This report contains certain forward-looking statements and information relating
to us that are based on the beliefs and assumptions made by our management as
well as information currently available to the management. When used in this
document, the words "anticipate," "believe," "estimate," "expect," and similar
expressions are intended to identify forward-looking statements. Such statements
reflect our current views with respect to future events and are subject to
certain risks, uncertainties, and assumptions. If one or more of these risks or
uncertainties materialize, or if underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated, or expected.
You should read the following discussion of our financial condition and results
of operations together with the audited consolidated financial statements and
notes to the financial statements included elsewhere in this Annual Report. This
discussion contains forward-looking statements that involve risks and
uncertainties. The forward-looking statements are not historical facts, but
rather are based on current expectations, estimates, assumptions and projections
about our industry, business and future financial results. Our actual results
could differ materially from the results contemplated by these forward-looking
statements due to a number of factors, including those discussed under "Item 1A.
Risk Factors" and other sections in this Annual Report.
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 Pacific
Ventures' 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 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.
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 audited financial statements for our fiscal years ended December 31, 2019
and 2018 include a summary of our significant accounting policies and should be
read in conjunction with the discussion below. In the opinion of management, all
material adjustments necessary to present fairly the results of operations for
such periods have been included in these audited financial statements. All such
adjustments are of a normal recurring nature.
Overview
Corporate History
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Kid Castle Educational Corporation ("KDCE") 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.
The details of KDCE corporate history are as follows. KDCE was incorporated in
Florida on July 19, 1985 as Omni Doors, Inc. From inception through June 30,
1998, our primary business was the assembly and distribution of industrial doors
for sale to building contractors in the South Florida market. Until April 6,
1998, we were a wholly-owned subsidiary of Millennia, Inc., a publicly-owned
Delaware corporation. On April 6, 1998, the Board of Directors of Millennia
declared the payment of a stock dividend to Millennia's stockholders. Millennia
stockholders received one share of our common stock for each four shares of
Millennia common stock. This distribution of approximately 570,000 shares of our
company represented approximately 5% of the total issued and outstanding shares
of our common stock.
Pursuant to a contract dated July 14, 1998, Millennia sold 10,260,000 shares
(representing 90% of the total outstanding shares) of our common stock to an
unrelated firm, China Economic Growth Investment Corp., LLC, which then
distributed the shares to its three members, Yong Chen, Zuxiang Huang, and Zheng
Yao.
On April 6, 2001, pursuant to a stock purchase agreement dated April 2, 2001,
Halter Capital Corporation, a privately-owned Texas corporation, purchased
6,822,900 shares of our common stock from Zheng Yao, representing approximately
60% of our issued and outstanding shares of common stock. Simultaneously with
this change-in-control transaction, Sophia Yao, our then sole officer and
director, resigned. Kevin B. Halter, Sr., as President and director, and Kevin
B. Halter, Jr., as Secretary-Treasurer and director, were elected to replace
her.
On June 19, 2002, pursuant to a stock purchase agreement dated June 6, 2002,
Powerlink International Finance, Inc., a British Virgin Islands corporation,
purchased 2,830,926 shares of our common stock from Halter Capital Corporation,
representing approximately 57% of our issued and outstanding shares of common
stock. Simultaneously with the purchase, the officers and directors of the
Company resigned. Chin-Chung Hsu, President, Treasurer, and Director; Wen-Hao
Hsu, Secretary and Director; and Chien-Hwa Liu, Director, were elected to
replace them.
On June 25, 2002, we changed our name to King Ball International Technology
Corporation and, on August 22, 2002, we changed our name again to Kid Castle
Educational Corporation.
On March 29, 2010, the Company which has been a public reporting company
registered with the Securities Exchange Commissioner ("SEC"), filed Form 15D,
Suspension of Duty to Report. As a result of filing Form 15D, the Company was
no longer required to file any SEC forms since March 29, 2010. Similarly, on
March 22, 2011, the company voluntarily dissolved its Florida registration with
intention to simultaneously incorporate in Delaware and convert into a Delaware
corporation. The Company has been dormant since March 22, 2011and non-operating
since March 29, 2010.
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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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 merger 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 the specific needs financial products
in form of asset-backed loans, business property mortgages and other financial
products to qualified individuals/businesses in the legal-CBD businesses.
The Merged Company ("CBDZ and KDCE" or "KDCE" or "CBDZ") will prioritize
establishment of CBD process control, protocols, and formulations
standardization. The Merged 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. CBDZ's goal is to bring standardization to the CBD industry, the same
way that John D Rockefeller's Standard Oil brought standardization to crude
refining in the United States in the nineteenth century. 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:
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, Henry and Leke, 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 six months through February 28, 2021, we anticipate to incur
general and other operating expenses of $388,000.
b. For the six months through August 31, 2021 we anticipate to incur
additional general and other operating expenses of $378,000.
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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.
Critical Accounting Policies, Estimates and New Accounting Pronouncements
Management's discussion and analysis of its financial condition and plan of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires that we make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. At each balance sheet date, management evaluates its estimates. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions. The
estimates and critical accounting policies that are most important in fully
understanding and evaluating our financial condition and results of operations
include those stated in our financial statements and those listed below:
Going Concern
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The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, we had limited/insignificant cash flows from operations for the
twelve months ended December 31, 2019 and 2018. These conditions raise
substantial doubt as to our ability to continue as a going concern. The
financial statements do not include any adjustments that might be necessary if
we are unable to continue as a going concern. Management intends to finance
these deficits by making additional shareholder notes and seeking additional
outside financing through either debt or sales of its Common Stock.
Recently Adopted Accounting Standards
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU
requires lessees to recognize a lease liability, on a discounted basis, and a
right-of-use asset for substantially all leases, as well as additional
disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU
2018-11, Leases (Topic 842), which provides an optional transition method of
applying the new lease standard.
In considering its qualitative disclosure obligations under ASC 842-20-50-3, the
Company determined that it has no leases subject to treatment under ASC
842-20-50-3.
The adoption of this guidance resulted in no significant impact to our results
of operations or cash flows.
Revenue Recognition
For annual reporting periods after December 15, 2017, the Financial Accounting
Standards Board ("FASB") made effective ASU 2014-09 "Revenue from Contracts with
Customers" to supersede previous revenue recognition guidance under current U.S.
GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue
Recognition. The guidance presents a single five-step model for comprehensive
revenue recognition that requires an entity to recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for
those goods or services. Two options are available for implementation of the
standard which is either the retrospective approach or cumulative effect
adjustment approach. The guidance became effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that
reporting period, with early adoption permitted. As we have no operations at
this time that generate revenue, we determined that upon adoption of ASC 606
there were no adjustments converting from ASC 605 to ASC 606.
Income Taxes
We recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns in accordance with applicable accounting guidance for accounting for
income taxes, using currently enacted tax rates in effect for the year in which
the differences are expected to reverse. We record a valuation allowance when
necessary to reduce deferred tax assets to the amount expected to be realized.
For the year ended December 31, 2019 and December 31, 2018, due to cumulative
losses, we recorded a valuation allowance against our deferred tax asset that
reduced our income tax benefit for the period to zero. As of December 31, 2019
and December 31, 2018, we had no liabilities related to federal or state income
taxes and the carrying value of our deferred tax asset was zero.
Loss Contingencies
Consistent with ASC 450-20-50-1C, if the Company determines that there is a
reasonable possibility that a material loss may have been incurred, or is
reasonably estimable, regardless of whether the Company accrued for such a loss
(or any portion of that loss), the Company will confer with its legal counsel,
consistent with ASC 450. If the material loss is determinable or reasonably
estimable, the Company will record it in its accounts and as a liability on the
balance sheet. If the Company determines that such an estimate cannot be made,
the Company's policy is to disclose a demonstration of its attempt to estimate
the loss or range of losses before concluding that an estimate cannot be made,
and to disclose it in the notes to the financial statements under Contingent
Liabilities.
--------------------------------------------------------------------------------
Net Income (Loss) Per Common Share
We report net income (loss) per common share in accordance with ASC 260,
"Earnings per Share." This statement requires dual presentation of basic and
diluted earnings with a reconciliation of the numerator and denominator of the
earnings per share computations. Basic net income (loss) per share is computed
by dividing net income attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the period and
excludes the effects of any potentially dilutive securities. Diluted net income
(loss) per share gives effect to any dilutive potential common stock outstanding
during the period. The computation does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive effect on
earnings.
Related Party Transactions
We follow ASC subtopic 850-10, "Related Party Transactions," for the
identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related parties include: a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g) other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
Material related party transactions are required to be disclosed in the
financial statements, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure
of transactions that are eliminated in the preparation of or combined financial
statements is not required in those statements. The disclosures shall include:
a) the nature of the relationship(s) involved; b) a description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which statements of operation are
presented, and such other information deemed necessary to an understanding of
the effects of the transactions on the financial statements; c) the dollar
amounts of transactions for each of the periods for which statements of
operations are presented and the effects of any change in the method of
establishing the terms from that used in the preceding period; and d) amounts
due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Results of Operations
Comparison of Fiscal Years 2019 and 2018
Our financial statements are prepared using accounting principles generally
accepted in the United States of America applicable to a going concern, which
contemplates the realization of assets and the liquidation of liabilities in the
normal course of business.
Revenues - The Company recorded $6,189 in revenue for the fiscal year ended
December 2019 as compared to $0.00 revenue for the fiscal year ended December
2018.
Operating Expenses - Our general and administrative expenses were $150,133 for
the twelve months ended December 31, 2019, versus $5,710 for the same period in
2018.
Net Loss - The Company recorded net loss of $149,682 for the fiscal year ended
December 2019 as compared to $5,710 for the fiscal year ended December 2018.
--------------------------------------------------------------------------------
Accumulated Deficit - As at December 31, 2019, we have accumulated deficit of
$7,801,050 compared to accumulated deficit of $7,351,368 as at December 31,
2018.
Liquidity and Capital Resources
Cash and Cash Equivalent - As at December 31, 2019, we had $10,879 cash on hand
compared to $1,393 as at December 31, 2018.
Other Current Assets - Receivables - as at December 31, 2019, we had $8,620 in
account receivable compared to $0 as at December 31, 2018.
Other Assets - As at December 31, 2019, we had $41,579 of investment in a
private company compared to $0 as at December 31, 2018.
Related parties liabilities - As at December 31, 2019, we had $41,559 balance
from advances from related compared to $4,101 as at December 31, 2018.
We anticipate that our cash position is not sufficient to fund current
operations. We have limited lending relationships with commercial banks and are
dependent upon the completion of one or more financings or equity raises to fund
our continuing operations. We anticipate that we will seek additional capital
through debt or equity financings. While we are aggressively pursuing
financing, there can be no assurance that we will be successful in our capital
raising efforts. Any additional equity financing may result in substantial
dilution to our stockholders.
Since 2018, all of our operations have been financed through advances from a
company controlled by our president and CEO. As of December 31, 2019, the
company controlled by our president and CEO has loaned $41,559 to us, with no
formal commitments or arrangements to advance or loan any additional funds to us
in the future. We have not yet achieved significant profitability. We expect
that our general and administrative expenses will continue to increase and, as a
result, we will need to generate significant revenues to achieve significant
profitability. We may never achieve significant profitability. Future financing
of our operation depends largely on our controlling shareholder, Mr. Igwealor,
advancing most or all of our operating budget.
Our financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of these
uncertainties. Our ability to continue as a going concern is dependent upon our
ability to raise additional debt or equity funding to meet our ongoing operating
expenses and ultimately in merging with another entity with experienced
management and profitable operations. No assurances can be given that we will be
successful in achieving these objectives.
We have not established revenue generating operations and will be dependent upon
obtaining financing to pursue any future extensive acquisitions and activities.
The revenues, if any, generated from our operations or acquisitions may not be
sufficient to fund our operations or planned growth. We will require additional
capital to continue to operate our business, and to further expand our business.
Sources of additional capital through various financing transactions or
arrangements with third parties may include equity or debt financing, bank loans
or revolving credit facilities. We may not be successful in locating suitable
financing transactions in the time period required or at all, and we may not
obtain the capital we require by other means.
We will now be obligated to file annual, quarterly and current reports with the
SEC pursuant to the Exchange Act. In addition, the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley") and the rules subsequently implemented by the SEC and the
Public Company Accounting Oversight Board have imposed various requirements on
public companies, including requiring changes in corporate governance practices.
We expect these rules and regulations to increase our legal and financial
compliance costs and to make some activities of ours more time- consuming and
costly. In order to meet the needs to comply with the requirements of the
Securities Exchange Act, we will need investment of capital.
Off-Balance Sheet Arrangements
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As of December 31, 2019, we did not engage in any off-balance sheet arrangements
as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC under the
Securities Exchange Act of 1934.
Contractual Obligations
Not applicable.
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