The following discussion should be read in conjunction with the Company’s
audited consolidated financial statements and the related notes for the year
ended
The following discussion contains forward-looking statements that reflect the
Company’s plans, estimates and beliefs. The Company’s actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include but are not
limited to those discussed below and elsewhere in this annual report.
The Company’s consolidated financial statements are stated in
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.
Overview of Current Operations
Results of Operations for the years ended
During the fiscal years ended
generated
certain licensing and marketing agreements subsequent to fiscal year ended
between March and
to the eXPOTM platform, as at
from this agreement have not been received by the Company and therefore while
revenue has been generated, no revenue has been recorded in our financial
statements. We intend to record the revenue attributable to the Company of
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Costs of revenue totaled
As at
and total current assets.
During the fiscal years ended
total operating expenses of
costs of sales of
During fiscal 2020 and 2019 the Company recorded depreciation and impairment of
certain amounts expended on software development during the year, with no
impairment expense in fiscal 2019. Amounts expended on advertising and marketing
reflect a reduction in expenses year over year from
in fiscal 2020. The majority of the expense in 2019 included costs associated
with the introduction its Herbo enterprise software and Herbo app on various
media, including iOS and Android and other marketing initiatives including
promotional expenses for various public venues and sponsorship fees, with no
recurring charges in fiscal 2020. Amounts expended on management and consulting
fees were also reduced from
contracts were not renewed on expiry during the current fiscal year. Amounts
incurred for accounting, audit and legal fees decreased period over period as a
result of a decline in legal costs from
in fiscal 2020. During fiscal 2020 and 2019 research and development fees
incurred were
development were reduced as the Company completed commercialization of its
enterprise software platform “Herbo”. Other operating and general and
administrative expenses were reduced year over year from
rent, travel and other costs.
The Company recorded interest expense of
certain convertible notes and other loan agreements, respectively during fiscal
2020 and 2019, including amortization of debt discount of
2019, with no similar expense in the current fiscal year. During fiscal 2020
the Company recorded bad debt of
which remained uncollected with no comparable expense if fiscal 2019. Interest
income recorded in fiscal 2020 and 2019 totaled
respectively.
The net loss in fiscal 2020 totaled
fiscal 2019.
The Company used net cash in operations of
during the twelve-month periods ended
in both years as net cash used for investing activities and received cash from
financing activities of
certain notes payable, as well as proceeds from related party loans.
Plan of Operation
The Company changed the focus of its business at the close of fiscal 2016 to
operate in the eco friendly technology sector using social media sites and
offering apps to generate advertising revenues and download fees, and to
development certain enterprise software for the cannabis industry. During fiscal
2017 the Company laid the groundwork for income generation from these services
by investing in ongoing development of its applications, websites and visibility
in both the local and global market. The Company has invested heavily in
advertising to allow its applications and ecommerce website visibility on a
global stage. During fiscal 2018 we further added to our business portfolio with
the acquisition of Ga-Du corporation and the entry into a licensing and
marketing agreement that should see the Company generating revenues future
fiscal periods. A series of beta tests on the eXPOTM platform between March and
receipt from AFN. Subsequently the operations were suspended through
2019
now able to service and scale as needed with the client’s needs. While AFN
re-commenced operating the eXPOTM platform during
yet have any additional revenue allocations. Presently AFN is growing
exclusively on a Member referral basis. We expect revenue from this agreement to
resume during fiscal 2021.
Fiscal 2020 brought our first revenues from our Herbo enterprise software and we
expect to see increasing revenues from this suite of services as we focus on
marketing to a larger client base. The Company’s need for ongoing capital by
way of loans, sale of equity and/or convertible notes is expected to continue
during the current fiscal year until we can establish substantive revenues from
operations to cover all operational overhead. We have also had to rely heavily
on loans from related parties in our most recently completed fiscal year as we
work to have our shares returned for quotation to the OTCMarkets QB. There are
no assurances additional capital will be available to the Company on acceptable
terms or that this equity line will be available to us when needed.
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Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or amortization
expenses related to goodwill and other intangible assets, which could materially
adversely affect the Company’s business, results of operations and financial
condition. Any future funding might require the Company to obtain additional
equity or debt financing, which might not be available on terms favorable to the
Company, or at all, and such financing, if available, might be dilutive.
Going Concern
These consolidated financial statements have been prepared on a going concern
basis, which implies that the Company will continue to realize its assets and
discharge its liabilities in the normal course of business. The Company has not
generated significant revenues to date and has never paid any dividends and is
unlikely to pay dividends or generate significant earnings in the immediate or
foreseeable future. As at
deficit of
continuation of the Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability to raise equity or debt
financing, and the attainment of profitable operations from the Company’s future
business. These factors raise substantial doubt regarding the Company’s ability
to continue as a going concern.
The recent COVID-19 pandemic could have an adverse impact on the Company going
forward. COVID-19 has caused significant disruptions to the global financial
markets, which may severely impact the Company’s ability to raise additional
capital and to pursue certain planned business activities. The Company may be
required to cease operations if it is unable to finance its’ operations. The
full impact of the COVID-19 outbreak continues to evolve as of the date of this
report and is highly uncertain and subject to change. Management is actively
monitoring the situation but given the daily evolution of the COVID-19 outbreak,
the Company is not able to estimate the effects of the COVID-19 outbreak on its
operations or financial condition in the next 12 months. There are no assurances
that the Company will be able to meet its obligations, raise funds or continue
to implement its planned business objectives to obtain profitable operations.
The consolidated financial statements reflect all adjustments consisting of
normal recurring adjustments, which, in the opinion of management, are necessary
for a fair presentation of the results for the periods shown. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Liquidity and Capital Resources
As of
total current liabilities of
resources available outside loans from its officers and directors and funds it
has obtained through use of convertible notes and loans from related
parties. While the Company entered into an Equity Purchase Agreement to sell up
to 10,000,000 shares of our common stock (Ref: Note 12(b)) to the financial
statements contained herein) we have been unable to obtain any funding under
this agreement in the most recently completed fiscal year. There can be no
guarantee the Company will receive proceeds from loans, related party advances
or convertible notes sufficient to meet its ongoing operational overheads.
While we generated modest revenue in fiscal 2020, we do not yet have resources
to meet our operational shortfalls. Without realization of additional capital,
it would be unlikely for the Company to continue as a going concern. As noted,
additional working capital may be sought through additional debt or equity
private placements, additional notes payable to banks or related parties
(officers, directors or stockholders), or from other available funding sources
at market rates of interest, or a combination of these. The ability to raise
necessary financing will depend on many factors, including the nature and
prospects of any business to be acquired and the economic and market conditions
prevailing at the time financing is sought. During the most recently completed
fiscal year management has obtained additional funding with success, however
there is no guarantee we will be able to continue to obtain financing if and
when required. The current economic downturn may make it difficult to find new
capital sources for the Company should they be required.
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Future Financings
We anticipate continuing to rely on related party and third-party loans and
equity sales of our common shares and/or shares for services rendered in order
to continue to fund our business operations in the event of ongoing operational
shortfalls. Issuances of additional shares will result in dilution to our
existing shareholders. There is no assurance that we will achieve any of
additional sales of our equity securities or arrange for debt or other financing
to fund our research and development activities.
Revenue
While the Company has entered into an LMMA (re: Note 6 to the financial
statements contained herein) under which we are entitled to fee-based revenue on
a profit-sharing basis from a financial services platform known as eXPOTM, the
Company has determined that when recording its revenue, the monthly income is
not clearly determinable until the fees are actually paid to the Company by
AFN. As at
through
not been received by the Company. Subsequently the operations were suspended
through
relationship and is now able to service and scale as needed with the client’s
needs. While AFN re-commenced operating the eXPOTM platform during
Ga-Du does not yet have any additional revenue allocations. Presently AFN is
growing exclusively on a Member referral basis. We expect revenue from this
agreement to resume during fiscal 2021. Because of this, the Company has
determined to record its revenue in respect to the LMMA upon receipt. In the
future, should the fee structure and reporting process become more easily
determinable, the recognition method may change. Pursuant to AFN’s revenue
reports, the amount payable to
generated by Colorado Business)
record the revenue once we receive the proceeds.
During fiscal 2020 we commenced operation of our Herbo enterprise software
suite. The Herbo enterprise software is a customizable, all-in-one
business software (SaaS) and resource for businesses in the Cannabis and Hemp
industries. Herbo provides the software, custom web development, operational
training and support needed to plan and manage your Marijuana or CBD business.
During fiscal 2020 we recorded gross revenues of
licensing of the software.
Cost of Revenue
Costs of revenue consist of the direct expenses incurred to generate revenue.
Such costs are recorded as incurred. Our cost of revenue will consist consists
primarily of fees associated with the operation of our social media venues and
fulfillment of specific customer advertising campaigns related to our
downloadable apps as well as commissions and operational charges related to our
Herbo enterprise software. During fiscal 2020 we incurred costs of sales of
of revenue earned by our wholly owned subsidiary, proceeds allocated to our
revenue interest are net of associated costs.
General and Administrative Expenses
For the year ended
January 31,
2020 2019 Variances
Depreciation and impairment 4,423 367,391 $ (362,968 )
Legal, accounting and audit fees 425,741 707,155 (281,414 )
Management and consulting fees 785,541 1,287,333 (501,792 )
Research, development, and promotion 157,837 657,948 (500,111 )
Office supplies and other general expenses 98,594 246,353 (147,759 )
Advertising and marketing 49,099 942,021 (892,922 )
Total operating expenses 1,521,235 4,208,201 $ (2,686,966 )
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Contractual Obligations
As a “smaller reporting company”, the Company is not required to provide tabular
disclosure obligations.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company’s financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.
Critical Accounting Policies
The discussion and analysis of the Company’s financial condition and results of
operations are based upon the Company’s consolidated audited financial
statements, which have been prepared in accordance with the accounting
principles generally accepted in
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses. These
estimates and assumptions are affected by management’s application of accounting
policies. The Company believes that understanding the basis and nature of the
estimates and assumptions involved with the following aspects of the Company’s
financial statements is critical to an understanding of its consolidated
financial statements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions
related to long-lived assets and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the
Company’s estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be affected.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and were
the fiscal year ended
through programs placed on a wide network of mediums acquired from advertising
consolidators including Outbrain, MGID, Rev Content, Yahoo,
others for the full scope of the Company’s brands including the Herbo app and
enterprise software for all platforms, GooglePlay, iOS, Android, as well as the
corporate e-commence site and all the other underlying supporting social media
platforms such as YouTube, Twitter, Instagram, and Facebook. Further the Company
incurs other advertising expense in respect to its attendance at various venues
to promote our business objectives.
Revenue Recognition
Effective
with Customers. Under ASC 606, the Company recognizes revenue from licensing
agreements and contracts by applying the following steps: (1) identify the
contract with a customer; (2) identify the performance obligations in the
contract; (3) determine the transaction price; (4) allocate the transaction
price to each performance obligation in the contract; and (5) recognize revenue
when each performance obligation is satisfied. For the comparative periods,
revenue has not been adjusted and continues to be reported under ASC 605 –
Revenue Recognition. Under ASC 605, revenue is recognized when the following
criteria are met: (1) persuasive evidence of an arrangement exists; (2) the
performance of service has been rendered to a customer or delivery has occurred;
(3) the amount of fee to be paid by a customer is fixed and determinable; and
(4) the collectability of the fee is reasonably assured.
2020
generated under enterprise software licenses will be recorded in accordance with
the terms of the individual Customer contracts. We expect license fees will be
recorded on a monthly basis over the term of the contract, activation fees will
be earned upon completion of set up and installation of the enterprise software,
and customization and/or professional consulting services will be earned as
rendered.
While the Company has entered into an LMMA (re: Note 6) under which we are
entitled to fee-based revenue on a profit-sharing basis from a financial
services platform known as eXPOTM, the Company has determined that when
recording its revenue, the monthly income is not clearly determinable until the
fees are actually paid to the Company by AFN. As at
payable by AFN for the period May through
commission reports received from AFN have not been received by the Company.
Subsequently the operations were suspended through
time AFN solidified its’ primary banking relationship and is now able to service
and scale as needed with the client’s needs. While AFN re-commenced operating
the eXPOTM platform during
revenue allocations. Presently AFN is growing exclusively on a Member referral
basis. We expect revenue from this agreement to resume during fiscal 2021. The
Company has determined to record its revenue in respect to the LMMA upon receipt
until such time as the fee structure and reporting process become more easily
determinable. Pursuant to AFN’s revenue reports, the amount payable to
Corporation
we receive the proceeds.
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Cost of Revenue
Costs of revenue consist of the direct expenses incurred to generate revenue.
Such costs are recorded as incurred. Our cost of revenue will consist consists
primarily of fees associated with the operation of our social media venues and
fulfillment of specific customer advertising campaigns related to our
downloadable apps. In the case of revenue earned by our wholly owned subsidiary,
proceeds allocated to our revenue interest are net of associated costs.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC
718, Share-Based Payments, using the fair value method. All transactions in
which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. Equity instruments issued to employees
and the cost of the services received as consideration are measured and
recognized based on the fair value of the equity instruments issued.
Convertible Debt and Beneficial Conversion Features
The Company evaluates embedded conversion features within convertible debt under
ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a
derivative at fair value with changes in fair value recorded in earnings. If the
conversion feature does not require derivative treatment under ASC 815, the
instrument is evaluated under ASC 470-20 “Debt with Conversion and Other
Options” for consideration of any beneficial conversion features.
Stock Settled Debt
In certain instances, the Company will issue convertible notes which contain a
provision in which the price of the conversion feature is priced at a fixed
discount to the trading price of the Company’s common shares as traded in the
over-the-counter market. In these instances, the Company records a liability,
in addition to the principal amount of the convertible note, as stock-settled
debt for the fixed value transferred to the convertible note holder from the
fixed discount conversion feature. As of
2019
notes is included in the Convertible note, net account under balance sheet. (see
Note 10).
Recently issued accounting pronouncements
The Company has reviewed other recently issued accounting pronouncements and
plans to adopt those that are applicable to it. The Company does not expect the
adoption of any other pronouncements to have an impact on its results of
operations or financial position.
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