Market Information
Our Company commenced quotation on the OTC Markets on September 14, 2010. From September 14, 2010, through May 3, 2013, our common stock was quoted on the OTC Markets under the name "Pristine Solutions, Inc." From
May 3, 2013, until February 18, 2014, our Company was quoted on the OTC Markets under the name "Eaton Scientific Systems, Inc." From February 18, 2014, to February 2017, our common stock was quoted on the OTC Pink Markets under the name "Eco
Science Solutions, Inc. and under the symbol "ESSI"; from February 2017 to May 2017 our Company was quoted on the OTCMarkets: QB under the symbol "ESSI". During May 2017 the trading of ESSI shares on the public exchanges was suspended, and although
the suspension has been lifted, a Form 15c2-11 with current information must be filed with the Financial Industry Regulatory Authority (FINRA) prior to the caveat emptor status being lifted. At that time we will need to re-apply to be quoted on the
OTCMarkets: QB.
The following table sets forth, for the quarters indicated, the high and low closing bid prices per share of our common stock on Yahoo Finance, reported by the Financial Industry Regulatory Authority Composite Feed
or other qualified interdealer quotation medium. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
The Company's common stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in "penny stocks." Those disclosure rules applicable to "penny stocks"
require a broker dealer, prior to a transaction in a "penny stock" not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Securities and Exchange Commission. That disclosure document advises an
investor that investment in "penny stocks" can be very risky and that the investor's salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution
in connection with an investment in "penny stocks," to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must
also provide the customer with certain other information and must make a special written determination that the "penny stock" is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Further, the
rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for its common stock. Many brokers may be unwilling to engage in transactions in its common stock
because of the added disclosure requirements, thereby making it more difficult for stockholders to dispose of their shares.
On June 24, 2020, the last reported sales price of our common stock as reported by Yahoo Finance was $0.03
Record Holders
The Company's common shares are issued in registered form. Empire Stock Transfer Inc., 1859 Whitney Mesa Drive, Henderson, NV 89014, (702) 818-5898, is the registrar and
transfer agent for the Company's common shares.
As of June 15, 2020, we had 72 shareholders of record for our common stock and a total of 48,557,572 shares issued and 47,557,572 outstanding.
Re-Purchase of Equity Securities
On February 26, 2016, the Company purchased back and cancelled 1,000,000 shares of common stock for $7,500 as part of a Share Buyback program. The shares are reflected as Treasury shares on the Company's balance
sheet.
Under the stock repurchase program, and depending on market conditions, shares may be repurchased from time to time at prevailing market prices through open-market or negotiated transactions in accordance with all
applicable securities laws and regulations. To remain in compliance with item 703 of Regulation S-K the Company, whether through an open market or private transaction, will at a minimum disclose on a quarterly basis all repurchases of equity
securities.
Dividends
We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements,
financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in
our business and have no present intention to pay cash dividends on our common stock.
Equity Compensation Plan Information
On September 1, 2012, the board of directors of the Company adopted the 2012 Employee Stock Option Plan (the "2012 Plan"). Under the 2012 Plan, 25,000,000 restricted shares
of common stock have been reserved for issuance upon exercise of options granted from time to time under the stock option plan. The 2012 Plan is intended to assist the Company in securing and retaining key employees, directors and consultants by
allowing them to participate in the Company's ownership and growth through the grant of incentive and non-qualified options. Under the 2012 Plan, the Company may grant incentive stock options only to key employees and employee directors, or the
Company may grant non-qualified options to employees, officers, directors and consultants. Subject to the provisions of the 2012 Plan, the board of directors will determine who shall receive options, and the number of shares of common stock that
may be purchased under the options.
As of January 31, 2016, the Company had granted a total of 6,500,000 options to purchase common shares under this plan. In connection with the options granted, a total of $2,665,000 has been recorded as deferred
compensation and was expensed during the fiscal year ended January 31, 2016 and prior.
During the fiscal year ended January 31, 2017, in accordance with the terms of the underlying option agreements, upon the termination of services to the Company by the consultant and the officer holding the granted
options, all outstanding stock options expired unexercised 90 days thereafter. As at January 31, 2017 there are no options outstanding under the 2012 Employee Stock Option Plan.
On January 1, 2016, the Company's Board of Directors approved the 2016 Equity Incentive Plan. The purpose of this Plan is to attract, retain and motivate the officers, directors, employees and consultants of the
Company and its Subsidiaries and Affiliates, as well as provide a means of compensation for consultants, and to promote the success of the Company's business by providing them with appropriate incentives and rewards either through a proprietary
interest in the long-term success of the Company or compensation based on fulfilling certain performance goals.
The Plan shall become effective and Awards may be granted on and after January 1, 2016 (the "Effective Date"). Any Awards of incentive stock options granted under the Plan are granted subject to approval of the Plan
by the stockholders of the Company within twelve (12) months after the Effective Date. If such approval has not been obtained within such twelve (12) month period, grants of incentive stock options shall be deemed to have been grants of
non-qualified stock options.
Participants will consist of such Employees, Directors and Consultants as the Committee in its sole discretion determines and whom the Committee may designate from time to time to receive Awards under this Plan;
provided, however, that Options and Stock Appreciation Rights may only be granted to those Employees, Directors and Consultants with respect to whom the Company is an "eligible issuer" within the meaning of Section 409A of the Code. The designation
of an individual as a Participant in any year shall not require that the Committee designate such individual to receive an Award in any other year or to receive the same type or amount of Award in any other year.
Awards under this Plan may be granted in any one or a combination of: (a) Non-Restricted Employee Benefit Plan Stock; (b) Restricted Stock; and (c) Other Stock-Based Awards. Awards granted under this Plan shall be
evidenced by Award Agreements (which need not be identical) that provide additional terms and conditions associated with such Awards, including, without limitation, restrictive covenants, as determined by the Committee in its sole discretion;
provided, however, that in the event of any conflict between the provisions of this Plan and any such Award Agreement, the provisions of the Plan shall prevail unless otherwise indicated in the Award Agreement.
During fiscal 2017 the Company filed two separate Form S-8's in April and November 2016 respectively for a total of 10,000,000 shares under its 2016 Equity Incentive Plan. As of January 31, 2017, a total of
9,307,953 shares had been issued under the respective Form S-8's.
On June 20, 2017 the Company's Board of Directors approved the 2017 Equity Incentive Plan, reserving a total of 15,000,000 shares of common stock for issuance from time to time. The purpose of this Plan is to
attract, retain and motivate the officers, directors, employees and consultants of the Company and its Subsidiaries and Affiliates, as well as provide a means of compensation for consultants, and to promote the success of the Company's business by
providing them with appropriate incentives and rewards either through a proprietary interest in the long-term success of the Company or compensation based on fulfilling certain performance goals.
The Plan shall become effective and Awards may be granted on and after June 20, 2017 (the "Effective Date"). Any Awards of incentive stock options granted under the Plan are granted subject to approval of the Plan by
the stockholders of the Company within twelve (12) months after the Effective Date. If such approval has not been obtained within such twelve (12) month period, grants of incentive stock options shall be deemed to have been grants of non-qualified
stock options.
Participants will consist of such Employees, Directors and Consultants as the Committee in its sole discretion determines and whom the Committee may designate from time to time to receive Awards under this Plan;
provided, however, that Options and Stock Appreciation Rights may only be granted to those Employees, Directors and Consultants with respect to whom the Company is an "eligible issuer" within the meaning of Section 409A of the Code. The designation
of an individual as a Participant in any year shall not require that the Committee designate such individual to receive an Award in any other year or to receive the same type or amount of Award in any other year.
Awards under this Plan may be granted in any one or a combination of: (a) Non-Restricted Employee Benefit Plan Stock; (b) Restricted Stock; and (c) Other Stock-Based Awards. Awards granted under this Plan shall be
evidenced by Award Agreements (which need not be identical) that provide additional terms and conditions associated with such Awards, including, without limitation, restrictive covenants, as determined by the Committee in its sole discretion;
provided, however, that in the event of any conflict between the provisions of this Plan and any such Award Agreement, the provisions of the Plan shall prevail unless otherwise indicated in the Award Agreement.
During fiscal 2018, 2019 and 2020, there were no options or awards granted under the 2017 Equity Incentive Plan.
Recent Sales of Unregistered Securities
There were no sales of equity securities sold during the period covered by this Report that were not previously included in a Current Report on Form 8-K.
The following discussion should be read in conjunction with the Company's audited consolidated financial statements and the related notes for the year ended January 31, 2020
and 2019, that appear elsewhere in this annual report. 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 United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview of Current Operations
Results of Operations for the years ended January 31, 2020 and 2019
During the fiscal years ended January 31, 2020 and 2019, the Company has generated $59,729 and $0 in total revenue. During fiscal 2020 revenues include $6,894 of revenue generated from related parties. We entered
into amendments to certain licensing and marketing agreements subsequent to fiscal year ended January 31, 2018 which provide for fee-based income calculated retroactively between March and October 2018 as a result of certain beta trials with
respect to the eXPOTM platform, as at January 31, 2020 and 2019, the amounts generated 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 $28,431 upon receipt.
Costs of revenue totaled $36,329 and $0 in fiscal 2020 and 2019.
As at January 31, 2020 and 2019, the Company had $59,310 and $148,569 in cash and total current assets.
During the fiscal years ended January 31, 2020 and 2019, the Company incurred total operating expenses of $1,557,564 and $4,208,201, respectively, including costs of sales of $36,329 in fiscal 2020 with no similar
expense in fiscal 2019. During fiscal 2020 and 2019 the Company recorded depreciation and impairment of $4,423 and $367,391 respectively, with 2019 results including the 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 $942,021 (2019) to $49,099 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 $1,287,333 (2019) to $785,541 as several management 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 $707,135 in fiscal 2019 to only $425,741 in fiscal 2020. During fiscal 2020 and 2019 research and development fees incurred were $157,837
and $657,948 respectively. Costs for research and 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 $246,353 in 2019 to $98,594 in fiscal 2020 relative to amounts paid to maintain our public listing, rent, travel and other costs.
The Company recorded interest expense of $249,962 and $586,702 in respect of certain convertible notes and other loan agreements, respectively during fiscal 2020 and 2019, including amortization of debt discount of
$371,969 during fiscal 2019, with no similar expense in the current fiscal year. During fiscal 2020 the Company recorded bad debt of $127,833 with respect to a loan receivable which remained uncollected with no comparable expense if fiscal 2019.
Interest income recorded in fiscal 2020 and 2019 totaled $9,000 and $12,000, respectively.
The net loss in fiscal 2020 totaled $1,866,630 as compared to $4,782,903 in fiscal 2019.
The Company used net cash in operations of $787,142 and $2,416,138 respectively during the twelve-month periods ended January 31, 2020 and 2019, recorded $Nil in both years as net cash used for investing activities
and received cash from financing activities of $788,410 and $2,415,645, predominantly as a result 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 October 2018
generated revenues of $28,431 for ESSI which will be recorded upon receipt from AFN. Subsequently the operations were suspended through August 2019, during which 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 August 2019, 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.
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.
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 January 31, 2020, the Company
had a working capital deficit of $11,247,723 and an accumulated deficit of $73,048,082. The 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 January 31, 2019, the Company had total current assets of $59,310, and total current liabilities of $11,307,033. The Company has limited financial 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.
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 October 31, 2018 fees payable by AFN for the
period March 2018 through October 2018 as reconciled in commission reports received from AFN have not been received by the Company. Subsequently the operations were suspended through August 2019, during which 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 August 2019, 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 Ga-Du Corporation is $28,431 (10% of net revenue generated by
Colorado Business) January 31, 2020 and 2019. The Company will 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 $59,729 in respect to the 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 $36,329 with respect to the licensing of our Herbo software suite. In the case of revenue earned by our wholly owned subsidiary, proceeds allocated to our revenue interest are net of
associated costs.
General and Administrative Expenses
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 the United States of America. Preparing 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.
The preparation of financial statements in conformity with United States 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 $49,099 during the fiscal year ended January 31, 2020 and $942,021 in the same period ended January 31,
2019. Advertising and marketing costs include ad placement and click through programs placed on a wide network of mediums acquired from advertising consolidators including Outbrain, MGID, Rev Content, Yahoo, MSN, AOL, Google and 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.
Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts 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.
$59,729 has been recognized as revenue in the fiscal year ended January 31, 2020, with $0 revenue in the same period ended January 31, 2019. Revenue 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 October 31, 2018 fees payable by AFN for the period May through October 2018 as reconciled
in commission reports received from AFN have not been received by the Company. Subsequently the operations were suspended through August 2019, during which 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 August 2019, 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. 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 Ga-Du Corporation is $28,431 (10% of net revenue generated by Colorado Business) at January 31, 2020 and January 31, 2019. The Company will record the revenue once we receive
the proceeds.
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.
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 January 31, 2020, and January 31, 2019, $248,432 for the value of the stock settled debt for certain convertible notes is included in the Convertible
note, net account under balance sheet. (see Note 10).
Recently issued accounting pronouncements
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on
its results of operations or financial position.
The Company's consolidated audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The consolidated audited financial statements are filed
as part of this annual report starting on page F-1.
ECO SCIENCE SOLUTIONS, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended January 31, 2020 and 2019
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Eco Science Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Eco Science Solutions, Inc. as of January 31, 2020 and 2019, the related statements of operations, stockholders' equity (deficit), and cash flows for
the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2020
and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from
operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2016
Lakewood, CO
July 6, 2020
ECO
SCIENCE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these audited condensed consolidated financial statements
ECO SCIENCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these audited consolidated financial statements
ECO SCIENCE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
The accompanying notes are an integral part of these audited consolidated financial statements
ECO SCIENCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these audited consolidated financial statements
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
Organization and nature of business
The Company was incorporated in the state of Nevada on December 8, 2009 under the name Pristine Solutions, Inc. On January 8, 2014, the Company changed its name from Pristine Solutions, Inc. to Eco Science
Solutions, Inc.
During fiscal 2016 the Company changed its business focus to pursue eco-friendly consumer related technologies, software and applications.
On January 11, 2016, the Company's Board of Directors (the "Board") authorized the creation of 1,000 shares of Series A Voting Preferred Stock. The holder of the shares of the Series A Voting Preferred Stock has
the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock
is equal to and counted as 10 times the votes of all of the shares of the Company's (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company
regarding each and every matter submitted to the shareholders of the Company for approval.
On June 21, 2017, the Company acquired 100% of the shares of capital stock of Ga-Du Corporation (“Ga-Du”), at which time Ga-Du became a wholly owned subsidiary of the
Company. Concurrent with the transaction, Mr. John Lewis and Mr. Randall Overton joined the Board of directors of ESSI. Ga-Du offers a Financial Services Platform, as well as Inventory Control and
Advisory Software Platforms, and Retail Inventory Control, bringing important enterprise technologies in-house and bringing ESSI an opportunity to expand the reach of its Herbo branding. Subsequently
Ga-Du Corporation entered into an Assignment Agreement with G&L Enterprises, wherein G&L Enterprises assigned to Ga-Du Corporation, all of its rights, interest in, and obligations under a License and
Master Marketing Agreement (LMMA) it entered into with Alliance Financial Network, Inc. ("AFN").
AFN provides financial and enterprise services to businesses and individuals, including the cannabis industry, on a programmatic or membership basis from which AFN derives fees and income from enrolling companies in
their financial program and providing a range of services, with respect to which AFN and Ga-Du derive fees and income on a fee based schedule.
The primary focus of AFN is a mobile application known as eXPO™ electronic eXchange Portal which provides virtual financial and enterprise services to businesses and individuals that are challenged in the
traditional banking systems, and/or require more intensive compliance than banks are willing, or able to perform and/or do not have the technical expertise or financial wherewithal in house to develop their own FinTech solutions, including
accounting and enterprise management software.
Following the closing of the SPA, Ga-Du is a wholly owned subsidiary of ESSI, bringing to ESSI a Financial Services Platform, and Inventory Control and Advisory Software
Platforms, thus completing the ESSI product suite to benefit both consumer and professional customers of the Company.
With the acquisition of Ga-Du, ESSI's product suite expanded to include an enclosed ecosystem for business location, localized communications between consumers and business
operators, on-topic social networking, inventory management / selection, payment facilitation and delivery arrangement. The Company's holistic commerce and content platform enables health, wellness and alternative medicine enthusiasts to easily
locate, access, and connect with others to facilitate the research of and purchasing of eco-science friendly products.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS (cont'd)
Organization and nature of business (cont'd)
During fiscal 2018 and 2019, as AFN focussed its efforts to expand its eXPOTM banking relationships to support next phase operations, the Company focussed on rolling out its Herbo Enterprise Software and
building that user base. The Herbo software provides a point of sale, bookkeeping and banking functions, inventory management and tracking, compliance and reporting, tax and accounting, payroll and HR, ecommerce and payment gateway services and
CRM and customer loyalty functions all under one software suite. During fiscal 2020, the Company entered into various licensing contracts for the Herbo Enterprise Software and has commenced generating revenue from this segment of its operations.
Eco Science Solutions, Inc. is committed to becoming a vertically integrated provider of consumer and enterprise technology products and services, which assist consumers, companies, brands and entrepreneurs to
effectively transact business, with compliance, in the combined multi-billion-dollar cannabis and CBD hemp industries.
The Company's consumer initiatives are centered on education and connecting consumers with various cannabis and CBD hemp businesses. Its enterprise initiatives are focused on developing technology and accounting
solutions, coupled with data analytics to help businesses to be more effective in their abilities to connect, market, and sell to consumers.
Eco Science Solutions, Inc has technology and service relationships with those in farming, extraction, manufacturing and distribution in both the cannabis and CBD hemp industries. Along with its subsidiary Ga-Du, ESSI is able to provide a 360-degree ecosystem for business location, localized communications between consumers and business operators, on-topic social
networking, inventory management / selection, payment facilitation and cash management.
* Eco Science Solutions, Inc. is not in the business of growing, manufacturing, or distributing cannabis.
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 January 31, 2020, the Company
had a working capital deficit of $11,247,723 and an accumulated deficit of $73,048,082. The 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.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in understanding the Company's consolidated financial statements. These accounting policies conform
to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the consolidated financial statements. Certain reclassifications have been made to the prior period's
consolidated financial statements to conform to the current period's presentation.
Principals of Consolidation
The consolidated financial statements include the accounts of Eco Science Solutions, Inc. and its wholly owned subsidiary, Ga-Du
Corporation. All significant intercompany balances and transactions have been eliminated.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Use of Estimates
The preparation of financial statements in conformity with United States 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.
Cash and cash equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of purchase to be cash equivalents. As of January 31, 2020 and January 31, 2019, respectively, the Company had
cash, but no cash equivalents.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization on property and equipment are determined using the straight-line method over the three to five year estimated useful lives of the assets.
Technology, licensing rights and software (Intangible assets)
Technology, licensing rights and software are recorded at cost and capitalized and are reviewed for impairment at a minimum of once per year or whenever events or changes in circumstances suggest a need for
evaluation. There is no impairment expense for the intangible assets in fiscal year ended January 31, 2020. Impairment expense for the intangible assets in the fiscal year January 31, 2019 was $362,282.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and were $49,099 during the fiscal year ended January 31, 2020 and $942,021 in the same period ended January 31,
2019. Advertising and marketing costs include ad placement and click through programs placed on a wide network of mediums acquired from advertising consolidators including Outbrain, MGID, Rev Content, Yahoo, MSN, AOL, Google and 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.
Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts 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.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Revenue Recognition (cont’d)
$59,729 has been recognized as revenue in the fiscal year ended January 31, 2020, with $0 revenue in the same period ended January 31, 2019. Revenue 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 October 31, 2018 fees payable by AFN for the period May through October 2018 as reconciled
in commission reports received from AFN have not been received by the Company. Subsequently the operations were suspended through August 2019, during which 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 August 2019, 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. 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 Ga-Du Corporation is $28,431 (10% of net revenue generated by Colorado Business) at January 31, 2020 and January 31, 2019. The Company will record the revenue once we receive
the proceeds.
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.
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.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
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 January 31, 2020, and January 31, 2019, $248,432 for the value of the stock settled debt for certain convertible notes is included in the Convertible
note, net account under balance sheet. (see Note 10).
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share
(EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
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.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
Depreciation expense (excluding impairment) amounted to $4,423 and $5,109 for the years ended January 31, 2020 and 2019, respectively.
NOTE 4: INTANGIBLE ASSETS
On June 21, 2017, the Company acquired a 100% interest in Ga-Du including certain intangible assets such as a Financial Services Platform, Testing Labs, and Inventory
Control and Advisory Software Platforms. Intangible assets acquired as part of the acquisition of Ga-Du were fully impaired on acquisition.
During fiscal 2019 the Company incurred software development expenses with respect to its Herbo enterprise software totaling $362,282 which amounts were initially capitalized as intangible assets. On January 31,
2019, the Company impaired intangible assets totaling $362,282.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 5: SPONSORSHIP AGREEMENT
On April 1, 2018, ESSI entered into a Sponsorship Agreement with Fruit of Life Productions, LLC. The terms of the Agreement allowed Eco Science Solutions, Inc. (ESSI) to sponsor Kaya Fest 2018, to be held in San
Bernardino, California.
The term of the Agreement began on April 1, 2018, and continued until April 30, 2018, at the closing of the Kaya Fest. Total fees paid of $250,000 were recorded as research,
development, and promotional expenses during fiscal 2019. These fees were paid to Fruit of Life directly by a third party.
NOTE 6: LICENSE AND MASTER MARKETING AGREEMENT
During fiscal 2018 the Company’s subsidiary Ga-Du entered into an Assignment Agreement with G&L Enterprises, wherein G&L Enterprises assigned to Ga-Du Corporation, all
of its rights, interest in, and obligations under a License and Master Marketing Agreement (LMMA) it entered into with Alliance Financial Network, Inc. ("AFN").
AFN provides financial and enterprise services to businesses and individuals, including the cannabis industry, on a programmatic or membership basis from which AFN derives fees and income from enrolling companies in
their financial program and providing a range of services, with respect to which AFN and Ga-Du derive fees and income on a fee based schedule.
The primary focus of AFN is a mobile application known as eXPO™ electronic eXchange Portal which provides virtual financial and enterprise services to businesses and individuals that are challenged in the traditional
banking systems, and/or require more intensive compliance than banks are willing, or able to perform and/or do not have the technical expertise or financial wherewithal in house to develop their own FinTech solutions, including accounting and
enterprise management software. One such industry is the cannabis industry where AFN establishes Membership relationships with businesses in this industry, following a full compliance audit on the business. These services utilize the Herbo suite
of software to effectively track transactional data for eXPO™ users, providing Ga-Du a share of all Cannabis related revenues received by AFN regardless of the source of revenues through (i) membership fees; (ii) cash depository fees; (iii)
merchant processing and credit card fees; (iv) transfer fees; and (v) advertising fees. AFN’s services operate on a national level with sales in both cannabis and non-cannabis-based industries. While revenues allocated to Ga-Du are currently
governed on a territory by territory basis, Ga-Du and AFN are actively negotiating an amendment to the agreements to become all inclusive.
In exchange for the revenue split under the LMMA, as amended in March 2018, Ga-Du agreed to pay to AFN $405,000 in three tranches for operational expenses and business development.
Under the terms of the aforementioned agreements with respect to a beta trial for the AFN services focused solely on the State of Colorado during the period May through
October 31, 2018, $28,431 is payable to Ga-Du from revenue generated by operations on the eXPOTM platform. Subsequently the operations were suspended through August 2019, during which 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 August 2019, 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.
NOTE 7: PREPAID EXPENSES
Prepaid expenses consist of the following:
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 8: CONVERTIBLE PROMISSORY NOTE RECEIVABLE
During fiscal 2018, the Company’s subsidiary Ga-Du entered into an Assignment Agreement with G&L Enterprises, wherein G&L Enterprises assigned to Ga-Du Corporation,
all of its rights, interest in, and obligations under a LMMA with AFN. (Note 6) As part of this agreement the Company was assigned a loan receivable with the principal amount of $100,000.
The Note matured on July 6, 2018, accrued interest at a rate of 12% per annum was payable to Ga-Du Corporation. The Note can, at Ga-Du's option, be converted upon maturity
into 1.12% of the equity of AFN. The Company wrote off the balance of promissory note receivable on Oct 31, 2019.
During the fiscal year ended January 31, 2020 and 2019, the company recorded interest income of $9,000 and $12,000, respectively. The Company wrote off the balance of interest receivable on Oct 31, 2019. As of
October 31, 2019, the interest receivable on this note totaled $0 (January 31, 2019 - $18,833).
During the fiscal year ended January 31, 2017, the Company received an accumulated amount of $14,930 from a third party. The notes bear interest at a rate of 1% per annum, and each due three months from issue
date. During the fiscal years ended January 31, 2020 and 2019 the Company accrued interest expense of $149 and $150, respectively. As of January 31, 2020, and 2019, the Company has accrued interest payable of $555 and $406, respectively.
During the fiscal year ended January 31, 2017, the Company received an amount of $50,000 from a third party. The note bears interest at a rate of 1% per annum and is due three months from issue date. As at January
31, 2018 the note became due and remained unpaid. During the fiscal years ended January 31, 2020 and 2019 the Company accrued interest expense of $500. As of January 31, 2020, and 2019, the Company has accrued interest payable of $1,626 and
1,126, respectively.
During the fiscal year ended January 31, 2017, the Company received an amount of $225,000 from a third party. The note bears interest at a rate of 6% per annum and is due one year from issue date.
During the fiscal year ended January 31, 2018 the Company received accumulated amounts of $1,842,500 from a third party. The notes bear interest at a rate of 6% per annum and each is due one year from issue date.
During the fiscal year ended January 31, 2019 the Company received accumulated amounts of $1,420,500 from a third party. The notes bear interest at a rate of 6% per annum and each is due one year from issue date.
On March 28, 2018 this third party purchased an additional $250,000 in notes from our COO, Mr. Michael Rountree. The purchased notes bear interest at a rate of 1% per annum beginning on June 27, 2018 and are
payable within thirty days notice of the Maturity Date.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 9: NOTES PAYABLE (cont’d)
During the fiscal year ended January 31, 2020, the Company made cash payment of $7,500 to the note.
During the fiscal years ended January 31, 2020 and 2019, the Company accrued interest expense of $224,189 and $196,254, respectively. As of January 31, 2020, and 2019, the Company has accrued interest payable of
$492,951 and $268,762, respectively.
Note 4:
During the year ended January 31, 2019, the Company received accumulated amount of $305,266 from a third party. The notes bear interest at a rate of 1% per annum, and due nine months from issue date. During the
fiscal years ended January 31, 2020 and 2019 the Company accrued interest expense of $2,843 and $1,463, respectively. As of January 31, 2020, and 2019, the Company has accrued interest payable of $4,306 and $1,463, respectively.
On September 12, 2018 the Company received amount of $14,422 from a third party. The notes bear interest at a rate of 1% per annum, and due nine months from issue date. During the fiscal years ended January 31,
2020 and 2019 the Company accrued interest expense of $144 and $39, respectively on the aforementioned notes. As of January 31, 2020, and 2019, the Company has accrued interest payable of $183 and $39, respectively.
NOTE 10: CONVERTIBLE NOTE PAYABLE
During fiscal 2018, the Company entered into a convertible note for a total of $1,407,781 bearing interest at 1% per annum, beginning on November 1, 2017 and payable each 120 days as to any outstanding balance. At
the Maturity Date of this convertible debenture, Lender has the option to:
The total beneficial conversion feature discount recognized was $496,864 which is being amortized over the terms of the convertible notes payable. During the years ended
January 31, 2019 and 2018 the Company recognized interest expense of $371,969 and $124,895, respectively, related to the amortization of the beneficial conversion feature discount. The unamortized balance of the beneficial conversion feature
was $0 and $371,969 as of January 31, 2019 and January 31, 2018, respectively.
As at the date of this report, the Lender has not made a demand for payment and the note is in default.
At January 31, 2020 and 2019, convertible note payable consisted of the following:
During the fiscal years ended January 31, 2020 and 2019 the Company accrued interest expense of $14,273 As of January 31, 2020 and 2019 the Company has accrued interest payable of $32,144 and $17,871, respectively.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 11: RELATED PARTY TRANSACTIONS
As of January 31, 2020, and January 31, 2019, related parties are due a total of $1,543,088 and $537,325, respectively.
Services provided from related parties:
Interest expenses from related parties:
Revenue from related parties:
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 11: RELATED PARTY TRANSACTIONS (cont’d)
|
(1)
|
Effective December 17, 2015, Mr. Jeffery Taylor was appointed to serve as Chief Executive Officer of the Company and Mr. Don Lee Taylor was appointed to serve as Chief Financial Officer of the Company.
On December 21, 2015, the Company entered into employment agreements with Mr. Jeffery Taylor and Mr. Don Lee Taylor for a period of 24 months, where after the contract may be renewed in one-year terms at the
election of both parties. Jeffery Taylor shall receive an annual gross salary of $115,000 and Don Lee Taylor shall receive an annual gross salary of $105,000 payable in equal installments on the last day of each calendar month and which
may be accrued until such time as the Company has sufficient cash flow to settle amounts payable. Further under the terms of the respective agreements all inventions, innovations, improvements, know-how, plans, development, methods,
designs, analyses, specifications, software, drawings, reports and all similar or related information (whether or not patentable or reduced to practice) which relate to any of the Company's actual or proposed business activities and which
are created, designed or conceived, developed or made by the Executive during the Executive's past or future employment by the Company or any Affiliates, or any predecessor thereof ("Work Product"), belong to the Company, or its Affiliates,
as applicable. During the fiscal year ended January 31, 2020, the company paid $181,019 to Mr. Jeffery Taylor and $10,500 to Mr. Don Lee Taylor. As at January 31, 2020 there was a total of $59,137 owing to Mr. Jeffery Taylor (January 31,
2019 - $125,156) and $191,700 to Mr. Don Lee Taylor (January 31, 2019 - $97,200), respectively, in accrued and unpaid salary under the terms of the employment agreement.
|
|
(2)
|
For fiscal years ended January 31, 2020 and 2019 the Company was invoiced a total of $36,000, as consulting services by Ms. Jennifer Taylor, sister of the Company's officers and directors. As at January 31,
2020 there was a total of $58,000 in accrued and unpaid (January 31, 2019 - $22,000).
|
|
(3)
|
On February 17, 2016, the Company issued promissory notes to Mr. Jeffery Taylor, CEO, in the amount of $17,500 and to Mr. Don Lee Taylor, CFO, in the amount of $17,500, respectively. The notes bear interest
at a rate of 1% per annum, maturing on August 17, 2016. During the fiscal year ended January 31, 2017, the company repaid $2,500 to Mr. Jeffery Taylor and $2,500 to Mr. Don Lee Taylor. During the fiscal year ended January 31, 2019, the
company repaid $5,000 to Mr. Jeffery Taylor and $2,000 to Mr. Don Lee Taylor. During the nine months ended October 31, 2019, the company repaid $10,000 to Mr. Jeffery Taylor and $0 to Mr. Don Lee Taylor. As at January 31, 2020 there was a
total of $0 owing to Mr. Jeffery Taylor (January 31, 2019 - $10,000) and $13,000 to Mr. Don Lee Taylor (January 31, 2019 - $13,000), respectively.
|
|
(4)
|
On June 21, 2017, the Company entered into an employment agreement with Michael Rountree whereby Mr. Rountree agreed to serve as the Company's Chief Operating Officer for two years unless terminated earlier
in accordance with the agreement. During his period of employment, Mr. Rountree has a base salary at an annual rate of $120,000. The Board shall review the Base Salary on an annual basis and may, but is not required to, make upward
adjustments from time to time. We recorded $120,000 in the fiscal years ended January 31, 2020 and 2019 under the terms of this agreement, all of which remains unpaid. As at January 31, 2020 there was a total of $320,000 (January 31, 2019
- $200,000) in accrued and unpaid salary under the terms of the employment agreement.
During the year ended January 31, 2019, the Company issued promissory notes to Mr. Rountree in the accumulated amount of $379,319. During the fiscal year ended January 31, 2020 the Company issued promissory
notes to Mr. Rountree in the accumulated amount of $805,901. The notes bear interest at a rate of 1% per annum, each is due nine months from issue date.
|
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 11: RELATED PARTY TRANSACTIONS (cont’d)
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 11: RELATED PARTY TRANSACTIONS (cont’d)
NOTE 12: CAPITAL STOCK
Common Stock
The total number of authorized shares of common stock that may be issued by the Company is 650,000,000 shares with a par value of $0.0001.
As of January 31, 2020, and January 31, 2019, there were 48,557,572 shares issued and 47,557,572 shares outstanding.
There were no shares issued during the year ended January 31, 2020.
On May 1, 2018, the Company deemed the issuance of 1,000,000 shares of restricted stock valued at $90,000 or $0.09 per share, the fair market value on the date of the
agreement. (ref: Note 13 (h)).
Series A Voting Preferred Shares
On January 11, 2016, the Company's Board of Directors (the "Board") authorized the creation of 1,000 shares of Series A Voting Preferred Stock. The holder of the shares of the Series A Voting Preferred Stock has
the right to vote those shares of the Series A Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series A Voting Preferred Stock
is equal to and counted as 10 times the votes of all of the shares of the Company's (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company
regarding each and every matter submitted to the shareholders of the Company for approval. The Series A Voting Preferred Stock will not be convertible into Common Stock.
As of January 31, 2020, and January 31, 2019, no Series A Voting Preferred Shares were issued and outstanding.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS (cont’d)
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS (cont’d)
(1) On July 7, 2017, a purported shareholder of Eco Science Solutions, Inc. (the "Company"), Mr. Jimmie Glorioso, filed a verified shareholder derivative complaint against Jeffrey L. Taylor, Don L. Taylor (collectively,
Jeffrey and Don Taylor are the "Taylors"), L. John Lewis and S. Randall Oveson, directors and officers in the Company, and Gannon Giguiere (collectively, the Taylors, Lewis, Oveson and Giguiere are the "Individual Defendants"), in the First
Judicial District Court of the State of Nevada, Carson City County (the "Nevada Complaint"). Mr. Glorioso filed an amended complaint on or about January 11, 2019. The Company is identified as a nominal defendant, against which no claims are
plead. The Nevada Complaint arises out of alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of Company. The Nevada Complaint asserts claims on behalf of the Company for
breach of fiduciary duties against the Individual Defendants, aiding and abetting the breach of fiduciary duties against Lewis, Oveson and Giguiere, against the Individual Defendants for waste of corporate assets, and unjust enrichment against
the Individual Defendants. The Nevada Complaint (1) seeks judicial declarations that (i) Mr. Glorioso may maintain this action on behalf of the Company and (ii) all individual defendants have breached and/or aided and abetted the breach of
their fiduciary duties to the Company; (2) seeks damages to the Company allegedly sustained as a result of the acts/omissions of all individual defendants; (3) seeks an order directing the Company and all individual defendants to take all
necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company.
(2) On October 20, 2017, a purported shareholder of the Company, Mr. Ian Bell, filed a verified stockholder derivative complaint against the Individual Defendants in the United States District Court for the District of
Hawaii (the "First Hawaii Complaint"). On January 11, 2018, a purported shareholder of the Company, Mr. Marc D' Annunzio, filed a verified stockholder derivative complaint against the Individual Defendants in the United States District Court
for the District of Hawaii (the "Second Hawaii Complaint"). On February 9, 2018, the Hawaii federal court consolidated the First Hawaii Complaint and the Second Hawaii Complaint (the "Consolidated Hawaii Action"). On December 10, 2018,
plaintiffs in the Consolidated Hawaii Action filed their amended complaint (the "Amended Hawaii Complaint"). The Company is identified as a nominal defendant, against which no claims are plead. The Amended Hawaii Complaint arises out of alleged
materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of the Company. The Amended Hawaii Complaint asserts claims on behalf of the Company for breach of fiduciary duty against the
Taylors and Mr. Lewis and Mr. Oveson, for aiding and abetting breaches of fiduciary duties against Mr. Lewis and Mr. Oveson, for aiding and abetting breaches of fiduciary duties against Mr. Giguiere, for waste of corporate assets against the
Individual Defendants, and for unjust enrichment against the Individual Defendants. The Amended Hawaii Complaint seeks damages for the alleged breaches of fiduciary duties, aiding and abetting, waste and unjust enrichment, demands restitution
and disgorgement and requests an order directing the Company and all individual defendants to take all necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company. The Parties have agreed to mediate the potential resolution of all claims with U.S. Magistrate Judge Wes R. Porter on December 3, 2019 in Honolulu. The Parties have agreed to continue their
settlement discussions, which are ongoing, in good faith. There is no guarantee that the claims will be settled.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 14: CONTINGENCIES (Continued)
(3) On November 3, 2017, a purported shareholder of the Company, Mr. Hans Menos, filed a verified shareholder derivative complaint against the Individual Defendants in the United States District Court for the District of
Nevada (the "Nevada Federal Complaint"). Mr. Menos amended the Nevada Federal Complaint on December 21, 2018. The Company is identified as a nominal defendant, against which no claims are plead. The Nevada Federal Complaint arises out of
alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of Company. The Nevada Federal Complaint asserts claims on behalf of the Company for breach of fiduciary duties against
the Individual Defendants, for aiding and abetting breaches of fiduciary duties against Mr. Giguiere, Mr. Lewis and Mr. Oveson, unjust enrichment against the Individual Defendants, waste of corporate assets against the Individual Defendants,
abuse of control against the Individual Defendants, and gross mismanagement against the Individual Defendants. The Nevada Federal Complaint (I) seeks judicial declarations that (i) Mr. Menos may maintain this action on behalf of the Company and
(ii) the Individual Defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company; (2) seeks damages to the Company allegedly sustained as a result of the acts/omissions of the Individual Defendants; (3)
seeks an order directing the Company and the Individual Defendants to take all necessary actions to reform and improve the Company's corporate governance in order to avoid any alleged future harm to the Company. On March 2, 2020, the parties to the Nevada Federal Complaint stipulated to the dismissal thereof, which the Court approved on March 3, 2020.
(4) On February 1, 2019, the lead plaintiff, Mr. Richard Raschke, a purported shareholder of the Company, filed an amended consolidated class action complaint against the Company, the Taylors, and Mr. Gannon Giguiere in the
United States District Court for the District of New Jersey (the "Class Action"). The Class Action arises out of alleged materially false and misleading statements or omissions from SEC filings and/or public statements by or on behalf of
Company. The Class Action asserts claims against all defendants for violation of Section 10(b) of the Securities Exchange Act of 1934 (the "Act"), violation of Section 20(a) of the Act against the Taylors and Giguiere and Violation of Section
20(b) against Mr. Giguiere. The Class Action seeks (1) certification of the purported class of plaintiffs, (2) compensatory damages in favor of the class and (3) an award of reasonable costs and expenses. Defendants have moved to stay this
action. By consent of the parties, the Court has agreed to suspend this matter pending resolution of the consolidated derivative action in Hawaii.
(5) Although the following lawsuit was not filed against the Company or any of its officers or directors, it nonetheless has a huge impact on the Company. On July 6, 2018, the Securities and Exchange Commission (the "SEC")
filed a Complaint against Gannon Giguiere ("Giguiere"), president of Phenix Ventures, LLC and the Company's largest outside funder. The Complaint alleges Mr. Giguiere's involvement in certain activities, of which the Company, its' officers,
board members, and others directly involved with the Company, have no knowledge of. The Complaint seeks monetary and injunctive relief. On October 24, 2018, the Court granted the U.S. Government's motion to intervene in the proceedings and stay
the action pending resolution of parallel criminal proceedings (described below). Pursuant to the Complaint being filed, the Company continues to seek funding elsewhere as it requires outside funding until it generates more consistent revenue.
The Company previously filed an S-1 Registration Statement whereby Phenix would fund the Company in exchange for shares of common stock, and upon Put Notices; to date, there have been no Put Notices and no funds from Phenix Ventures have been
distributed to the Company under the registration statement - no shares have been issued pursuant to the Registration Statement.
(6) On June 29, 2018, the United States Government filed an indictment as to Gannon Giguiere in the U.S. District Court for the Southern District of California. In a Superseding Indictment, filed on January 25, 2019, the
United States alleges that the defendant engaged in a scheme to manipulate the market for the common stock of two penny stock issuers, including ESSI. The United States claims that Mr. Giguiere is guilty of (1) conspiracy to commit securities
fraud and manipulative trading and (2) securities fraud. On April 22, 2019, Mr. Giguiere entered a plea of not guilty to each of the counts against him in the Superseding Indictment. On July 23, 2019, defendant entered into a Plea Agreement
(the “Plea”) with the Government wherein defendant plead guilty to one charge of conspiracy. Under the Plea, the Government agreed to dismiss and to not prosecute in the future, the remaining charges including, but not limited to, all charges
relating to ESSI when defendant is sentenced. The sentencing hearing is currently set for September 21, 2020.
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 14: CONTINGENCIES (Continued)
(7) On September 10, 2018 the Company received a Letter of Summons and Notice of Complaint from Wendy Maguire, Vice President of Business Development for Ga Du Corporation,
filed in the United States District Court from the Western District of Washington on September 4, 2018 and naming the Company, its subsidiary Ga Du Corporation and two of the Company's officers as Defendants. The Claims filed under the
Complaint include payment of accrued and unpaid wages, legal fees and damages. The Company has filed its Answer. Plaintiff filed a Motion for Summary Judgment on March 14, 2019 on her statutory claim for unpaid wages and on her claim for
breach of employment contract. The motion has been fully briefed. On May 13, 2020, plaintiff’s motion for summary judgment as to the personal liability of corporate officers of ESSI and Ga-Du under the Washington Wage Rebate Act was
Granted. Corporate officers of ESSI and its subsidiary Ga-Du are jointly and severally liable (along with ESSI and its wholly-owned subsidiary Ga-Du) for $240,000 in unpaid wages, another $240,000 in exemplary damages, attorney’s fees, and
prejudgment interest. Defendants’ cross-motions regarding personal liability was denied.
The Company is vigorously defending all of the aforementioned lawsuits where the action has yet to be adjudicated, dismissed or judgement entered. The successful defense of any of the outstanding lawsuits is
undeterminable at this time, as are the extent of any possible damages.
NOTE 15: SUBSEQUENT EVENTS
On April 15, 2020 Mr. L. John Lewis resigned all positions with the Company’s wholly owned subsidiary Ga-Du and also resigned as a director of ESSI.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events to disclose.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under supervision and with the participation of the Company's Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as
defined under Exchange Act Rule 13a-15(e). Based upon this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of January 31, 2020, because of the material weakness in our internal control over financial
reporting ("ICFR") described below, our disclosure controls and procedures were not effective.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that required information to be disclosed in our reports filed or submitted under the Securities Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that required information to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 14d-14(f). Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable
assurance with respect to financial reporting reliability and financial statement preparation and presentation. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls become inadequate
because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of January 31, 2020. In making the assessment, management used the criteria issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework 2013. Based on its assessment, management concluded that, as of January 31, 2020, our internal control over financial reporting was not effective and that
material weaknesses in ICFR existed as more fully described below.
As defined by Auditing Standard No. 5, "An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements" established by the Public Company Accounting Oversight Board
("PCAOB"), a material weakness is a deficiency or combination of deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with
the assessment described above, management identified the following control deficiencies that represent material weaknesses as of January 31, 2020:
1) Lack of an independent audit committee or audit committee financial expert, and no independent directors. We do not have any members of the Board who are independent directors and we do not have an audit
committee. These factors may be counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management;
2) Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;
Management's Remediation Initiatives
As of January 31, 2020, management assessed the effectiveness of our internal control over financial reporting. Based on that evaluation, it was concluded that during the period covered by this report, the internal
controls and procedures were not effective due to deficiencies that existed in the design or operation of our internal controls over financial reporting. However, management believes these weaknesses did not have an effect on our financial results.
During the course of our evaluation, we did not discover any fraud involving management or any other personnel who play a significant role in our disclosure controls and procedures or internal controls over financial reporting.
Due to a lack of financial and personnel resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until, if ever, we
acquire sufficient financing and staff to do so. We will implement further controls as circumstances, cash flow, and working capital permits. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as
identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the period ended January 31, 2020, fairly presents our financial position, results of operations, and cash flows for the periods
covered, as identified, in all material respects.
Management believes that the material weaknesses set forth above were the result of the scale of our operations and intrinsic to our small size. Management also believes that these weaknesses did not have an effect
on our financial results.
This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by
the Company's registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
During the period covered by this report, there were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that
occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.