ("CBD") product, "Cibidinol,"
which is formulated based on a process developed by its founder Mark Palumbo.
CBD is a non-psychoactive compound found in hemp. CannAssist's initial research
and development work, aimed at enhancing the bioavailability of desired
molecular structures, resulted in the creation of a line of CBD products, most
notably its CBD product, Cibidinol. Cibidinol will be available in a line of
consumable and topical products that the Company believes will make enhanced CBD
products more available and accessible to consumers.
The Company's independent auditors have issued a report raising substantial
doubt about the Company's ability to continue as a going concern. At present,
the Company has no operations and the continuation of the Company as a going
concern is dependent upon financial support from its stockholders, its ability
to obtain necessary equity financing to continue operations and/or to
successfully locate and negotiate with a business entity for the combination of
that target company with it.
Results of Operation for the Three Months Ended September 30, 2020 and 2019
Revenues
For the three months ended September 30, 2020, the Company had revenues of
$409,138, cost of revenue of $273,325 and a gross margin of $135,813. In
comparison, for the three months ended September 30, 2019, the Company had
revenue of $77,264, cost of revenue of $ 15,161 and a gross margin of $62,103.
The increase in revenue, cost of revenue and gross margin is from a change in
the demand for our products derived from expanded commercialization of our
products.
General and administrative expenses
General and administrative expenses ("G&A") were $56,112 for the three months
ended September 30, 2020 compared to $70,163 for the three months ended
September 30, 2019. The decrease in general and administrative expenses are
related to decreases in expenses related to product testing, supplies and
materials, insurance and travel.
13
General and administrative expenses to a related party, were $0 for the three
months ended September 30, 2020 compared to $3,350 for the three months ended
September 30, 2019. General and administrative expenses to a related party,
which were incurred for product design services provided by the son of the CEO,
decreased because they were not recurring expenses.
Commissions
Commission expense was $8,527 for the three months ended September 30, 2020
compared to $11,395 for the three months ended September 30, 2019. Commission
expense was paid to EME, LLC, a related party, and has decreased in the current
period in conjunction with the decrease in sales attributable to customers
managed by EME, LLC.
Professional fees
Professional fees were $29,600 for the three months ended September 30, 2020
compared to $56,120 for the three months ended September 30, 2019. Professional
fees consist of audit, accounting, consulting and legal fees. The fees have
decreased with the decrease in services required to comply with SEC filing
requirements during the relevant periods.
Other expense
For the three months ended September 30, 2020 we incurred $2,653 of credit card
interest expense compared to $ 1,903 for three months ended September 30, 2019.
Net Income
For the three months ended September 30, 2020, we realized net income of $38,921
as compared to net loss of $ 80,828 for three months ended September 30, 2019.
The increase from a net loss in the prior period to net income in the current
period is the result of higher revenue combined with decreased expenses.
Results of Operation for the Nine Months Ended September 30, 2020 and 2019
Revenues
For the nine months ended September 30, 2020, the Company had revenues of
$679,050, cost of revenue of $416,923 and gross margin of $262,127. In
comparison, for the nine months ended September 30, 2019, the Company had
revenue of $515,942, cost of revenue of $343,729 and gross margin of $172,213.
The increase in revenue, cost of revenue and gross margin is from a change in
the demand for our products derived from expanded commercialization of our
products.
General and administrative expenses
General and administrative expenses were $210,535 for the nine months ended
September 30, 2020 compared to $194,771 for the nine months ended September 30,
2019. In general G&A expenses have increased with the increase in business
activity.
General and administrative expenses to a related party, were $0 for the nine
months ended September 30, 2020 compared to $157,450 for the nine months ended
September 30, 2019. General and administrative expenses to a related party,
which were a result of the issuance of 5,000,000 shares of common stock for a
licensing agreement for total non-cash expense of $150,000 and for product
design services provided by the son of the CEO, have decreased because they were
not recurring expenses.
Commissions
Commission expense was $12,900 for the nine months ended September 30, 2020
compared to $23,962 for the nine months ended September 30, 2019. Commission
expense was paid to EME, LLC, a related party, and has decreased in the current
period in conjunction with the decrease in sales attributable to customers
managed by EME, LLC.
Professional fees
Professional fees were $86,450 for the nine months ended September 30, 2020
compared to $161,152 for the nine months ended September 30, 2019. Professional
fees consist of audit, accounting, consulting and legal fees. The fees have
decreased with the decrease in services required to comply with SEC filing
requirements during the relevant periods.
Other expense
For the nine months ended September 30, 2020 we incurred $7,010 of credit card
interest expense compared to $2,419 for nine months ended September 30, 2019.
14
Net Loss
For the nine months ended September 30, 2020, we realized a net loss of
$2,820,018 as compared to net loss of $367,541 for the nine months ended
September 30, 2019. The increase in net loss in the current period is primarily
due to the expense incurred in connection with the issuance of preferred stock.
Liquidity and Capital Resources
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has generated revenues
of $679,050 for the nine months ended September 30, 2020 and had a net loss of
$2,820,018 for the nine months ended September 30, 2020. The Company has an
accumulated deficit of $3,242,530 as of September 30, 2020. The Company requires
capital for its contemplated operational and marketing activities. The
obtainment of additional financing, through an initial capital raise, the
successful development of the Company's contemplated plan of operations, and its
transition to the attainment of continued profitable operations are necessary
for the Company to continue operations. There is no guarantee that the Company
will be able to obtain the necessary financing or profitable operations. These
conditions and the ability to successfully resolve these factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements of the Company do not include any adjustments that may
result from the outcome of these aforementioned uncertainties.
The Company used $75,571 of cash from operations for the nine months ended
September 30, 2020. Net cash provided by financing activities for the nine
months ended September 30, 2020 was $52,971.
As of September 30, 2020, the Company had $57,421 in cash.
Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Note 2 to the Financial Statements describes the
significant accounting policies and methods used in the preparation of the
Financial Statements. Estimates are used for, but not limited to, contingencies
and taxes. Actual results could differ materially from those estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of
business. We consider the likelihood of loss or impairment of an asset or the
incurrence of a liability, as well as our ability to reasonably estimate the
amount of loss in determining loss contingencies. An estimated loss contingency
is accrued when management concludes that it is probable that an asset has been
impaired, or a liability has been incurred and the amount of the loss can be
reasonably estimated. We regularly evaluate current information available to us
to determine whether such accruals should be adjusted.
Off-Balance Sheet Arrangements
We have not entered into any 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 and would be considered
material to investors.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in
effect. These pronouncements did not have any material impact on the financial
statements unless otherwise disclosed, and the Company does not believe that
there are any other new accounting pronouncements that have been issued that
might have a material impact on its financial position or results of operations.
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