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.
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.
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Basis of Presentation
The unaudited financial statements for the period ended June 30, 2020 and
audited financial statements for the fiscal year ended December 31, 2019 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 consolidated financial statements. All
such adjustments are of a normal recurring nature.
Overview
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, 2011 and
non-operating since March 29, 2010.
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The Company used to be a Florida corporation until March 22, 2011 when it
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.
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.
Because we took control of the Company on October 21, 2019, we have limited
knowledge of events that took place prior to October 21, 2019, which was the
date that we formally took control of the management of the Company, we relied
on information supplied to us by the previous management of the Company and we
also relied on their filings with the SEC as shown on the SEC website.
Thus, we knew that the Company filed with the SEC to the suspension of your duty
to file SEC reports after March 29, 2010. We are not aware of the circumstances
that led to the decision of the previous management of the Company to seek to
stop reporting. We just knew that the steps taken by the Company was not
unusual since several other small reporting companies seems to also take that
route when reporting obligation has gotten burdensome to them that the cost /
benefit analysis was no longer favorable to those companies.
Our knowledge and understanding of the events that were contained in the
Company's SCHEDULE 13E-3 filing on June 18, 2009 was totally based on the
filings themselves which is listed on the SEC website. We do not have any
additional information on that matter or any other occurrence in the Company
prior to the filing of the FORM 15-15D.
We only obtained information from the Company previous managers concerning the
Company's failure to re-incorporate in Delaware after termination of their
Florida registration. We were satisfied with their explanation that it was
oversight and not deliberate. We were also satisfied that the Company has been
incorporated in Delaware by January of 2019.
Based on the foregoing, investing in the Company may carry additional risk of
the unknown or whatever might has occurred in the Company prior to October 21,
2019, which was not reported alongside the Company's filings shown on the SEC
website, which is our primary source of information about the Company's
activities prior to October 21, 2019.
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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.
We used the acquisition of method of accounting for acquisition of subsidiaries
by the Group method to account for the purchase of Cannabinoid Biosciences, Inc.
The cost of the acquisition was measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange.
The acquisition of control by Cannabinoid Biosciences, Inc. has transformed our
business model going forward. The Company is now focused on 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.
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.
Our 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.
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.
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.
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.
Furthermore, during the last quarter of 2019, we entered into nonbinding Letter
of Intent (LOIs) with 5 CBD operations to acquire their businesses. Each of
these businesses is producing revenue and each operation is profitable. These
five revenue producing and profitable businesses would cost the Company about
$33.4 million to consummate the acquisitions. The five businesses comprise of:
(1) a CBD Affiliate Marketplace that would cost $300,000; (2) a Hemp Farm with
Real Estate, farms and extraction facilities Colorado and Kentucky which sells
for $30,000,000; (3) a Michigan hemp farm with Real Estate and CBD plant which
would cost $1,600,000; 4) a North Carolina Hemp grower and CDB technology with
real estate selling for $1,300,000; and (5) another CBD Affiliate Marketplace
going for $30,000. With the LOIs in hand, we approached some professional
finance guys to help us raise the money for the acquisition. There is no
guarantee that we could raise the capital needed for this acquisition or that
the sellers would wait for us to raise the capital.
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Subsequently, as we were pulling together financing for the acquisition,
COVID-19 exploded and crippled most business transactions across the world. As a
result of the disruptions occasioned by COVID-19, the operations of our major
financier coming from New York and London came under the lockdown. We have
informed the sellers about this situation and advised that they move on to other
potential acquirers as we are completely uncertain about the where things would
be after the end of COVID-19 pandemic. There is no guarantee that we could be
able to acquire one or more of these businesses, or that these businesses would
still be available to us to acquire in the future, or at the initially
contemplated price.
Our Business Objectives and Growth Strategies
Our principal business objective is to maximize stockholder returns through a
combination of (1) acquisition and rollup of profitable CBD operations across
the United States of America (2) sustainable long-term growth in cash flows from
increased profits, which we hope to pass on to stockholders in the form of
distributions, and (3) potential long-term appreciation in the value of our
businesses through process optimization and financial engineering.
Mission Statement
Our vision is to standardize the pharmaceuticals and non-pharmaceutical CBD
products formulations and applications across the CBD market while developing
robust capitalization to finance a more professional ecosystem within the CBD,
Hemp and CBD/Hemp industry, creating a better work environment for our clients,
as well as creating improved patient experiences, and a clear choice for
investors in the sector.
The CBD market in the US is young and very fragmented, lack established process
control and protocols, and is yet to establish formulations standardization.
Our 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.
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.
There is no guarantee that we could successfully standardize the pharmaceuticals
and non-pharmaceutical CBD products formulations and applications. Our mission
as stated above is only a guiding principle as we start our acquisition. We
have never standardized any pharmaceuticals or non-pharmaceutical CBD products
formulations and applications before. Although we have a theoretical picture of
what our mission called for, none of our staff have ever done it before. As at
the date of this filing, the Company does not currently maintain an ownership
interest in any CBD production company, marijuana dispensaries or production
facilities.
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.
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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.
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.
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Competition
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 June 30, 2020, 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
Results of Operations for the Three Months ended June 30, 2020, as Compared to
same Period of June 30, 2019
Revenues - The Company recorded $0 in revenue for the Three Months ended June
30, 2020 as compared to $0.00 for the same period of June 30, 2019.
Operating Expenses - Total operating expenses for the Three Months ended June
30, 2020 was $23,131 as compared to $23,370 for the Three Months ended June 30,
2019.
Net Loss - Net loss for Three Months ended June 30, 2020 was $23,131, as
compared to net loss of $23,370 for the Three Months ended June 30, 2019.
Accumulated Deficit - As at June 30, 2020, we have accumulated deficit of
$7,874,954 compared to accumulated deficit of $7,801,050 as at December 31,
2019.
Results of Operations for the Six Months ended June 30, 2020, as Compared to
same Period of June 30, 2019
Revenues - The Company recorded $0 in revenue for the Six Months ended June 30,
2020 as compared to $0.00 for the same period of June 30, 2019.
Operating Expenses - Total operating expenses for the Six Months ended June 30,
2020 was $73,904 as compared to $54,282 for the Six Months ended June 30, 2019,
due to increased operating activities during the period ended June 30, 2020.
Net Loss - Net loss for Six Months ended June 30, 2020 was $73,904, as compared
to net loss of $54,282 for the Six Months ended June 30, 2019.
Accumulated Deficit - As at June 30, 2020, we have accumulated deficit of
$7,874,954 compared to accumulated deficit of $7,801,050 as at December 31,
2019.
Liquidity and Capital Resources
Cash and Cash Equivalent- As at June 30, 2020, we had $8,265 cash on hand
compared to $10,879 as at December 31, 2019.
Other Current Assets- Receivables - as at June 30, 2020, we had $23,434 in
account receivable compared to $8,620 as at December 31, 2019.
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Other Assets - As at June 30, 2020, we had $0.00 of investment in a private
company compared to $41,579 as at December 31, 2019.
Related parties liabilities- As at December 31, 2019, we had $57,523 balance
from advances from related compared to $41,559 as at December 31, 2019.
For the Six Months period ended June 30, 2020, the Company used $85,850 on
operating activities, generated cash of $41,579 from investing activities, and
generated $41,658 from financing activities, resulting in a net cash decrease of
$2,612 and a cash balance of $8,266 for the period. For the Six Months period
ended June 30, 2019, the Company used cash of $55,565 in operating activities,
used cash of $11,187 for investing activities and obtained cash of $85,487 from
financing activities, resulting in an increase in cash of $20,737 and a cash
balance of $22,130 at the end of that period.
Total Notes Payable to related parties increased by $57,523.
As of June 30, 2020, the Company had a cash balance of $8,266 (i.e. cash is used
to fund operations). The Company does not believe our current cash balances will
be sufficient to allow us to fund our operating plan for the next twelve months.
Our ability to continue as a going concern is dependent on us obtaining adequate
capital to fund operating losses until we become profitable. If we are unable to
obtain adequate capital, we could be forced to cease operations or substantially
curtail its drug development activities. These conditions 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.
Our principal sources of liquidity in the past has been cash generated 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.
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.
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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
As of June 30, 2020, 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. 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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KID CASTLE EDUCATIONAL CORPORATION 
