UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2020
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number 000-54803
ECO SCIENCE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
|
Nevada
|
46-4199032
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
1135 Makawao Avenue, Suite 103-188
Makawao, Hawaii 96768
|
96768
|
|
(Address of principal executive offices)
|
(Zip Code)
|
|
(833) 464-3726
|
|
|
Registrant's telephone number
|
|
Securities registered pursuant to Section 12(b) of the Act: None
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
None
|
Not applicable
|
Not applicable
|
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
|
Yes
|
[ ]
|
No
|
[X]
|
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
|
Yes
|
[ ]
|
No
|
[X]
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
|
Yes
|
[X]
|
No
|
[ ]
|
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
Yes
|
[X]
|
No
|
[ ]
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large
accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer
|
[ ]
|
Accelerated filer
|
[ ]
|
|
Non-accelerated filer
|
[ ]
|
Smaller reporting company
|
[X]
|
|
Emerging growth company
|
[X]
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act.
|
Yes
|
[ ]
|
No
|
[X]
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
|
Yes
|
[ ]
|
No
|
[X]
|
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was $323,648.72.
As of June 15, 2020, the Issuer had 48,557,572 common shares issued and 47,557,572 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
ii
TABLE OF CONTENTS
|
Item No.
|
|
|
|
Page No.
|
|
|
PART I
|
|||||
|
|
1
|
|
|||
|
|
8
|
|
|||
|
|
8
|
|
|||
|
|
9
|
|
|||
|
|
9
|
|
|||
|
|
10
|
|
|||
|
|
|
|
|
|
|
|
PART II
|
|||||
|
|
11
|
|
|||
|
|
13
|
|
|||
|
|
14
|
|
|||
|
|
18
|
|
|||
|
|
18
|
|
|||
|
|
19
|
|
|||
|
|
19
|
|
|||
|
|
20
|
|
|||
|
|
|
|
|
|
|
|
PART III
|
|||||
|
|
21
|
|
|||
|
|
26
|
|
|||
|
|
31
|
|
|||
|
|
32
|
|
|||
|
|
35
|
|
|||
|
|
|
|
|
|
|
|
|
|||||
|
|
36
|
|
|||
|
|
36
|
|
|||
|
|
|
|
37
|
|
|
iii
FORWARD-LOOKING STATEMENTS
This Report contains predictions, estimates and other forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results,
performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Annual Report. You should read this Report and the
documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which
they are made, except as required by federal securities and any other applicable law.
In this form 10-K references to "we", "us", "our", "ESSI", and "Eco Science"" mean Eco Science Solutions, Inc., a Nevada corporation. References to "Ga-Du" mean Ga-Du Corporation, our wholly owned subsidiary.
AVAILABLE INFORMATION
We file annual, quarterly and special reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov. You can also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further
information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Eco Science
Solutions, Inc. 1135 Makawao Avenue, Suite 103-188 Makawao, Hawaii 96768.
iv
PART I
|
BUSINESS
|
Corporate Overview
The Company's principal executive office is located at 1135 Makawao Avenue, Suite 103-188 Makawao, Hawaii 96768. The Company's telephone number is 833-GoHerbo (833 464-3726). The Company's website is
www.useherbo.com.
The Company's common stock symbol is "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, and before trading can resume. The Company is in the process of getting a Form 15c2-11 filed; as soon as it meets FINRA's
criteria, it will be filed. This is anticipated to take place during the third quarter of fiscal 2021.
On February 14, 2014, the company effected a 1,000- for 1 reverse split. All share and per share figures herein reflect the impact of the split.
Corporate History
Formation and Business Development
The Company was incorporated in the state of Nevada on December 8, 2009, under the name Pristine Solutions, Inc.
On March 7, 2012, the Company filed a Certificate of Change with the State of Nevada increasing the shares of common stock from 100,000,000 to 650,000,000 common stock; par value $0.0001 and decreasing the shares of
Preferred Stock from 100,000,000 to 50,000,000; par value $0.001.
On August 23, 2012, the Company changed its fiscal year from December 31 to January 31.
During the fiscal years ended January 31, 2012 thorough 2015 the Company acquired various projects and corporate entities across various industry sectors in an effort to commence revenue generating operations. As a
result of the transition in business focus, management teams and controlling shareholders over these fiscal periods, the Company changed its name from Pristine Solutions Inc. to Eaton Scientific Systems Inc. effective November 27, 2012, and
subsequently to Eco Science Solutions, Inc. during February 2014, in order to better reflect its evolving business operations. The Company effected a 1000-to-1 reverse stock split in February 2014.
On December 15, 2015, our current management, Mr. Jeffery Taylor and to Mr. Don Taylor became the controlling shareholders of the Company and continue to control approximately 20% of the issued and outstanding
shares.
Effective December 17, 2015, Mr. Jeffery Taylor was appointed to serve as Chief Executive Officer and President of the Company and Mr. Don Lee Taylor was appointed to serve as Chief Financial Officer of the Company.
Upon this change in control, the direction of business turned to a focus on eco-friendly products and related businesses. Between 2015 and 2017 the Company worked to develop certain apps known as Herbo and Fitrix for introduction to the
marketplace.
The Fitrix app is a powerful and flexible companion, which helps users keep track of your day-to-day fitness routines, dietary habits and alternative medicine intake. Fitrix users can measure and track anything and
everything when it comes to their health and wellness. One can track the accomplishment of custom created goals, monitor dietary, exercise and alternative medication schedules, be notified of important milestones, establish timelines to develop
effective habits ... all leveraging a unique notebook and calendar. During fiscal 2020, the Company determined to cease support of the Fitrix app in favour of its Herbo app and suite of enterprise software.
The Herbo apps include a database of over 14,000 alternative medicine locations and delivery services, doctors who provide evaluations, and local shops that sell relevant product. The Herbo app helps consumers find
products and services that support the intake of alternative medicines for a more naturopathic way of living. Expansions to Herbo over the most recent fiscal years include Herbo For Consumers, Herbo for Business and Herbo for Drivers.
1
During fiscal 2018 ESSI 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, on June 21, 2017, Mr. John Lewis and Mr. S. Randall Overson 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. 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.
During February 2019 the Company determined to focus on the growth of its Herbo branding with the development of an easy-to-use enterprise software that allows clients to
simplify their processes, remain compliant, and enjoy steady growth. We engaged a third party to provide development services relative to a suite of software for managing operations including accounting, inventory control and
management, data management, reporting and compliance, lead generation and marketing, CRM sales management and certain other key functions.
On March 1, 2019 the Company and Haiku Holdings LLC "Haiku", a company controlled by our COO, Mike Rountree, entered into a Trademark Licensing Agreement. Under the terms of the agreement, the Licensed Marks,
including and incorporating Herbo, may be used by Haiku to facilitate the Company's business including lead generation and referral services. Further, as a result of any revenue generating business generated by Haiku, the Company shall receive
90% of the net revenue. The license remains in effect for a period of ten (10) years from the effective date of the agreement and may be terminated on sixty (60) days written notice by the Company should there be a material breach which remains
uncured, or at any time on ten (10) days written notice by Haiku without cause.
2
Effective July 1, 2019, the Company (“Reseller”) entered into a Software Reseller Agreement with respect to the Herbo suite of software offerings with Haiku (“Licensor”). Licensor is the owner of certain computer
software-as-a-service offerings and related documentation that it provides to end users. Under the terms of the agreement, the Reseller desires (a) a non-exclusive license of the Software and (b) a non-exclusive, non-transferable, non-assignable
and limited right and license to reproduce, market, and distribute such Software, and Licensor agrees to grant to Reseller such right and license. Under the terms of the agreement for each respective End User License Agreement (EULA) entered into
with an End User, Reseller shall pay Licensor the corresponding license fee for the software usage of 10% of gross receipts from End Users. Fees are due on or prior to the 15th day of each calendar month in respect of all gross receipts received
from End Users during the previous calendar month.
During the fiscal year ended January 31, 2020 the company recorded $5,973 as license fees payable to Haiku under costs of sales as a result of gross revenues generated from software sales of $59,729.
Current Business and Strategy
Our business operations commenced generating modest revenues subsequent to our fiscal year ended January 31, 2018 and up to the period ended October 31, 2018, when the initial phase of our eXPOTM beta
revenue model testing were complete. 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. During fiscal 2020 we took steps to shift our focus to monetizing our Herbo branded apps and recently developed enterprise software to assist companies in the cannabis industry to
simplify their processes, remain compliant, and enjoy steady growth. Under the terms of our licensing agreements with Haiku we commenced generating revenues from licensing of our software during the current fiscal year and continue to
seek expansion of this growing area of operation.
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.
Operations of Ga-Du
Our wholly owned subsidiary, Ga-Du, acquired in June 2017, offers the following suite of business functions and opportunities:
Financial Services Platform Summary
Ga-Du has developed multiple financial services applications. It has created a software platform that captures individual and business entity data. Ga-Du platform is a secure portal for account access and features
incorporating current banking standards for operating and securing online data. In terms of Financial Services, the Ga-Du platform uses a strict and proprietary Know-Your-Customer (KYC) process, this ensures compliance regardless of the underlying
usage. This software can be used for membership capture, registrations of various kinds, for customer accounts retention and marketing, and/or for bank accounts. In addition, the Ga-Du banking platform has been enhanced for mobile devices. The
mobile payment platform accommodates the purchasing of products and services like those offered by ESSI, and/or a combined entity, as well as other products and services both inside and outside the cannabis industry. By targeting digital customers
rather than brick-and-mortar customers, the digital Ga-Du platform acquired by ESSI is ready to provide banking services to any underserved area.
3
Inventory Control and Advisory Systems Business Summary
Retail marijuana is arguably the fastest growing segment of the cannabis industry. National monthly sales numbers seem to demonstrate, average year-over-year increases of over 100% for some years following
legalization. However, cannabis retailers still face hurdles finding working capital due to the federal regulation of cannabis as a Schedule I drug. This lack of capital results in a potential market disruption opportunity. Because businesses
have not had financial resources to develop their own effective business solutions of various kinds, they represent potential "soft targets" for Ga-Du software and enterprise processes for inventory control and other services. ESSI, through its
acquisition of Ga-Du Corporation, will make available its Ga-Du solutions, advisory services, and inventory control systems (from raw materials to finished product) directly to licensed retail businesses, as well as work-flow analysis and
management. Ga-Du has an experienced retail management team which has put in place similar as well as other services systems and processes for inventory acquisition and control. These systems and processes can be licensed to regulate marijuana
retail businesses potentially, allowing the retail business to focus on the customer experience while letting ESSI provide the backend technology and systems. The Ga-Du Management team believes that combining the business customer network of ESSI
with the technology and systems that Ga-Du has assembled, in a manner that can allow retail businesses rapid access to cutting-edge technology and retail-marijuana-specific inventory control solutions, may provide ESSI with an edge in the rapidly
expanding area of cannabis advisory/business services.
Master marketing agreement and AFN
Through our executed LMMA between Ga-Du and AFN, Ga-Du has the exclusive right to undertake marketing responsibilities of AFN's eXPOTM platform to businesses globally for CBD, Hemp and Cannabis, provided
that such sales do not include Cannabis sales which have not been legalized by that territory’s laws.
AFN is registered with FinCEN (MSB Registration Number: 31000094744769) as a non-financial services institution, compliant with the AML/BSA guidelines of FinCEN, and is regulated by the IRS. Operating a mobile
application known as eXPO™ electronic eXchange Portal, AFN provides financial and marketing services to businesses and individuals, which are challenged in the traditional banking systems, and generally are those that require more intensive
compliance then banks are willing, or able to perform. One such industry is the cannabis industry; however the portal has application to various other industry segments. AFN is configured to establish Membership relationships with businesses in
this industry following a full compliance audit on the business, where applicable, allowing licensed cannabis businesses and other clients an automated tax payment system and Internet banking services including wire transfers, ACH, electronic
checks, armored pickup of cash, and bill pay, payroll services, and inventory control "seed to "CPA". AFN has partnered with our enterprise software suite “Herbo” to augment its services with an enterprise software bundle offering extended
services such as business accounting, business insurance, director insurance, employee payroll, inventory system, and credit/debit card management. Additionally, the AFN automated tax payment system
can calculate and deliver state tax payments within 48hrs after the funds are made available in a taxpayer's account. The AFN eXPO™ solution is a federally registered solution in the United States
which incorporates an in-depth anti-laundering and "Know Your Customer" process, ensuring compliance with the Cole memo and all federal and state regulations. Further bundled into this software solution is the "seed to CPA" accounting system, which
provides a frugal and efficient way for businesses to report and manage their finances. In terms of tax collection, account services, and business features, this software is unparalleled at providing fast, compliant, and traceable cash management
solutions.
Under the agreements, AFN will provide all software platform(s) necessary to deliver the Financial Services, assure compliance with appropriate Federal Requirements and international money laundering restrictions,
administer all compliance, enrollment, and collection of fees from the Members contracting with AFN, provide any and all necessary marketing or other materials describing AFN's services and program, will forward any required Sales Commissions to
the appropriate recipients, and assure adequate customer service at all times.
AFN will be responsible for the functional operation of any software utilized in providing its services and for the administration and handling of monies and/or any credits relating thereto and, in the event of any
claim, cause of action or lawsuit (together the "Claims") for failure to properly administer such responsibilities, AFN shall have the sole obligation to defend such Claim(s) and shall fully indemnify, defend and hold harmless Ga-Du from and
against such Claims.
AFN will maintain accounting and data concerning the income from the Cannabis Industry and will generate a monthly income statement as to each of the following revenue streams: (i) membership fees; (ii) cash
depository fees; (iii) merchant processing and credit card fees; (iv) transfer fees; and (v) advertising fees.
AFN and Ga-Du split compensation derived from income generated from enrollees of Ga-Du according to a fee schedule established for each level of business relationship. As noted above, while the revenue sharing
agreement is currently based on territory, AFN and GA-Du are currently re-negotiating to include all service areas.
During fiscal 2019 we completed a beta program restricted to the State of Colorado whereby we generated revenues between May and October 2018 under this business segment and while initial revenue sharing was
modest, we expect this segment to become a viable revenue stream in the Company's portfolio during fiscal 2021. 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.
4
Herbo App
Herbo
The Herbo apps include a database of over 14,000 alternative medicine locations and delivery services, doctors who provide evaluations, and local shops that sell relevant product. The Herbo app helps consumers find
products and services that support the intake of alternative medicines for a more naturopathic way of living.
Consumers may use the UseHerbo ecommerce platform and access "The Pursuit of Fine Herb" original content. Under the direction and vision of our officers and directors, Jeff Taylor and Don Taylor, the Company
continues to source and release into the market relevant products for sale coupled with unique original, educational content. Initially created and copyrighted content within two distinct channels: one branded Eco Science Solutions, which is
focused on Legislative, Geo-political, Financial, , and general Macro-trends within the Cannabis marketplace; and one branded Herbo, which is focused on user-generated that revolves around Daily lifestyle, Medical and Recreational Usage content,
Reviews of Application, Products, Technologies and Commerce Options, as well as Food Pairings and Edibles.
Image of Herbo application:
A component of our business is involved with the medical marijuana category. As evidenced in the following services offered:
Herbo for Consumers
Consumers can use our Consumer-facing Herbo app with the following core e-commerce and social networking features: (1) location and directory listings of cannabis-related businesses that include physical
dispensaries, delivery services, smoke shops and doctors; (2) product catalog of cannabis-related products that can be browsed; (3) e-wallet that stores credit cards and specialty gift cards, allowing for seamless electronic payments; (4) discrete
messaging that allows for consumers to communicate directly with cannabis-related businesses; and (5) content streams that allow for consumer-generated and business-generated content to be captured and share amongst the Herbo community to build
engagement and loyalty.
Herbo's e-commerce features allow consumers to locate, access, and buy premium cannabis-related products easily, conveniently and securely. Its social networking features focus on engaging and growing the Herbo
community with like-minded enthusiasts.
5
Herbo for Business
Enterprise-focused app for marijuana businesses with the following core features: (1) claiming of business listing; (2) updating and management of business profile information; (3) messaging that allows for
management of businesses to discretely communicate directly with cannabis enthusiasts; (4) updating and management of product catalog and product offerings; (5) affiliate marketing; and (6) customer relationship management tools that support the
targeting and engagement of prospective, current, and past customers.
Herbo for Drivers
Herbo is currently developing a branded delivery service for its client base. We anticipate that “Herbo Drivers” will be able to receive, coordinate and provide same-day delivery services for consumer orders that are
purchased on Herbo and desired immediately. The Herbo Drivers app once complete will integrate seamlessly with Herbo's consumer and business platforms to provide customers with enhanced visibility and tracking of their Herbo orders.
While ESSI does not grow or distribute medical marijuana, certain professional customers of ours do. Thus, adverse regulatory legislation may have a material negative effect on
our business.
Enterprise software
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. Our software has provided businesses with intelligence software for over 15 years, while offering seed-to-sale software solutions to the Cannabis and Hemp
industries since 2010.
Cultivators, Processors, Manufacturers, Labs, Distributors, Transporters, Dispensaries, Retailers and Regulators, from seed-to-CPA are all target users of Herbo.
We have developed a one-stop-shop our clients’ business needs with a goal of providing all services with one single login:
|
•
|
Point-of-Sale
|
|
•
|
Bookkeeping & Banking
|
|
•
|
Inventory Tracking & Management
|
|
•
|
Compliance & Reporting
|
|
•
|
Tax & Accounting
|
|
•
|
Payroll & Employee Time Tracking
|
|
•
|
e-Commerce
|
|
•
|
Merchant Processing Integration
|
|
•
|
CRM & Customer Loyalty
|
Customers can support any business with the Herbo end-to-end enterprise software, no matter size or industry
|
•
|
Single dispensary operations
|
|
•
|
Integrated vertical operations
|
|
•
|
Multiple site operations with
|
Our complete Herbo software product website is available at www.useherbo.com.
6
Strategy
In recent years the Company has changed the focus of its original strategy from App based revenue to revenue generated from several key operational areas.
The Company intends to be 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 currently 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.
Over the past several years, ESSI has developed 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 now 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.
Intellectual Property
The Company has registered and has in process applications for certain Herbo trademarks. There is no other intellectual property.
Government Regulations
Cannabis is currently a Schedule I controlled substance under the Controlled Substances Act (CSA) and is, therefore, illegal under federal law. Even in those states in which the use of cannabis has been legalized
pursuant to state law, its use, possession or cultivation remains a violation of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States, a lack of safety for use under
medical supervision and a high potential for abuse. The U.S. Department of Justice (the “DOJ”) defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical
dependence.” If the federal government decides to enforce the CSA, persons that are charged with distributing, possessing with intent to distribute or growing cannabis could be subject to fines and/or terms of imprisonment, the maximum being life
imprisonment and a $50 million fine, even though these persons are in compliance with state law.
In light of such conflict between federal laws and state laws regarding cannabis, the previous administration had effectively stated that it was not an efficient use of resources to direct federal law enforcement
agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. Although they have not done so, the current administration could decide to strongly enforce the federal laws applicable to
cannabis. See Justice Department Memo on Marijuana Enforcement discussed below. Any such change in the federal government’s enforcement of current federal laws could impact our planned business operation.
Because the business activities of businesses, engaged in the medicinal cannabis industry, that we may direct our customers is illegal under federal law, we may be deemed to be aiding and abetting illegal activities through the location services
that we provide to our customers, relative to the cannabis industry. As a result, we may be subject to actions by law enforcement authorities, which would materially and adversely affect our business.
Legislation is currently pending in the U.S. Congress which would reclassify cannabis from Schedule 1 to Schedule 3. If enacted into law, such change could provide a material benefit to businesses engaged in the cultivation and sale of cannabis,
including eligibility for federal tax deductions, access to the banking system and generally de-criminalizing the use or sale of cannabis where it is legal under applicable state laws.
The current administration has indicated that it will closely scrutinize the cannabis industry, in particular, recreational marijuana. While we do not directly engage in the sale or cultivation of cannabis, changes
in laws, rules and regulations could have a material adverse or positive effect on our business and financial condition.
Justice Department Memo on Marijuana Enforcement
Because of the inconsistencies in federal and state law, on January 4, 2018, the Department of Justice (DOJ) issued a memo on federal marijuana enforcement policy announcing what it deemed to be a return to the rule
of law and the rescission of previous guidance documents which would include the so called Cole Memorandum. Since the passage of the Controlled Substances Act in 1970, Congress has generally prohibited the cultivation, distribution, and possession
of marijuana. In the memorandum, the Attorney General directed all U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities. The DOJ asserts this
return to the rule of law is also a return of trust and local control to federal prosecutors who know where and how to deploy Justice Department resources most effectively to reduce violent crime, stem the tide of the drug crisis, and dismantle
criminal gangs.
On April 13, 2018 it was announced that President Donald Trump had promised Senate Republican Cory Gardner that he will support congressional efforts to protect states that have legalized marijuana, defusing a
months-long standoff between Sen. Cory Gardner and the administration over Justice Department nominees. Trump told Gardner that despite the DOJ memo of January 4, 2018, the marijuana industry in Colorado will not be targeted. A bill has not been
finalized, but discussion has commenced to find legislation that would, in effect, make clear the federal government cannot interfere with states that have voted to legalize marijuana.(1)
(1)https://www.washingtonpost.com/politics/trump-gardner-strike-deal-on-legalized-marijuana-ending-standoff-over-justice-nominees/2018/04/13/2ac3b35a-3f3a-11e8-912d-16c9e9b37800_story.html
7
Industrial Hemp
Industrial hemp is now legal in the U.S., which advocates hope could eventually loosen laws around the popular marijuana extract CBD.
The 2018 farm bill which legalized hemp including a variety of cannabis that does not produce the psychoactive component of marijuana, paved the way to legitimacy for an agricultural sector that has been operating on
the fringe of the law. Industrial hemp has made investors and executives swoon because of the potential multibillion-dollar market for cannabidiol, or CBD, a non-psychoactive compound that has started to turn up in beverages, health products and
pet snacks, among other products.
Currently, it appears that CBD will remain largely off-limits for ingestible products. The Food and Drug Administration issued a statement saying that despite the new status of hemp, CBD is still considered a drug
ingredient and remains illegal to add to food or health products without the agency’s approval, disappointing many hemp advocates, who said they will continue to work to convince the FDA to loosen its CBD rules. The FDA said some hemp ingredients,
such as hulled hemp seeds, hemp seed protein and hemp seed oil, are safe in food and won’t require additional approvals.
The farm bill places industrial hemp, which is defined as a cannabis plant with under 0.3% of tetrahydrocannabinol, or THC, under the supervision of the Agriculture Department and removes CBD from the purview of the
Controlled Substances Act, which covers marijuana. The law also “explicitly” preserved the Food and Drug Administration’s authority to regulate products containing cannabis, or cannabis-derived compounds.
Facilities
The Company's corporate headquarters are located at 1135 Makawao Avenue, Suite 103-188 Makawao, Hawaii 96768.
Employees
As of January 31, 2020, the Company had 3 employees, inclusive of our executive officers and directors and one special consultant under contract. The Company continues to use
independent contractors on an as needed basis with respect to our software development initiatives.
Research and Development
There will be an ongoing requirement to undertake research and development as our existing apps and future apps are presented to the marketplace. During fiscal 2020 and 2019 we expended $157,837 and $657,948
respectively on improvement to our apps, the platform we use to manage our websites, social media and applications and our now commercialized enterprise software.
Reports to Security Holders
The Company is not required to deliver an annual report to its stockholders, but will voluntarily send an annual report, together with the Company's annual audited financial
statements upon request. The Company is required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. The Company's Securities and Exchange Commission filings are
available to the public over the Internet at the SEC's website at www.sec.gov.
The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The Internet address of the site is www.sec.gov.
|
RISK FACTORS
|
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
|
UNRESOLVED STAFF COMMENTS
|
None.
8
|
PROPERTIES
|
The Company's corporate headquarters are located at 1135 Makawao Avenue, Suite 103-188 Makawao, Hawaii 96768. We have entered into a two-year lease commencing April
1, 2016 for a total of 253 square feet of office and 98 square feet of reception space. Monthly base rent for the period April 1, 2016 to March 31, 2017 is $526.50 per month and increases to $552.83 per month for the subsequent year ending March
31, 2018. Operating costs for the first year of the lease are estimated at $258.06 per month. The Company has remitted a security deposit in the amount of $817.24 in respect of the lease. Further our officers and directors have executed a
personal guarantee in respect of the aforementioned lease agreement. On expiry of the lease, and to date, the Company continues to occupy the space on a month to month basis at a rate of approximately $860 per month including operating costs.
On July 21, 2017, we entered into a Sublease for office space in Seattle, Washington commencing August 1, 2017 and terminating the earlier of (a) March 31, 2020, or (b) the date this sublease is terminated by sub
landlord upon the occurrence of an event of default, the sublease covers a total of 6,120 square feet of office space. Monthly base rent for the period September 1, 2017 to July 31, 2018 is $14,535, and the first month of rent is free of charge. In
the second year the monthly base rent increases to $15,173. In the third year the monthly base rent increases to $15,810. The Company has remitted a security deposit in the amount of $15,810 in respect of this sublease. The Company has passed on
recording the deferred rent relative to the one free month of rent contained within the lease as it has been determined to be immaterial. During the period ended April 30, 2018 the Company accrued rent in respect to this sublease for the months of
March and April 2018 including applicable operating costs. During fiscal 2019, the Company has abandoned the space without payment or further accruals, and the lease has been effectively terminated. A balance of $21,051 remains due and payable.
The Company does not own any property.
|
LEGAL PROCEEDINGS
|
(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.
(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.
9
(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.
(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.
Other than as set out above, the Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There
are no proceedings in which its director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.
|
MINE SAFETY DISCLOSURES
|
Not applicable
10
PART II
|
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
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.
|
Quarter Ended
|
High
|
Low
|
||||||
|
January 31, 2020
|
$
|
0.06
|
$
|
0.001
|
||||
|
October 31, 2019
|
$
|
0.035
|
$
|
0.001
|
||||
|
July 31, 2019
|
$
|
0.045
|
$
|
0.001
|
||||
|
April 30, 2019
|
$
|
0.055
|
$
|
0.001
|
||||
|
January 31, 2019
|
$
|
0.058
|
$
|
0.015
|
||||
|
October 31, 2018
|
$
|
0.109
|
$
|
0.016995
|
||||
|
July 31, 2018
|
$
|
0.36
|
$
|
0.02
|
||||
|
April 30, 2018
|
$
|
0.239
|
$
|
0.10
|
||||
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.
11
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.
12
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.
|
SELECTED FINANCIAL DATA
|
As a "smaller reporting company", the Company is not required to provide the information required by this Item.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
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.
13
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.
14
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.
15
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
|
For the year ended
|
||||||||||||
|
January 31,
|
||||||||||||
|
2020
|
2019
|
Variances
|
||||||||||
|
Depreciation and impairment
|
4,423
|
367,391
|
$
|
(362,968
|
)
|
|||||||
|
Legal, accounting and audit fees
|
425,741
|
707,155
|
(281,414
|
)
|
||||||||
|
Management and consulting fees
|
785,541
|
1,287,333
|
(501,792
|
)
|
||||||||
|
Research, development, and promotion
|
157,837
|
657,948
|
(500,111
|
)
|
||||||||
|
Office supplies and other general expenses
|
98,594
|
246,353
|
(147,759
|
)
|
||||||||
|
Advertising and marketing
|
49,099
|
942,021
|
(892,922
|
)
|
||||||||
|
Total operating expenses
|
1,521,235
|
4,208,201
|
$
|
(2,686,966
|
)
|
|||||||
16
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.
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.
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.
Revenue Recognition
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.
17
Cost of Revenue
Costs of revenue consist of the direct expenses incurred to generate revenue. Such costs are recorded as incurred. Our cost of revenue will consist consists primarily of fees associated with the operation of our
social media venues and fulfillment of specific customer advertising campaigns related to our downloadable apps. In the case of revenue earned by our wholly owned subsidiary, proceeds allocated to our revenue interest are net of associated costs.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are
the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments
issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Convertible Debt and Beneficial Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s)
should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is
evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.
Stock Settled Debt
In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the
trading price of the Company's common shares as traded in the over-the-counter market. In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value
transferred to the convertible note holder from the fixed discount conversion feature. As of January 31, 2020, and January 31, 2019, $248,432 for the value of the stock settled debt for certain convertible notes is included in the Convertible
note, net account under balance sheet. (see Note 10).
Recently issued accounting pronouncements
The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on
its results of operations or financial position.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
As a "smaller reporting company", the Company is not required to provide the information required by this Item.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
The Company's consolidated audited financial statements are stated in United States dollars (US$) 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.
18
ECO SCIENCE SOLUTIONS, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended January 31, 2020 and 2019
|
Page
|
|
| F-2 | |
| F-3 | |
| F-4 | |
| F-5 | |
| F-6 | |
| F-7 to F-23 |
F-1
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
F-2
|
January 31,
2020
|
January 31,
2019
|
|||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash
|
$
|
2,877
|
$
|
1,609
|
||||
|
Account receivable
|
23,441
|
-
|
||||||
|
Interest receivable
|
-
|
18,833
|
||||||
|
Prepaid expenses,
|
32,992
|
28,127
|
||||||
|
Convertible note
|
-
|
100,000
|
||||||
|
Total current assets
|
59,310
|
148,569
|
||||||
|
|
||||||||
|
Property and equipment, net
|
1,741
|
6,164
|
||||||
|
|
||||||||
|
TOTAL ASSETS
|
$
|
61,051
|
$
|
154,733
|
||||
|
|
||||||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable and accrued expenses
|
$
|
2,871,720
|
$
|
2,212,166
|
||||
|
Related party payables
|
1,365,333
|
1,040,349
|
||||||
|
Notes payable, short-term, related party
|
1,298,649
|
502,739
|
||||||
|
Notes payable
|
4,115,118
|
4,122,618
|
||||||
|
Convertible note, net
|
1,656,213
|
1,656,213
|
||||||
|
Total current liabilities6
|
11,307,033
|
9,534,085
|
||||||
|
|
||||||||
|
Total liabilities
|
11,307,033
|
9,534,085
|
||||||
|
|
||||||||
|
Stockholders' deficit
|
||||||||
|
Preferred stock, $0.001 par, 50,000,000 shares authorized, none issued and outstanding at January 31, 2020 and January 31, 2019
|
-
|
-
|
||||||
|
Common stock, $0.0001 par, 650,000,000 shares authorized, 48,557,572 shares issued and 47,557,572 outstanding at January 31, 2020 and January 31, 2019
|
4,856
|
4,856
|
||||||
|
Treasury stock (1,000,000 shares issued at a cost of $0.0075 per share)
|
(7,500
|
)
|
(7,500
|
)
|
||||
|
Additional paid in capital, common, and deferred compensation
|
61,804,744
|
61,804,744
|
||||||
|
Accumulated deficit
|
(73,048,082
|
)
|
(71,181,452
|
)
|
||||
|
Total stockholders' deficit
|
(11,245,982
|
)
|
(9,379,352
|
)
|
||||
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
61,051
|
$
|
154,733
|
||||
The accompanying notes are an integral part of these audited condensed consolidated financial statements
F-3
ECO SCIENCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
For the Fiscal Year ended
January 31,
|
|||||||
|
|
2020
|
2019
|
||||||
|
|
||||||||
|
Revenue
|
$
|
52,835
|
$
|
-
|
||||
|
Revenue, related parties
|
6,894
|
-
|
||||||
|
Total revenue
|
59,729
|
-
|
||||||
|
|
||||||||
|
Operating expenses:
|
||||||||
|
Cost of revenue
|
36,329
|
-
|
||||||
|
Depreciation and impairment
|
4,423
|
367,391
|
||||||
|
Legal, accounting and audit fees
|
425,741
|
707,155
|
||||||
|
Management and consulting fees
|
785,541
|
1,287,333
|
||||||
|
Research, development, and promotion
|
157,837
|
657,948
|
||||||
|
Office supplies and other general expenses
|
98,594
|
246,353
|
||||||
|
Advertising and marketing
|
49,099
|
942,021
|
||||||
|
Total operating expenses
|
1,557,564
|
4,208,201
|
||||||
|
|
||||||||
|
|
||||||||
|
Net operating loss
|
(1,491,835
|
)
|
(4,208,201
|
)
|
||||
|
|
||||||||
|
Other income (expenses)
|
||||||||
|
Interest income
|
9,000
|
12,000
|
||||||
|
Interest expense
|
(249,962
|
)
|
(586,702
|
)
|
||||
|
Bad debt
|
(127,833
|
)
|
-
|
|||||
|
Total other income (expenses)
|
(368,795
|
)
|
(574,702
|
)
|
||||
|
|
||||||||
|
Net loss
|
$
|
(1,866,630
|
)
|
(4,782,903
|
)
|
|||
|
|
||||||||
|
Net loss per common share - basic and diluted
|
$
|
(0.04
|
)
|
(0.10
|
)
|
|||
|
|
||||||||
|
Weighted average common shares outstanding - basic and diluted
|
47,557,572
|
47,310,997
|
||||||
|
|
||||||||
|
|
||||||||
The accompanying notes are an integral part of these audited consolidated financial statements
F-4
ECO SCIENCE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
|
|
Preferred Stock
|
Common Stock
|
Treasury Stock
|
Additional
Paid in
|
Accumulated
|
|||||||||||||||||||||||||||||||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, January 31, 2018
|
-
|
$
|
-
|
47,557,572
|
$
|
4,756
|
(1,000,000
|
)
|
$
|
(7,500
|
)
|
$
|
61,714,844
|
$
|
(66,398,549
|
)
|
$
|
(4,686,449
|
)
|
|||||||||||||||||
|
Shares issued for non-employee services
|
-
|
-
|
1,000,000
|
100
|
-
|
-
|
89,900
|
-
|
90,000
|
|||||||||||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,782,903
|
)
|
(4,782,903
|
)
|
|||||||||||||||||||||||||
|
Balance, January 31, 2019
|
-
|
48,558,572
|
4,856
|
(1,000,000
|
)
|
(7,500
|
)
|
61,804,744
|
(71,181,452
|
)
|
(9,379,352
|
)
|
||||||||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,866,630
|
)
|
(1,866,630
|
)
|
|||||||||||||||||||||||||
|
Balance, January 31, 2020
|
$
|
-
|
48,558,572
|
$
|
4,856
|
(1,000,000
|
)
|
$
|
(7,500
|
)
|
$
|
61,804,744
|
$
|
(73,048,082
|
)
|
$
|
(11,245,982
|
)
|
||||||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements
F-5
ECO SCIENCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Fiscal Year
January 31,
|
|||||||
|
|
2020
|
2019
|
||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$
|
(1,866,630
|
)
|
$
|
(4,782,903
|
)
|
||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Depreciation and impairment
|
4,423
|
367,391
|
||||||
|
Bad debt on uncollected loan receivable
|
100,000
|
-
|
||||||
|
Bad debt on uncollected interest receivable
|
27,833
|
-
|
||||||
|
Amortization of debt discount
|
-
|
371,969
|
||||||
|
Stock based compensation
|
-
|
90,000
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Interest receivable
|
(9,000
|
)
|
(12,000
|
)
|
||||
|
Accounts receivable
|
(23,441
|
)
|
-
|
|||||
|
Prepaid expenses
|
(4,865
|
)
|
10,270
|
|||||
|
Increase (decrease) in accounts payable and accrued expenses
|
659,554
|
1,012,231
|
||||||
|
Increase (decrease) in related party payables
|
324,984
|
526,904
|
||||||
|
Net cash used in operating activities
|
(787,142
|
)
|
(2,416,138
|
)
|
||||
|
|
||||||||
|
Cash Flows from Investing Activities:
|
||||||||
|
Net cash used in investing activities
|
-
|
-
|
||||||
|
|
||||||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from related party loans
|
795,910
|
425,457
|
||||||
|
Notes payable
|
(7,500
|
)
|
1,990,188
|
|||||
|
Net cash provided by financing activities
|
788,410
|
2,415,645
|
||||||
|
|
||||||||
|
Net decrease in cash
|
1,268
|
(493
|
||||||
|
|
||||||||
|
Cash-beginning of period
|
1,609
|
2,102
|
||||||
|
|
||||||||
|
Cash-end of period
|
$
|
2,877
|
$
|
1,609
|
||||
|
|
||||||||
|
SUPPLEMENTAL DISCLOSURES
|
||||||||
|
Interest paid
|
$
|
-
|
$
|
-
|
||||
|
Income taxes paid
|
$
|
-
|
$
|
-
|
||||
|
|
||||||||
The accompanying notes are an integral part of these audited consolidated financial statements
F-6
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.
F-7
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.
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.
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.
F-8
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.
Revenue Recognition
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.
F-9
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.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are
the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments
issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Convertible Debt and Beneficial Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s)
should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is
evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.
F-10
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:
|
|
January 31,
2020
|
January 31,
2019
|
||||||
|
Office equipment
|
$
|
15,528
|
$
|
15,528
|
||||
|
Less: accumulated depreciation and amortization
|
(13,787
|
)
|
(9,364
|
)
|
||||
|
Total property and equipment, net
|
$
|
1,741
|
$
|
6,164
|
||||
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.
F-11
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:
|
|
January 31,
2020
|
January 31,
2019
|
||||||
|
Office lease – Security deposits
|
$
|
13,127
|
$
|
13,127
|
||||
|
Prepaid other expenses
|
19,865
|
15,000
|
||||||
|
Total prepaid expense
|
$
|
32,992
|
$
|
28,127
|
||||
F-12
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).
NOTE 9: NOTES PAYABLE
|
|
Total
|
|||
|
Balance, January 31, 2018
|
$
|
2,132,430
|
||
|
Additions
|
1,990,188
|
|||
|
Balance, January 31, 2019
|
4,122,618
|
|||
|
Repayment to Note 3
|
(7,500
|
)
|
||
|
Balance, January 31, 2020
|
$
|
4,115,118
|
||
Note 1:
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.
Note 2:
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.
Note 3:
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.
F-13
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.
Note 5:
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:
|
(a)
|
Convert the $1,407,781 Debt, plus accrued interest, into shares of Eco Science Solutions, Inc. Common Stock, at the rate of 15% discount to the closing price on the day of lender's conversion request, per
share; or
|
|
(b)
|
Lender may demand full payment of $1,407,781 or any unpaid balance of the original debt, plus accrued interest from the Company.
|
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:
|
|
January 31,
2020
|
January 31,
2019
|
||||||
|
Principal amount
|
$
|
1,407,781
|
$
|
1,407,781
|
||||
|
Liability on stock settled debt
|
248,432
|
248,432
|
||||||
|
Convertible notes payable, net
|
$
|
1,656,213
|
$
|
1,656,213
|
||||
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.
F-14
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.
|
|
January 31,
2020
|
January 31,
2019
|
||||||
|
Related party payable (1)(2)(4)(5)(6)(7)
|
$
|
1,365,333
|
$
|
1,040,349
|
||||
|
Notes payable (3)
|
1,298,649
|
502,739
|
||||||
|
Total related party transactions
|
$
|
2,371,738
|
$
|
1,543,088
|
||||
Services provided from related parties:
|
|
Twelve Months Ended
January 31,
|
|||||||
|
|
2020
|
2019
|
||||||
|
Mr. Jeffery Taylor (1)
|
$
|
115,000
|
$
|
115,000
|
||||
|
Mr. Don Lee Taylor (1)
|
105,000
|
105,000
|
||||||
|
Ms. Jennifer Taylor (2)
|
36,000
|
36,000
|
||||||
|
Mr. Michael Rountree (4)
|
120,000
|
120,000
|
||||||
|
L. John Lewis (6)
|
40,000
|
120,000
|
||||||
|
S. Randall Oveson (7)
|
40,000
|
120,000
|
||||||
|
Mr. Andy Tucker (8)
|
46,667
|
120,000
|
||||||
|
|
$
|
502,667
|
$
|
736,000
|
||||
Interest expenses from related parties:
|
|
Twelve Months Ended
January 31,
|
|||||||
|
|
2020
|
2019
|
||||||
|
Mr. Jeffery Taylor (3)
|
$
|
21
|
$
|
133
|
||||
|
Mr. Don Lee Taylor (3)
|
141
|
136
|
||||||
|
Mr. Michael Rountree (4)
|
6,002
|
929
|
||||||
|
Mr. Lewis (6)
|
1,700
|
857
|
||||||
|
|
$
|
7,864
|
$
|
2,085
|
||||
Revenue from related parties:
|
|
Twelve Months Ended
January 31,
|
|||||
|
|
2020
|
2019
|
||||
|
Greenfield Groves Inc. (5)
|
$
|
6,894
|
$
|
-
|
||
F-15
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.
|
F-16
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 11: RELATED PARTY TRANSACTIONS (cont’d)
|
(4)
|
…….
Licensing agreement with Haiku Holdings LLC ("Haiku")
On March 1, 2019 the Company and Haiku Holdings LLC "Haiku", a company controlled by Mr. Rountree, entered into a Trademark Licensing Agreement. Under the terms of the agreement, the Licensed Marks,
including and incorporating Herbo, may be used by Haiku to facilitate the Company's business including lead generation and referral services. Further, as a result of any revenue generating business generated by Haiku, the Company shall
receive 90% of the net revenue. The license remains in effect for a period of ten (10) years from the effective date of the agreement and may be terminated on sixty (60) days written notice by the Company should there be a material breach
which remains uncured, or at any time on ten (10) days written notice by Haiku without cause.
Software Reseller Agreement with Haiku Holdings LLC ("Haiku")
Effective July 1, 2019, the Company (“Reseller”) entered into a Software Reseller Agreement with respect to the Herbo suite of software offerings with Haiku (“Licensor”). Licensor is the owner of certain
computer software-as-a-service offerings and related documentation that it provides to end users. Under the terms of the agreement, the Reseller desires (a) a non-exclusive license of the Software and (b) a non-exclusive, non-transferable,
non-assignable and limited right and license to reproduce, market, and distribute such Software, and Licensor agrees to grant to Reseller such right and license. Under the terms of the agreement for each respective End User License
Agreement (EULA) entered into with an End User, Reseller shall pay Licensor the corresponding license fee for the software usage of 10% of gross receipts from End Users. Fees are due on or prior to the 15th day of each calendar month in
respect of all gross receipts received from End Users during the previous calendar month.
During the fiscal year ended January 31, 2020 the company recorded $5,973 as license fees under costs of sales.
|
|
(5)
|
Revenue from Greenfield Groves Inc.
Greenfield Groves Inc. is owned by Lindsay Giguiere, wife of Gannon Giguiere, who is the president of Phenix Ventures LLC (See Note 12(b) below), and an over 5% shareholder of the Company’s common stock.
|
|
(6)
|
On June 21, 2017, Ga-Du entered into an employment agreement with L. John Lewis whereby Mr. Lewis accepted employment as Chief Executive Officer of Ga-Du for two years unless terminated earlier in accordance
with the agreement. During his period of employment, Mr. Lewis 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. The employment agreement was not renewed on expiry. We recorded $40,000 and $120,000 in the fiscal years ended January 31, 2020 and 2019, respectively under the terms of this agreement, all of which remains unpaid. As at January 31,
2020 there was a total of $240,000 in accrued and unpaid salary under the terms of the employment agreement (January 31, 2019 - $200,000).
During the three months ended April 30, 2018, Mr. Lewis paid $175,000 to third parties on behalf of the Company which amount has been recorded in Accounts payable – related parties.
On July 31, 2018, the Company issued promissory notes to Mr. Lewis to convert the payable to note payable in the amount of $170,000. The notes bear interest at a rate of 1% per annum, each is due nine month
from issue date.
|
F-17
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 11: RELATED PARTY TRANSACTIONS (cont’d)
|
(7)
|
On June 21, 2017, Ga-Du Corporation, a wholly owned subsidiary of Eco Science Solutions Inc. entered into an employment agreement with S. Randall Oveson whereby Mr. Oveson accepted employment as Chief
Operating Officer of Ga-Du for two years unless terminated earlier in accordance with the agreement. During his period of employment, Mr. Oveson 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. The employment agreement was not renewed on expiry. We recorded $40,000 and $120,000 in the fiscal years ended January 31, 2020 and 2019, respectively
under the terms of this agreement, all of which remains unpaid. As at January 31, 2020 there was a total of $240,000 in accrued and unpaid salary under the terms of the employment agreement (January 31, 2019 - $200,000).
|
|
|
|
|
(8)
|
On June 21, 2017, Ga-Du entered into a consulting agreement with Andy Tucker, whereby Mr. Tucker will provide services to the Cannabis industry under development by the Company, as well as act as an advisor
to various State regulators concerning the Cannabis industry for two years unless terminated earlier in accordance with the agreement. During the period of the agreement, Mr. Tucker has a base salary at an annual rate of $120,000.
Compensation payments shall be divided into twelve (12) equal monthly payments, payable in arrears on the last day of each month following the commencement of the agreement, provided that any partial month worked shall be payable on the
last day of such partial month. The employment agreement was not renewed on expiry. We recorded $46,667 and $120,000 in the fiscal years ended January 31, 2020 and 2019, respectively under the terms of this agreement, all of which remains
unpaid. As at January 31, 2020 there was a total of $240,000 in accrued and unpaid salary under the terms of the employment agreement (January 31, 2019 - $193,333). Mr. Tucker holds approximately 11.45% of the Company's issued and
outstanding shares.
|
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.
F-18
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS
|
(a)
|
On March 22, 2016, we entered into a two-year lease commencing April 1, 2016 for a total of 253 square feet of office and 98 square feet of reception space. Monthly base rent for the period April 1, 2016 to
March 31, 2017 is $526.50 per month and increases to $552.83 per month for the subsequent year ending March 31, 2018. Operating costs for the first year of the lease were $258.06 per month. The Company has remitted a security deposit in
the amount of $817 in respect of the lease. Further our officers and directors have executed a personal guarantee in respect of the aforementioned lease agreement. On expiry of the lease, and to date, the Company continues to occupy the
space on a month to month basis at a rate of approximately $866 per month including operating costs.
|
|
(b)
|
On January 10, 2017, we entered into an Equity Purchase Agreement (the "Equity Purchase Agreement") with PHENIX VENTURES, LLC ("PVLLC"). Although we are not mandated to sell shares under the Equity Purchase
Agreement, the Equity Purchase Agreement gives us the option to sell to PVLLC, up to 10,000,000 shares of our common stock over the period ending January 25, 2019 (or 24 months from the date this Registration Statement is effective). The
purchase price of the common stock will be set at eighty-three percent (83%) of the volume weighted average price ("VWAP") of the common stock during the pricing period. The pricing period will be the ten consecutive trading days
immediately after the Put Notice date. In addition, there is an ownership limit for PVLLC of 9.99%. PVLLC is not permitted to engage in short sales involving our common stock during the commitment period ending January 25, 2019. In
accordance with Regulation SHO however, sales of our common stock by PVLLC after delivery of a Put Notice of such number of shares reasonably expected to be purchased by PVLLC under a Put will not be deemed a short sale.
A Complaint was filed against Gannon Giguiere, president of Phenix Ventures, in July 2018, by the SEC, which 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. Until the Complaint is resolved, no funding will be provided by Phenix Ventures to the Company.
To date, there have been no Put Notices and no funding available from Phenix Ventures under the Registration Statement; additionally, no shares have been issued pursuant to the registration statement.
In addition, we must deliver the other required documents, instruments and writings required. PVLLC is not required to purchase the Put Shares unless:
|
|
-
|
Our registration statement with respect to the resale of the shares of common stock delivered in connection with the applicable put shall have been declared effective.
|
|
-
|
We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the registrable securities.
|
|
-
|
We shall have filed with the SEC in a timely manner all reports, notices and other documents required.
|
|
|
The Company filed an S-1 Registration Statement in respect of the foregoing on January 27, 2017 which received Effect by the Securities and Exchange Commission, on May 15, 2017. To date there has been no
funding provided under the aforementioned agreement.
|
|
(c)
|
On June 21, 2017, Ga-Du entered into an employment agreement with Ms. Wendy Maguire, whereby Ms. Maguire accepted employment as Vice President, business development of Ga-Du for two years unless terminated
earlier in accordance with the agreement. During her period of employment, Ms. Maguire had a base salary at an annual rate of $120,000. Ms. Maguire resigned as Vice President, Business Development on December 12, 2018. Prior to her
resignation Ms. Maguire filed a Complaint in the United States District Court from the Western District of Washington for payment of accrued and unpaid wages, legal fees and damages. The Company
ceased to accrue fees for Ms. Maguire following receipt of the complaint (ref: Note 14).
|
F-19
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS (cont’d)
|
(d)
|
On June 21, 2017, Ga-Du entered into an employment agreement with Mr. Dante Jones, whereby Mr. Jones accepted employment as Special Advisor to Ga-Du for two years unless terminated earlier in accordance with
the agreement. During his period of employment, Mr. Jones 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. The employment agreement was not renewed on expiry.
|
|
(e)
|
On July 21, 2017, we entered into a Sublease commencing August 1, 2017 and terminating the earlier of (a) March 31, 2020, or (b) the date this sublease is terminated by sub landlord upon the occurrence of
an event of default, the sublease covers a total of 6,120 square feet of office space. Monthly base rent for the period September 1, 2017 to July 31, 2018 is $14,535, and the first month of rent is free of charge. In the second year the
monthly base rent increases to $15,173. In the third year the monthly base rent increases to $15,810. The Company has remitted a security deposit in the amount of $15,810 in respect of this sublease. The Company has passed on recording
the deferred rent relative to the one free month of rent contained within the lease as it has been determined to be immaterial. During the period ended April 30, 2018 the Company accrued rent in respect to this sublease for the months of
March and April 2018 including applicable operating costs. Subsequent to October 31, 2018 the Company has abandoned the space without payment or further accruals, and the lease has been effectively terminated. A balance of $21,051
remains due and payable as at January 31, 2020 and January 31, 2019.
|
|
(f)
|
The Company has entered into verbal agreements with Take2L, an arms length third party, to develop and service our current technology platform in consideration for certain fees as invoiced monthly. On
September 1, 2018, Take2L invoiced $350,000 to the Company in respect of the ongoing development of software to support our platform, which the Company recorded as intangible assets (ref: Note 4)
As at January 31, 2020 and January 31, 2019 an amount of $768,810 is due and payable to Take 2L in respect to invoices issued for services rendered. The Company has been unable to settle these invoices as
they have come due. Take 2L has had a long working relationship with our Chief Operating Officer, Mr. Rountree, and with regard to other business; Take 2L has no relationship with the Company other than as a provider of services to the
Company and does not hold any shares in the Company. Take 2L has continued to provide the Company essential services during the shortfall in funds to meet operational overhead as it comes due and it is expected these accounts will be
settled in full as soon as resources become available.
|
|
(g)
|
On November 14, 2017, ESSI entered into an Endorsement Agreement with Mr. Stephen Marley. The terms of the Agreement allow for Mr. Marley to act as a Spokesperson
for ESSI and to provide his endorsement of all ESSI products and services, domestically, and worldwide. The term of the Agreement is for one year, with automatic yearly renewals, unless terminated by either party with thirty days prior
notice. Mr. Marley will be compensated in the amount of Ten Thousand Dollars ($10,000) per month and has been issued 1,000,000 shares of the Company's restricted common stock. The contract was not renewed on its expiry in November
2018.
|
|
(h)
|
On April 15, 2018 the Company entered into a Consulting Agreement with Standard Consulting LLC (the "Consultant") where under the Consultant will provide business development and evaluation services
relative to the strategic growth of the Company. Further the Consultant will work with the CEO and CFO to develop new products, provide support for the Company's existing product suite, and provide logistical support services for
manufacturing, warehousing, shipping and customer service as may be required. Under the terms of the contract the Consultant be compensated at a rate of $120,000 per year, payable quarterly on the first day of each quarter with a
commencement date of May 1, 2018, for an initial term of six months, and renewable for a further six months on mutual agreement of the parties. Further the Company may settle amounts payable to Consultant by way of issuance of shares on
15 days notice. Any shares issued under the contract for services rendered will be issued at a 15% discount to market based on the closing market price on the day before the first day of the quarter. A further 1,000,000 restricted shares
shall be issued upon commencement of the term and are subject to a six-month leak out restriction once available for resale under Rule 144. The shares were issued prior to January 31, 2019 and the contract was renewed for a further
six-month term during November 2018. The contract terminated at the end of April 2019.
|
F-20
ECO SCIENCE SOLUTIONS, INC.
NOTES TO THE CONSOLIDTED FINANCIAL STATEMENTS
NOTE 13: COMMITMENTS (cont’d)
|
(i)
|
On February 1, 2019 the Company and a third party entered into a Consulting Services agreement whereunder the Consultant will provide development services relative to a suite of software for managing
operations including accounting, inventory control and management, data management, reporting and compliance, lead generation and marketing, CRM sales management and certain other key functions. The term of the agreement is three (3)
months shall be automatically renewed for successive three (3) month periods unless canceled in writing by either party thirty (30) days prior to the expiration of each term. Compensation shall be $10,000 per month payable by way of six
installments of $5,000, payable February 1, 2019, and each fifteen days thereafter. On May 31, 2019, the Consultant terminated the contract, and each of the Consultant and the Company agreed the termination shall take immediately effect
with no further compensation payable.
|
NOTE 14: CONTINGENCIES
(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.
F-21
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.
F-22
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.
F-23
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
None
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;
19
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.
None.
20
PART III
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Identification of Directors and Executive Officers
The following table represents the directors and executive officers of the Company and its wholly owned subsidiary, as of January 31, 2020:
|
Name
|
Position(s) Held
|
Age
|
Date first Elected
or Appointed
|
|
Jeffery Taylor
|
President, Secretary, Chief Executive Officer, Director
|
48
|
December 17, 2015 as to Chief Executive Officer and
President and January 11, 2016 as to Director and Secretary.
|
|
Don Lee Taylor
|
Chief Financial Officer, Treasurer and Director
|
51
|
December 17, 2015 as to Chief Financial Officer and
January 11, 2016 as to Director and Treasurer
|
|
Michael D. Rountree
|
Chief Operating Officer
|
50
|
June 21, 2017
|
|
L. John Lewis(1)
|
Chief Executive Officer, President, Secretary, Treasurer and Director Ga-Du Corporation
Director, ESSI
|
70
|
June 21, 2017 as to CEO
President, Secretary, Treasurer and Director since inception of Ga-Du on June 2, 2017. June 21, as to director of ESSI
|
|
S. Randall Oveson
|
Chief Operating Officer, Ga-Du Corporation
Director, ESSI
|
58
|
June 21, 2017 as to all positions.
|
|
(1)
|
Mr. Lewis resigned all positions with ESSI and Ga-Du effective April 15, 2020.
|
Term of Office
Directors serve until the next annual meeting of the stockholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve for such terms as
determined by our board of directors. Each officer holds office until such officer's successor is elected or appointed and qualified or until such officer's earlier resignation or removal.
Background and Business Experience
Mr. Jeffery Taylor
As CEO, Mr. Jeffrey Taylor will oversee the company's strategy, technology roadmap, and consumer community content development programs; Mr. Taylor is a recipient of the Army Commendation Medal from the United States
Army during service of operation Uphold Democracy; he served in the United States Army for 10 Years and focused on supply chain management technologies with an emphasis on logistics and distribution of specialty materials. Mr. Taylor was
discharged with a Medical Discharge; Mr. Taylor has been a real estate entrepreneur and holds a real estate license in the State of Hawaii from 2005 to present. In 2003, Mr. Taylor received his Microsoft technology certification from the Veterans
Association during rehabilitation process from being injured in the military. As part of his passion for open water scuba and snorkeling, he launched Liquid Marlin LLC, and works with the Make A Wish Foundation on Maui as one of its designated
snorkel instructors.
21
Mr. Don Lee Taylor
As CFO, Don Taylor will oversee the company's financial governance; business community content development program, and business partnerships. Mr. Taylor holds a real estate license in the State of Hawaii from 2001
to Present; and has been active in the Hawaii real estate and real estate financing community. Mr. Taylor currently holds the title of Broker in Charge of Maui Realty Co., Inc. Mr. Taylor holds a BS in Finance with an emphasis in Financial
Management from the California State University in Long Beach.
L. John Lewis
Mr. Lewis graduated Magna Summa Cum Laude from the University of Utah in 1976, with a Bachelor of Science degree in political science, and an international relations certificate. He received a Juris Doctor degree
from Stanford Law School in 1979, and was managing director of the Stanford Law Journal. Following law school, Mr. Lewis served as a law clerk on both the United States District Court for the Southern District of California and on the United
States Tenth Circuit Court of Appeals.
As a lawyer, Mr. Lewis has represented American Dairies, China Sky One, the Metropolitan Insurance Group, Skaggs-Alpha Beta, and numerous other companies in connection with private and public offerings, and/or
mergers with public entities now trading on the New York Stock Exchange.
Mr. Lewis departed from the practice of law to become involved in assisting private companies with significant growth trajectories. He has been active in assisting such companies with capital formation, structure
and the private equity and business management for approximately the last twenty years as a consultant, legal advisor and/or manger, and has been the General Manager of a household products manufacturing company, the CEO of a nutraceutical company,
and the Managing Director of a Swiss based asset management firm, as well as managing a large legal and contracting group for a multi-national NGO. His management duties have run the gamut from managing a small business development group of
several individuals to responsibility for hundreds of employees.
Mr. Lewis has served as an instructor of "International Legal and Treaty Conventions", "International Commercial Conflicts" for the United States Army, and was a part time Professor of Business Law at LDS Business
College, as well as Visiting Instructor of Business Communications and Entrepreneurship" at the University of Utah.
Mr. Lewis has received the following honorary distinctions: (i) Owl and Key; (ii) Pi Sigma Alpha; and (iii) Who's Who in American Law. Mr Lewis resigned from the board of directors and all officer positions with
Ga-Du effective April 15, 2020.
S Randall Oveson
BS MBA • Management, Finance, and Accounting
Mr. Oveson started his career as a Financial Analyst with Suite Thinking, Inc., a boutique hospitality consulting firm in Newport Beach, CA. There Mr. Oveson developed systems and processes used to analyze dozens of
hotels part of a $500 million+ portfolio in various financial and operational categories still in use in the hospitality industry today.
Upon completion of his MBA at Pepperdine University Mr. Oveson has taken CEO, COO, CFO, and CIO roles in hospitality, the aerospace, manufacturing, brokerage, action sports, telecommunications, and the banking and
healthcare technology industries. His range of experience includes all aspects of management for start-up and mid-tier companies both public and private entities. He has led dozens of full financial audits and reviews and has also led numerous PCI
audits and MasterCard RAMP reviews. He has been instrumental in projects as diverse as the first and largest prepaid CLEC in the State of California to building out and growing the first financial data center on the island of Antigua.
Mr. Oveson is currently involved in financial processing projects in Europe, Canada, and the US as well as assisting with the development of Ga-Du Corporation's enterprise solutions and operations.
22
Michael D. Rountree
Mr. Rountree is the Founder and President of Rountree Consulting, which he formed in 1997. He is a certified public accountant as well as a business and financial manager and advisor, providing financial, strategy,
and business consulting services to clients with the goal of increasing sales and growing revenue, while also actively lowering expenses while streamlining operational efficiencies. Mr. Rountree spent 3 years with Deloitte and Touche, as well as
Price Waterhouse, working on multi-state tax and financial accounting engagements for large Fortune 500 and Global 2000 clients. Mr. Rountree also spent 3 years at the State of California Franchise Tax Board. His initial work was with the
traditional corporate and individual audit group, but he was quickly promoted to the forensics audit practice where he handled complex financial, tax and audit engagements.
Mr. Rountree holds a BS degree with an emphasis in Accountancy from C.S.U Long Beach and a Masters in Business Taxation from the Leventhal School of Accounting at the University Southern of California.
Identification of Significant Employees
None
Family Relationships
Our directors and officers, Jeffery Taylor and Don Lee Taylor, are brothers. The Company currently has a Consulting Agreement with Jennifer Taylor, Jeff and Don's sister.
Involvement in Certain Legal Proceedings
Except as otherwise disclosed herein, our directors and executive officers have not been involved in any of the following events during the past ten years:
|
1.
|
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
|
|
2.
|
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
|
|
4.
|
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
5.
|
being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or
vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a
temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud
or fraud in connection with any business entity; or
|
|
6.
|
being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in
Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
|
23
(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.
(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.
24
(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.
(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.
Other than as set out above, the Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There
are no proceedings in which its director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.
25
Audit Committee and Audit Committee Financial Expert
The Company does not have an audit committee. We are not a "listed company" under SEC rules and are therefore not required to have an audit committee comprised of independent directors.
We do not currently have a "financial expert" within the meaning of the rules and regulations of the SEC.
The Company has no nominating or compensation committees at this time. The entire Board participates in the nomination and audit oversight processes and considers executive and director compensation. Given the size
of the Company and its stage of development, the entire Board is involved in such decision-making processes. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning
management compensation, nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.
Code of Ethics
The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior officers, such as the principal
executive officer, principal financial officer, controller, and persons performing similar functions.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% percent of our equity securities
("Reporting Persons") to file reports of ownership and changes in ownership with the SEC. Based solely on our review of copies of such reports and representations from the Reporting Persons, we believe that during the fiscal year ended January 31,
2020, the Reporting Persons timely filed all such reports.
|
EXECUTIVE COMPENSATION
|
Summary Compensation Table
The table below summarizes the compensation paid by the Company to the following persons:
|
(a)
|
its principal executive officer;
|
|
(b)
|
each of the Company's two most highly compensated executive officers who were serving as executive officers at the end of the years ended January 31, 2020 and 2019; and
|
|
(c)
|
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as the Company's executive officer at the end of the years ended
January 31, 2020 and 2019.
|
No disclosure is provided for any named executive officer, other than the Company's principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:
26
|
SUMMARY COMPENSATION TABLE
|
|||||||||||||||||||||
|
Name and Principal Position
|
FYE
Jan 31
|
Salary
($)
|
Bonus
($)
|
Stock Award
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
All Other Compensation
($)
|
Total
($)
|
||||||||||||
|
Jeffery Taylor,
President, Secretary, CEO, Director [1]
|
2020
|
115,000
|
None
|
None
|
None
|
None
|
None
|
None
|
115,000
|
||||||||||||
|
2019
|
115,000
|
None
|
None
|
None
|
None
|
None
|
None
|
115,000
|
|||||||||||||
|
Don Lee Taylor
CFO, Treasurer Director [2]
|
2020
|
105,000
|
None
|
None
|
None
|
None
|
None
|
None
|
105,000
|
||||||||||||
|
2019
|
105,000
|
None
|
None
|
None
|
None
|
None
|
None
|
105,000
|
|||||||||||||
|
Michael D Rountree
COO[3]
|
2020
|
120,000
|
None
|
None
|
None
|
None
|
None
|
None
|
120,000
|
||||||||||||
|
2019
|
120,000
|
None
|
None
|
None
|
None
|
None
|
None
|
120,000
|
|||||||||||||
|
L. John Lewis,
CEO Ga-Du Corporation [4]
|
2020
|
40,000
|
None
|
None
|
None
|
None
|
None
|
None
|
40,000
|
||||||||||||
|
2019
|
120,000
|
None
|
None
|
None
|
None
|
None
|
None
|
120,000
|
|||||||||||||
|
S. Randall Oveson,
COO, Ga D Corporation [5]
|
2020
|
40,000
|
None
|
None
|
None
|
None
|
None
|
None
|
40,000
|
||||||||||||
|
2019
|
120,000
|
None
|
None
|
None
|
None
|
None
|
None
|
120,000
|
|||||||||||||
|
[1]
|
Mr. Jeffery Taylor was appointed CEO and President on December 17, 2015. During fiscal 2020 and 2019 Mr. Taylor received payments of181,019 and $57,000, respectively to reduce his current salary accruals and prior unpaid salary amounts.
|
||
|
[2]
|
Mr. Don Lee Taylor was appointed CFO on December 17, 2015. During fiscal 2020 and 2019 Mr. Taylor received payments of $10,500 and $57,000, respectively to reduce his current salary accruals and prior unpaid salary amounts.
|
||
|
[3]
|
Michael D. Rountree was appointed COO of the Company on June 21, 2017. Under the terms of an Employment agreement with Mr. Rountree he charged the Company $120,000 for services during each of fiscal 2020 and 2019, all of which remains
unpaid.
|
||
|
[4]
|
L. John Lewis was appointed a director of ESSI and CEO of Ga-Du Corporation on June 21, 2017. He also serves as the President, Secretary, Treasurer and Director since inception of Ga-Du on June 2, 2017. He resigned from all positions
with ESSI and Ga-Du effective April 15, 2020. Under the terms of an Employment agreement with Mr. Lewis he charged the Company $40,000 for services during fiscal 2020 and $120,000 during fiscal 2019, all of which remains unpaid. His
employment agreement was not renewed on expiry.
|
||
|
[5]
|
S. Randall Oveson was appointed a director of ESSI and COO of Ga-Du Corporation on June 21, 2017. Under the terms of an Employment agreement with Mr. Oveson he charged the Company $40,000 for services during fiscal 2020 and $120,000
during fiscal 2019, all of which remains unpaid. His employment agreement was not renewed on expiry.
|
Employment Contracts and Termination of Employment and Change in Control Arrangements
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.
27
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. The agreement was renewed upon expiry. 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. Salary payable to Mr. Rountree under the employment agreement has been accrued during fiscal 2018, 2019 and 2020 and a total of $320,000 remains payable under the agreement.
On June 21, 2017, Ga-Du entered into an employment agreement with L. John Lewis whereby Mr. Lewis accepted employment as Chief Executive Officer of Ga-Du for two years unless terminated earlier in accordance with the
agreement. During his period of employment, Mr. Lewis 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. The
employment agreement was not renewed on expiry. Salary payable to Mr. Lewis under the employment agreement has been accrued during fiscal 2018 through fiscal 2020 and a total of $240,000 remains unpaid.
On June 21, 2017, Ga-Du entered into an employment agreement with S. Randall Oveson whereby Mr. Oveson accepted employment as Chief Operating Officer of Ga-Du for two years unless terminated earlier in accordance
with the agreement. During his period of employment, Mr. Oveson 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. The employment agreement was not renewed on expiry. Salary payable to Mr. Oveson under the employment agreement has been accrued during fiscal 2018 through 2020 in the total amount of $240,000, all of which remains unpaid.
On June 21, 2017, Ga-Du entered into an employment agreement with Ms. Wendy Maguire, whereby Ms. Maguire accepted employment as Vice President, business development of Ga-Du for two years unless terminated earlier
in accordance with the agreement. During her period of employment, Ms. Maguire had a base salary at an annual rate of $120,000. Ms. Maguire resigned as Vice President, Business Development on December 12, 2018. Prior to her resignation, during
September 2018, Ms. Maguire filed a Complaint in the United States District Court from the Western District of Washington for payment of accrued and unpaid wages, legal fees and damages. Refer to Note 14
(7) of the audited financial statements included in this Annual report.
On June 21, 2017, Ga-Du entered into an employment agreement with Mr. Dante Jones, whereby Mr. Jones accepted employment as Special Advisor to Ga-Du for two years unless terminated earlier in accordance with the
agreement. During his period of employment, Mr. Jones 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. The
employment agreement was not renewed on expiry. Salary payable to Mr. Jones under the employment agreement has been accrued during fiscal 2018 through 2020 in the total amount of $240,000, all of which remains unpaid.
On June 21, 2017, Ga-Du entered into a consulting agreement with Andy Tucker, whereby Mr. Tucker will provide services to the Cannabis industry under development by the Company, as well as act as an advisor to
various State regulators concerning the Cannabis industry for two years unless terminated earlier in accordance with the agreement. During the period of the agreement, Mr. Tucker has a base salary at an annual rate of $120,000. The employment
agreement was not renewed on expiry. Compensation payments shall be divided into twelve (12) equal monthly payments, payable in arrears on the last day of each month following the commencement of the agreement, provided that any partial month
worked shall be payable on the last day of such partial month. Salary payable to Mr. Tucker under the Consulting agreement has been accrued during fiscal 2018 through 2020 in the total amount of $240,000, all of which remains unpaid.
There are no other employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person
because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person's responsibilities following a change in control of the Company.
There are no agreements or understandings for any executive officer to resign at the request of another person. None of the Company's executive officers' acts or will act on behalf of or at the direction of any other
person.
28
Equity Compensation Plan
2012 Employee Stock Option Plan
On September 1, 2012, the Company adopted the Employee Stock Option Plan ("2012 Plan"), wherein 25,000,000 shares of common stock were reserved for issuance. The 2012 Plan was 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.
There are no options presently outstanding under this plan.
2016 Equity Incentive Plan
On January 1, 2016, the Company's Board of Directors approved the 2016 Equity Incentive Plan (the "2016 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. There were no shares issued under this plan in fiscal 2018, 2019 or 2020.
2017 Equity Incentive Plan
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.
29
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.
There have been no shares issued under this plan in fiscal 2020, 2019 or 2018.
Stock Options/SAR Grants
The Company granted no stock options to directors and officers through the 2012 Plan, 2016 Plan or 2017 Plan during the years ended January 31, 2020, 2019 or 2018.
Restricted Stock Awards
No restricted stock awards have been granted during the years ended January 31, 2020 and 2019.
Aggregated Option Exercised in Last Fiscal Year
There were no options exercised during the years ended January 31, 2020 and 2019, by any officer or director of the Company.
Outstanding Equity Awards at Fiscal Year End
There were no outstanding equity awards as of the years ended January 31, 2020 and 2019.
Compensation of Directors
The Company reimburses its directors for expenses incurred in connection with attending board meetings. The Company has no formal plan for compensating its directors for their service in their capacity as directors.
The Company has not paid any cash compensation or director's fees for services rendered as a director since the Company's inception to the date of this filing.
Pension, Retirement or Similar Benefit Plans
As of January 31, 2020, the Company had no pension plans or compensatory plans or other arrangements which provide compensation in the event of termination of employment or change in control of us. There are no
arrangements or plans in which the Company provides pension, retirement or similar benefits for directors or executive officers. The Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be
paid to its directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
Compensation Committee
The Company currently does not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.
30
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The following table sets forth, as of June 15, 2020 certain information with respect to the beneficial ownership of its common stock by each stockholder known by the Company to be the beneficial owner of more than 5%
of its common stock and by each of its current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated.
|
Title of Class
|
Name Of Beneficial Owner
|
Amount and Nature of Shares Beneficially Owned (1)
|
Percent of Class
Owned(2)
|
Percent of Total
Voting Shares (3)
|
|
Directors and Officers
|
||||
|
Common
|
Jeffery Taylor
|
5,047,019 Direct
|
10.16%
|
10.16%
|
|
Common
|
Don Lee Taylor
|
5,047,019 Direct
|
10.16%
|
10.16%
|
|
Common
|
Michael D. Rountree
|
2,126,491 Direct
|
4.47%
|
4.47%
|
|
Common
|
L. John Lewis
|
2,150,000 Indirect held by Deep Springs Holdings, LLC
|
4.52%
|
4.52%
|
|
Common
|
S. Randall Oveson
|
2,000,000 (of which 1,000,0000 shares are held directly and 1,000,000 shares are held by Deepsea Solutions LLC (4))
|
4.21%
|
4.21%
|
|
Total Officers and Directors as a group (5 persons)
|
15,370,529 Common shares
|
34.42%
|
34.42%
|
|
|
Greater than 5% holders
|
||||
|
Common
|
Gannon Giguiere
|
4,163,443 Direct
|
8.75%
|
8.75%
|
|
Common
|
Andy Tucker
|
5,447,019 Direct
|
11.45%
|
11.45%
|
|
Total greater than 5% holders as a group (2 persons)
|
9,610,462 Common shares
|
20.21%
|
20.21%
|
|
|
Total Common
|
25,980,991
|
54.63%
|
54.63%
|
|
(1)
|
As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to
vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise,
including a right to acquire such power(s) within 60 days of June 15, 2020. Unless otherwise noted, beneficial ownership consists of sole ownership, voting and investment rights.
|
|
(2)
|
There were 47,557,572 shares of common stock outstanding on June 15, 2020and 0 shares of Preferred Stock issued and outstanding.
|
|
(3)
|
Calculation of percentage of Voting Shares is based on the following voting rights: (a) each share of Common Stock has the right to cast one (1) vote.
|
|
(4)
|
Deepsea Solutions LLC is 50% controlled by S. Randall Oveson.
|
Changes in Control
The Company is unaware of any contract or other arrangement or provisions of its Articles or Bylaws the operation of which may at a subsequent date result in a change of control of the Company. There are not any
provisions in its Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of its company.
31
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
Related Party Transactions
None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 10% of the Company's outstanding shares of its Common Stock, nor any associate
or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the year ended January 31, 2020, or in any proposed transaction, which has materially affected or will affect the
Company, with the exception of the following:
As of January 31, 2020, and January 31, 2019, related parties are due a total of $1,543,088 and $537,325, respectively.
|
|
January 31,
2020
|
January 31,
2019
|
||||||
|
Related party payable (1)(2)(4)(5)(6)(7)
|
$
|
1,365,333
|
$
|
1,040,349
|
||||
|
Notes payable (3)
|
1,298,649
|
502,739
|
||||||
|
Total related party transactions
|
$
|
2,371,738
|
$
|
1,543,088
|
||||
Services provided from related parties:
|
|
Twelve Months Ended
January 31,
|
|||||||
|
|
2020
|
2019
|
||||||
|
Mr. Jeffery Taylor (1)
|
$
|
115,000
|
$
|
115,000
|
||||
|
Mr. Don Lee Taylor (1)
|
105,000
|
105,000
|
||||||
|
Ms. Jennifer Taylor (2)
|
36,000
|
36,000
|
||||||
|
Mr. Michael Rountree (4)
|
120,000
|
120,000
|
||||||
|
L. John Lewis (6)
|
40,000
|
120,000
|
||||||
|
S. Randall Oveson (7)
|
40,000
|
120,000
|
||||||
|
Mr. Andy Tucker (8)
|
46,667
|
120,000
|
||||||
|
|
$
|
502,667
|
$
|
736,000
|
||||
Interest expenses from related parties:
|
|
Twelve Months Ended
January 31,
|
|||||||
|
|
2020
|
2019
|
||||||
|
Mr. Jeffery Taylor (3)
|
$
|
21
|
$
|
133
|
||||
|
Mr. Don Lee Taylor (3)
|
141
|
136
|
||||||
|
Mr. Michael Rountree (4)
|
6,002
|
929
|
||||||
|
Mr. Lewis (6)
|
1,700
|
857
|
||||||
|
|
$
|
7,864
|
$
|
2,085
|
||||
32
Revenue from related parties:
|
|
Twelve Months Ended
January 31,
|
||||||
|
|
2020
|
2019
|
|||||
|
Greenfield Groves Inc. (5)
|
$
|
6,894
|
$
|
-
|
|||
|
(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.
Licensing agreement with Haiku Holdings LLC ("Haiku")
On March 1, 2019 the Company and Haiku Holdings LLC "Haiku", a company controlled by Mr. Rountree, entered into a Trademark Licensing Agreement. Under the terms of the agreement, the Licensed Marks,
including and incorporating Herbo, may be used by Haiku to facilitate the Company's business including lead generation and referral services. Further, as a result of any revenue generating business generated by Haiku, the Company shall
receive 90% of the net revenue. The license remains in effect for a period of ten (10) years from the effective date of the agreement and may be terminated on sixty (60) days written notice by the Company should there be a material breach
which remains uncured, or at any time on ten (10) days written notice by Haiku without cause.
Software Reseller Agreement with Haiku Holdings LLC ("Haiku")
Effective July 1, 2019, the Company (“Reseller”) entered into a Software Reseller Agreement with respect to the Herbo suite of software offerings with Haiku (“Licensor”). Licensor is the owner of certain
computer software-as-a-service offerings and related documentation that it provides to end users. Under the terms of the agreement, the Reseller desires (a) a non-exclusive license of the Software and (b) a non-exclusive, non-transferable,
non-assignable and limited right and license to reproduce, market, and distribute such Software, and Licensor agrees to grant to Reseller such right and license. Under the terms of the agreement for each respective End User License
Agreement (EULA) entered into with an End User, Reseller shall pay Licensor the corresponding license fee for the software usage of 10% of gross receipts from End Users. Fees are due on or prior to the 15th day of each calendar month in
respect of all gross receipts received from End Users during the previous calendar month.
During the fiscal year ended January 31, 2020 the company recorded $5,973 as license fees under costs of sales.
|
33
|
(5)
|
Revenue from Greenfield Groves Inc.
Greenfield Groves Inc. is owned by Lindsay Giguiere, wife of Gannon Giguiere, who is the president of Phenix Ventures LLC (See Note 12(b) below), and an over 5% shareholder of the Company’s common stock.
|
|
(6)
|
On June 21, 2017, Ga-Du entered into an employment agreement with L. John Lewis whereby Mr. Lewis accepted employment as Chief Executive Officer of Ga-Du for two years unless terminated earlier in accordance
with the agreement. During his period of employment, Mr. Lewis 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. The employment agreement was not renewed on expiry. We recorded $40,000 and $120,000 in the fiscal years ended January 31, 2020 and 2019, respectively under the terms of this agreement, all of which remains unpaid. As at January 31,
2020 there was a total of $240,000 in accrued and unpaid salary under the terms of the employment agreement (January 31, 2019 - $200,000).
During the three months ended April 30, 2018, Mr. Lewis paid $175,000 to third parties on behalf of the Company which amount has been recorded in Accounts payable – related parties.
On July 31, 2018, the Company issued promissory notes to Mr. Lewis to convert the payable to note payable in the amount of $170,000. The notes bear interest at a rate of 1% per annum, each is due nine month
from issue date.
|
|
(7)
|
On June 21, 2017, Ga-Du Corporation, a wholly owned subsidiary of Eco Science Solutions Inc. entered into an employment agreement with S. Randall Oveson whereby Mr. Oveson accepted employment as Chief
Operating Officer of Ga-Du for two years unless terminated earlier in accordance with the agreement. During his period of employment, Mr. Oveson 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. The employment agreement was not renewed on expiry. We recorded $40,000 and $120,000 in the fiscal years ended January 31, 2020 and 2019, respectively
under the terms of this agreement, all of which remains unpaid. As at January 31, 2020 there was a total of $240,000 in accrued and unpaid salary under the terms of the employment agreement (January 31, 2019 - $200,000).
|
|
|
|
|
(8)
|
On June 21, 2017, Ga-Du entered into a consulting agreement with Andy Tucker, whereby Mr. Tucker will provide services to the Cannabis industry under development by the Company, as well as act as an advisor
to various State regulators concerning the Cannabis industry for two years unless terminated earlier in accordance with the agreement. During the period of the agreement, Mr. Tucker has a base salary at an annual rate of $120,000.
Compensation payments shall be divided into twelve (12) equal monthly payments, payable in arrears on the last day of each month following the commencement of the agreement, provided that any partial month worked shall be payable on the
last day of such partial month. The employment agreement was not renewed on expiry. We recorded $46,667 and $120,000 in the fiscal years ended January 31, 2020 and 2019, respectively under the terms of this agreement, all of which remains
unpaid. As at January 31, 2020 there was a total of $240,000 in accrued and unpaid salary under the terms of the employment agreement (January 31, 2019 - $193,333). Mr. Tucker holds approximately 11.45% of the Company's issued and
outstanding shares.
|
Compensation, Stock Options and Awards:
Please refer to Related Party Transactions above for details of compensation paid to Related Parties.
Director Independence
For purposes of determining director independence, the Company has applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTC Markets Quotation Board s on which shares of Common Stock are quoted does not
have any director independence requirements. The NASDAQ definition of "Independent Officer" means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the
Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, neither Jeffery Taylor nor Don Lee Taylor are considered an independent
director of the Company.
34
|
PRINCIPAL ACCOUNTANTS FEES AND SERVICES
|
Our independent registered public accounting firm is BF Borgers CPA PC of Lakewood, Colorado. The aggregate fees billed or to be billed for the most recently completed fiscal years ended January 31, 2020 and 2019 for
professional services rendered by the principal accountant for the audit of its annual consolidated financial statements and review of the financial statements included in its quarterly reports on Form 10-Q and services that are normally provided
by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
|
Year ended:
|
January 31, 2020
$
|
January 31, 2019
$
|
||||||
|
Audit Fees
|
40,500
|
40,500
|
||||||
|
Audit Related Fees
|
-0-
|
-0-
|
||||||
|
Tax Fees
|
-0-
|
-0-
|
||||||
|
All Other Fees
|
-0-
|
-0-
|
||||||
|
Total
|
40,500
|
40,500
|
||||||
The Company's board of directors pre-approves all services provided by its independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The Company's board of directors has considered the nature and amount of fees billed by its independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with
maintaining its independent auditors' independence.
35
PART IV
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
|
Exhibit Number
|
Exhibit Description
|
Filed Previously
|
Filed herewith
|
|
*
|
|||
|
*
|
|||
|
*
|
|||
|
*
|
|||
|
*
|
|||
|
*
|
|||
|
*
|
|||
|
3.8
|
Designation of Series A Voting Preferred shares filed with the Nevada Secretary of State on January 12, 2016
|
|
* |
| 3.9 |
Certificate of Amendment of designation of Series A Voting Preferred shares filed with the Nevada
Secretary of State on September 19, 2017 |
* | |
|
*
|
|||
|
*
|
|||
|
*
|
|||
|
(31)
|
Rule 13a-14(a)/15d-14(a) Certifications
|
||
|
*
|
|||
|
*
|
|||
|
(32)
|
Section 1350 Certifications
|
||
|
*
|
|||
|
*
|
|||
|
(101)
|
Interactive Data Files
|
||
|
101.INS
|
XBRL Instance Document
|
*
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
*
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
*
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
*
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
*
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
None.
36
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ECO SCIENCE SOLUTIONS, INC.
|
|
|
Dated: July 7, 2020
|
/s/ Jeffery Taylor
|
|
Jeffery Taylor
|
|
|
President, Chief Executive Officer, Secretary and Director
|
|
|
Dated: July 7, 2020
|
/s/ Don Lee Taylor
|
|
Don Lee Taylor
|
|
|
Chief Financial Officer, Treasurer and Director
|
|
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Dated: July 7, 2020
|
/s/ Jeffery Taylor
|
|
Jeffery Taylor
|
|
|
President, Chief Executive Officer, Secretary and Director
|
|
|
Dated: July 7, 2020
|
/s/ Don Lee Taylor
|
|
Don Lee Taylor
|
|
|
Chief Financial Officer, Treasurer and Director
|
|
|
Dated: July 7, 2020
|
/s/ Michael D. Rountree
|
|
Michael D. Rountree
|
|
|
Chief Operating Officer
|
|
|
Dated: July 7, 2020
|
/s/ S. Randall Oveson
|
|
S. Randall Oveson
|
|
|
Director
|
|
37
