MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited
financial statements and notes to our financial statements included elsewhere in
this report. This discussion contains forward-looking statements that involve
risks and uncertainties. Actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors
discussed elsewhere in this report.
Certain information included herein contains statements that may be considered
forward-looking statements, such as statements relating to our anticipated
revenues, gross margin and operating results, future performance and operations,
plans for future expansion, capital spending, sources of liquidity, and
financing sources. This forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future,
and accordingly, such results may differ from those expressed in any
forward-looking statements made herein. These risks and uncertainties include
those relating to our liquidity requirements, the continued growth of the
Company's industry, the success of our product development, marketing and sales
activities, vigorous competition in the construction industry, dependence on
existing management, leverage and debt service (including sensitivity to
fluctuations in interest rates), domestic or global economic conditions, the
inherent uncertainty and costs of prolonged arbitration or litigation, and
changes in federal or state tax laws or the administration of such laws.
Overview
Electronic Servitor Publication Network Inc. (formerly CannAssist International
Corp.) was incorporated on May 17, 2017, under the laws of the State of Delaware
to engage in any lawful corporate undertaking, including, but not limited to,
selected mergers and acquisitions. The Company is a managed services company
providing digital activation and engagement solutions to established and
developing companies that seek to optimize their digital customer engagement
strategies. The Company's managed services are powered by a proven, proprietary
tech stack - the Digital Engagement Engine (or DE²). This technology provides
intelligent interaction management, dynamic content provisioning, and a
logic-driven workflow which creates digital experiences that accelerate an
audience from awareness to action, no matter what programs and processes that
the client already has in place.
The Company's corporate offices are located at 400 1ST Ave N., Ste. 100,
Minneapolis, MN 55401. The Company's email website is www.xespn.com. The
Company's telephone number is (883) 991-0800.
The Company's common stock trades on the OTCQB Venture Market under the stock
ticker symbol XESP.
On July 1, 2021, Mark Palumbo, a former officer and director of the Company, and
Forty 7 Select Holdings LLC, an entity controlled by Greg Shockey (who was an
existing shareholder of the Company), entered into an agreement pursuant to
which Mark Palumbo transferred all of his 1,000 shares of Series A Preferred
Stock (representing 100% of the Company's issued and outstanding Series A
Preferred Stock), of the Company to Forty 7 Select Holdings LLC in a private
transaction. The Series A Preferred Stock provides the holder thereof the right
to vote 60% of the Company's voting shares on any and all shareholder matters
and thereby constituted a change of control of the Company. Further, Mark
Palumbo contributed 7,500,000 shares of common stock held by him to the treasury
of the Company for cancellation at no cost (the "Contribution").
On July 23, 2021, the Company entered into a Technology License Agreement with
Phitech Management, LLC, an entity controlled by Peter Hager ("Licensor"),
whereby, at Closing, the Company shall be granted a license (the "License") to
use, market, promote and distribute certain technology related to Electronic
Sports Gaming, related patent applications, related trade-secrets and associated
knowhow, including methods, techniques, specifications, procedures, information,
systems, knowledge and business processes required to practice and carry on
business in the field of data collection, security and management (the
"Technology"). The initial term of the License is 10-years (the "Initial Term")
and shall automatically be renewed for successive 1-year terms (each, a "Renewal
Term") unless the Company elects to terminate the License by giving 30 days'
written notice prior to commencement of a Renewal Term. In exchange for the
License of the Technology, the Company shall issue to the Licensor 10,000,000
restricted shares of its common stock (which is an amount equal to $2,500,000
divided by $0.25, which was the closing market price of the Company's common
stock on the trading day prior to the effective date of the License Agreement).
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On July 23, 2021, the Company and Mark Palumbo entered into an agreement (the
"Spin-Off Agreement") whereby, at the Closing, the Company shall transfer 100%
of the issued and outstanding membership units of Xceptor LLC, an entity that
was a wholly-owned subsidiary of the Company, to Mark Palumbo (along with the
assets and liabilities associated with the prior business) for nominal
consideration as a condition of the Change-in-Control (the "Spin-Off").
Furthermore, at the Closing, that certain Technology License Agreement entered
into by and between the Company and Mark Palumbo dated April 29, 2019 (the
"Palumbo License Agreement") shall be terminated and the Company shall assign
all rights to the underlying Intellectual Property (as defined in the Palumbo
License Agreement) to Mark Palumbo.
On September 28, 2021, the Certificate of Incorporation of the Company was
amended to effect a change in the Company's name from "CannAssist International
Corp." to "The Electronic Servitor Publication Network, Inc." (the "Name
Change").
On October 9, 2021, the Closing of the Technology License Agreement occurred
whereby the Company received the License to the Technology and the Licensor
shall be 10,000,000 restricted shares of the Company's common stock, at a cost
basis of $0.25 per share.
On October 9, 2021, the Closing of the Spin-Off Agreement occurred whereby 100%
of the issued and outstanding membership units of Xceptor LLC was transferred to
Mark Palumbo (along with the assets and liabilities associated with the prior
business) in exchange for nominal consideration and the Palumbo License
Agreement was terminated.
Effective October 9, 2021, as a result of the transactions described above, the
business of the Company changed to focus on Electronic Sports Gaming technology
and the development of related infrastructure, specifically the development and
commercialization of a technology platform specifically designed for the
Electronic Sports and Electronic Gaming markets. The platform will provide an
omni-channel publishing tool, with talent identity protection and monetization
tools provided in line with interaction and media creation services. Further
publication and monetization products and services will be developed and
acquired to support these efforts.
On November 20, 2022, the Board approved the Company's amended and restated
By-laws. On and after the effective date of the By-laws, the annual meeting of
the Company's stockholder, shall be held annually on a date and at a time, and
via a format (in person, conference call, video conference etc.) designated by
the board of directors and stated in a notice of the meeting. Prior to the
amendment, the annual meeting was held on the third Thursday of May of each
calendar year at 10:30 am. Pursuant to the amended and restated By-laws, notice
of the meeting may now be served to stockholders by electronic transmission,
upon receipt of confirmation. Further, notice for special meetings of the
Company's board of directors may now be given with no less than 24 hours by
email or text, in addition to notice in person, by letter or telephone call. The
Company's officers, pursuant to the amended and restated By-laws will be
comprised of a chief executive officer, a president, a chief operating officer,
a chief financial officer, a secretary, a treasurer, a controller, and/or such
other officers as may from time to time be elected or appointed by the board of
directors. Consequently, new descriptions for the offices of chief operations
officer and chief financial officer have been included to the By-laws under
Sections 4.7 and 4.8, respectively. The amended and restated By-laws also
include an indemnification provision to indemnify the Company's officers and
directors to the maximum extent and in the manner permitted by the General
Corporation Law of Delaware.
The Company anticipates that it would need approximately $1,500,000 over the
next 12 months to continue as a going concern, satisfy its capital commitments
and continue its operations in accordance with its current business plan. In
addition to revenues generated from sales, the Chief Operating Officer and
several shareholders may fund the Company's operations, if needed, during the
next 12 months or until the Company can generate an ongoing source of capital
sufficient to independently continue its operations.
As of December 31, 2022, the Company had generated revenues of $0. At December
31, 2022, the Company had a total net loss of $447,250 and had an accumulated
deficit of $6,362,481.
For the period ended December 31, 2022, the Company's independent auditors
issued a report raising substantial doubt about the Company's ability to
continue as a going concern. The continuation of the Company as a going concern
is dependent upon financial support from its principal stockholders, its ability
to obtain necessary equity financing, or its ability to sell its services to
generate consistent profitability.
Revenues and Losses
During the year ended December 31, 2022, the Company posted revenues of $0. For
that same year ended, total operating expenses were $441,761, consisting of
general and administrative expenses of $19,672, professional fees of $73,800 and
stock-based compensation fees of $348,289. Loss from operations and before
income taxes totaled $441,761. Other expenses consisted of $5,489 in interest
expense. After income tax expense of $0, the Company generated a net loss from
continuing operations of $447,250, and a total net loss of $$447,250.
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Liquidity and Capital Resources
The Company had total assets of $17,139.
Since its inception, the Company has devoted most of its efforts to business
planning, research and development, recruiting management and staff and raising
capital. Accordingly, the Company was considered to be in the development stage
until it recently began formal operations. The Company generated limited
revenues since its inception and there is no assurance of future revenues.
The Company's proposed activities will necessitate significant uses of capital
beyond 2022.
There is no assurance that the Company's activities will generate sufficient
revenues to sustain its operations without additional capital, or if additional
capital is needed, that such funds, if available, will be obtainable on terms
satisfactory to the Company. Accordingly, given the Company's limited cash and
cash equivalents on hand, the Company will be unable to implement its business
plans and proposed operations unless it obtains additional financing or
otherwise is able to generate revenues and profits. The Company may raise
additional capital through sales of debt or equity, obtain loan financing or
develop and consummate other alternative financial plans. In the interim, the
Company plans to rely on its primary shareholder to continue his commitment to
fund the Company's continuing operating requirements. Management anticipates a
total capital raise of $1,500,000 over the course of the following four
consecutive quarters through private placements; provided, however, that the
Company will require a minimum of $1,500,000 for the next 12 months to fund its
operations, which will be used to fund expenses related to Platform Finalization
Costs, Initial Marketing, Furniture, Fixtures, and Equipment, Working Capital,
Professional Fees and Licensure and Miscellaneous Development Costs. Management
believes that this capital would allow the Company to meet its operating cash
requirements and would facilitate the Company's business of selling and
distributing its products. Management also believes that the acquisition of such
assets would generate revenue to cover overhead cost and general liabilities of
the Company and allow the Company to achieve overall sustainable profitability.
Discussion of the Year Ended December 31, 2022, as compared to the Year Ended
December 31, 2021
For the years ended December 31, 2022 and 2021, all of revenue and cost of
revenue have been included in the loss from discontinued operations (refer to
Note 10).
During the year ended December 31, 2022, the Company posted operating expenses
from continuing operations of $441,761, consisting of general and administrative
expenses of $19,672, professional fees of $73,800 and stock-based compensation
of $348,289. For the year ended December 31, 2021, all operating expense have
been included in the loss from discontinued operations (refer to Note 10).
During the year ended December 31, 2022, the Company posted a net loss of
$447,250 from continuing operations for a total net loss for the year of
$447,250, compared to a net loss of $166,077 from discontinued operations for
the year ended December 31, 2021.
During the year ended December 31, 2022, the Company used $63,134 of cash in
operating activities and generated $80,273 in cash from financing activities.
The Company did not use or generate any cash in investing activities.
Plan of Operations
For the next few months, the Company will be focusing on developing and
launching its platform, marketing and identifying customers.
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There is no assurance that the Company's activities will generate sufficient
revenues to sustain its operations without additional capital, or if additional
capital is needed, that such funds, if available, will be obtainable on terms
satisfactory to the Company. Accordingly, given the Company's limited cash and
cash equivalents on hand, the Company will be unable to implement its business
plans and proposed operations unless it obtains additional financing or
otherwise is able to generate revenues and profits. The Company may raise
additional capital through sales of debt or equity, obtain loan financing or
develop and consummate other alternative financial plans. In the interim, the
Company plans to rely on its primary shareholder to continue his commitment to
fund the Company's continuing operating requirements. Management anticipates a
total capital raise of $1,500,000 over the course of the following four
consecutive quarters through private placements; provided, however, that the
Company will require a minimum of $1,500,000 for the next 12 months to fund its
operations, which will be used to fund expenses related to Platform Finalization
Costs, Initial Marketing, Furniture, Fixtures, and Equipment, Working Capital,
Professional Fees and Licensure and Miscellaneous Development Costs. Management
believes that this capital would allow the Company to meet its operating cash
requirements and would facilitate the Company's business of selling and
distributing its products. Management also believes that the acquisition of such
assets would generate revenue to cover overhead cost and general liabilities of
the Company and allow the Company to achieve overall sustainable profitability.
Equipment Financing
The Company has no existing equipment financing arrangements.
Potential Revenue
The Company has developed a technology platform that is specifically designed
for digital activation and engagement. The platform's functionality will allow
its clients to better engage with their audiences on a global level. The
platform will also provide in depth engagement analytics.
The Company plans to generate its profits via several revenue streams that will
generate recurring streams of revenue for the business on a defined periodic
basis.
Alternative Financial Planning
As of December 31, 2022, the Company had cash available of $17,139.
Management anticipates a total capital raise of $1,500,000 over the course of
the following four consecutive quarters through private placements. Other than
as stated herein, the Company has no alternative financial plans at the moment.
If the Company is not able to successfully raise monies as needed through a
private placement or other securities offering (including, but not limited to, a
primary public offering of securities), the Company's ability to operate
effectively will be severely jeopardized.
The Company does not anticipate that it will generate revenue sufficient to
cover its planned operating expenses, and the Company must obtain additional
financing in order to develop and implement its business plan and proposed
operations. If the Company is not successful in generating sufficient revenues
and/or obtaining additional funding to develop its business plan and proposed
operations, this could have a material adverse effect on its business, results
of operations liquidity and financial condition.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
Critical Accounting Policies
Refer to Note 2 of our financial statements contained elsewhere in this Form
10-K for a summary of our critical accounting policies and recently adopted and
issued accounting standards.
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ELECTRONIC SERVITOR PUBLICATION NETWORK, INC. 