U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Mark One
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File No. 333-229638
CRUCIAL INNOVATIONS CORP. |
(Exact name of registrant as specified in its charter) |
Nevada | | EIN 98-1446012 |
(State or Other Jurisdiction of Incorporation or Organization) | | (IRS Employer Identification Number) |
120 Moorgate
London EC2M 6UR
United Kingdom
+44 77 4212 5992
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbols | | Name of each exchange on which registered |
N/A | | N/A | | N/A |
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). Yes ☒ 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. (Check one)
Large accelerated filer | ☐ | Smaller reporting company | ☒ |
Accelerated filer | ☐ | Emerging Growth Company | ☒ |
Non-accelerated Filer | ☒ | | |
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 7(a)(2)(B) of the exchange act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
There were 32,417,002 shares of the registrant’s common stock, $0.001 par value per share, outstanding on September 14, 2022.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
CRUCIAL INNOVATIONS, CORP.
CONDENSED BALANCE SHEETS
(Unaudited)
| | June 30, | | | December 31, | |
| | 2022 | | | 2021 | |
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash | | $ | - | | | $ | - | |
Prepaid expenses | | | - | | | | 10,750 | |
Total Current Assets | | | - | | | | 10,750 | |
| | | | | | | | |
Total Assets | | $ | - | | | $ | 10,750 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
Current Liabilities | | | | | | | | |
Accounts payable | | $ | 11,238 | | | $ | 6,245 | |
Convertible note and accrued interest | | | 10,000 | | | | 10,000 | |
Director loan - related party | | | 33,679 | | | | 17,500 | |
Total Current Liabilities | | | 54,917 | | | | 33,745 | |
| | | | | | | | |
Total Liabilities | | | 54,917 | | | | 33,745 | |
| | | | | | | | |
Commitments and contingencies | | | - | | | | - | |
| | | | | | | | |
Stockholders' Deficit | | | | | | | | |
Common stock: 75,000,000 authorized; $0.0001 par value, 32,417,002 shares issued and outstanding | | | 3,241 | | | | 3,241 | |
Additional paid-in capital | | | 87,910 | | | | 87,910 | |
Accumulated deficit | | | (146,068 | ) | | | (114,146 | ) |
Total Stockholders' Deficit | | | (54,917 | ) | | | (22,995 | ) |
| | | | | | | | |
Total Liabilities and Stockholders' Deficit | | $ | - | | | $ | 10,750 | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
CRUCIAL INNOVATIONS, CORP.
CONSENSED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended | | | Six Months Ended | |
| | June 30, | | | June 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | | | | | | | | | | |
Revenues | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | |
Professional fees | | | 26,300 | | | | 11,070 | | | | 28,700 | | | | 11,070 | |
General and administrative expenses | | | 2,397 | | | | - | | | | 3,222 | | | | - | |
Total operating expenses | | | 28,697 | | | | 11,070 | | | | 31,922 | | | | 11,070 | |
| | | | | | | | | | | | | | | | |
Loss from operations | | | (28,697 | ) | | | (11,070 | ) | | | (31,922 | ) | | | (11,070 | ) |
| | | | | | | | | | | | | | | | |
Other Expense | | | | | | | | | | | | | | | | |
Interest expense | | | - | | | | (3,012 | ) | | | - | | | | (3,012 | ) |
Total other expense | | | - | | | | (3,012 | ) | | | - | | | | (3,012 | ) |
| | | | | | | | | | | | | | | | |
Net loss before taxes | | | (28,697 | ) | | | (14,082 | ) | | | (31,922 | ) | | | (14,082 | ) |
| | | | | | | | | | | | | | | | |
Provision for income taxes | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | |
Net loss | | $ | (28,697 | ) | | $ | (14,082 | ) | | $ | (31,922 | ) | | $ | (14,082 | ) |
| | | | | | | | | | | | | | | | |
Basic and diluted loss per common share | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | | | | | | | | | |
Weighted average number of common shares outstanding, basic and diluted | | | 32,417,002 | | | | 32,417,002 | | | | 32,417,002 | | | | 32,417,002 | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
CRUCIAL INNOVATIONS, CORP.
CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
For the six months ended June 30, 2022
| | | | | | | | Additional | | | | | | Total | |
| | Common Stock | | | Paid-in | | | Accumulated | | | Stockholders' | |
| | Shares | | | Amount | | | Capital | | | Deficit | | | Deficit | |
| | | | | | | | | | | | | | | |
Balance, December 31, 2021 | | | 32,417,002 | | | $ | 3,241 | | | $ | 87,910 | | | $ | (114,146 | ) | | $ | (22,995 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | (3,225 | ) | | | (3,225 | ) |
Balance, March 31, 2022 | | | 32,417,002 | | | $ | 3,241 | | | $ | 87,910 | | | $ | (117,371 | ) | | $ | (26,220 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | (28,697 | ) | | | (28,697 | ) |
Balance, June 30, 2022 | | | 32,417,002 | | | $ | 3,241 | | | $ | 87,910 | | | $ | (146,068 | ) | | $ | (54,917 | ) |
For the six months ended June 30, 2021
| | | | | | | | Additional | | | | | | Total | |
| | Common Stock | | | Paid-in | | | Accumulated | | | Stockholders' | |
| | Shares | | | Amount | | | Capital | | | Deficit | | | Deficit | |
| | | | | | | | | | | | | | | |
Balance, December 31, 2020 | | | 32,417,002 | | | $ | 3,241 | | | $ | 87,910 | | | $ | (91,580 | ) | | $ | (429 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | |
Balance, March 31, 2021 | | | 32,417,002 | | | $ | 3,241 | | | $ | 87,910 | | | $ | (91,580 | ) | | $ | (429 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | (14,082 | ) | | | (14,082 | ) |
Balance, June 30, 2021 | | | 32,417,002 | | | $ | 3,241 | | | $ | 87,910 | | | $ | (105,662 | ) | | $ | (14,511 | ) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
CRUCIAL INNOVATIONS, CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Six Months Ended | |
| | June 30, | |
| | 2022 | | | 2021 | |
| | | | | | |
Cash Flows from Operating Activities: | | | | | | |
Net loss | | $ | (31,922 | ) | | $ | (19,626 | ) |
Changes in operating assets and liabilities: | | | | | | | | |
Prepaid expenses | | | 10,750 | | | | - | |
Expenses paid by related party | | | 16,179 | | | | - | |
Accounts payable | | | 4,993 | | | | 4,590 | |
Accrued interest | | | - | | | | 3,012 | |
Net Cash Used in Operating Activities | | | - | | | | (6,480 | ) |
| | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | |
Proceeds from convertible note | | | - | | | | 6,480 | |
Net Cash Provided by Financing Activities | | | - | | | | 6,480 | |
| | | | | | | | |
Net change in cash | | | - | | | | - | |
Cash, beginning of period | | | - | | | | - | |
Cash, end of period | | $ | - | | | $ | - | |
| | | | | | | | |
Supplemental cash flow information: | | | | | | | | |
Cash paid for interest | | $ | - | | | $ | - | |
Cash paid for taxes | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
CRUCIAL INNOVATIONS CORP.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 2022
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Crucial Innovations Corp. (referred as the “Company”, “we”, “our”) was incorporated in the State of Nevada and established on February 28, 2018. We were initially engaged in the business of English language tutoring over the Internet. However, were not able to execute our original business plan, develop significant operations or achieve commercial sales. We currently are pursuing the completion of an acquisition which will create a viable business model and value for our stockholders.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the unaudited interim financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year. The accompanying unaudited interim financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2021, as filed with the SEC on July 1, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of June 30, 2022, the Company had an accumulated deficit of $146,068, a net loss of $31,922 for the six months ended June 30, 2022 and has not earned any revenues since inception. The Company intends to fund operations through equity financing arrangements and related party advances, which may be insufficient to fund its capital expenditures, working capital and other cash requirements.
The ability of the Company to emerge from an early stage is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 – RELATED PARTY TRANSACTIONS
On September 24, 2021, a company controlled by the Company’s CEO advanced to the Company an amount of $17,500 by paying for operating expenses on behalf of the Company.
During the six months ended June 30, 2022, the Company’s CEO advanced to the Company an amount of $16,179 by paying for operating expenses on behalf of the Company.
As of June 30, 2022, and December 31, 2021, the Company was obligated to the officer and related party, for an unsecured, non-interest-bearing demand loan with a balance of 33,679 and $17,500, respectively.
NOTE 5 – CONVERTIBLE NOTE
On April 14, 2021, the Company issued a convertible note with a conversion price of 60% discount on the market price to pay operating expenses of $6,480. On June 30, 2021, conversion price of this note was amended to a fixed conversion price of $3.00 per share of common stock. As result, under ASU 2020-06, the Company will no longer incur non-cash interest expense related to the accretion of the debt discount associated with the embedded conversion option. The Company shall repay the amount of $10,000 within 90 days. As of June 30, 2022, and December 31, 2021, the Company had a convertible note of $6,480 and accrued interest of $3,520 for and aggregate of $10,000 and is currently in default.
NOTE 6 – STOCKHOLDER’ EQUITY
The Company has 75,000,000, $0.0001 par value shares of common stock authorized.
There were 32,417,002 shares of common stock issued and outstanding as of June 30,2022 and December 31, 2021.
NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date these financial statements were available to be issued.
On April 13, 2022, the Company entered into a definitive Share Exchange Agreement (the “Exchange Agreement”) with the stockholders of Eco Equity Limited, a company organized under the laws of England and Wales (“EE UK”). Pursuant to the terms of the Exchange Agreement, the Company will acquire 100% of the issued and outstanding shares of capital stock of EE UK, in exchange for the issuance of 42,000,000 restricted newly issued, fully paid and non-assessable shares of common stock of the Company (the “Exchange Shares”) at a ratio of 0.0763 Exchange Share for each of the surrendered shares transferred by the EE UK stockholders, which will represent fifty-six percent (56%) of all issued and outstanding shares of Company common stock at the time of the closing of the transaction. In addition, we will assume all assets and liabilities of EE UK, which includes EE UK’s wholly owned subsidiary, Eco-Equity Zimbabwe (Private) Limited, a Zimbabwe-registered company (“EE Zim”). As of July 13, 2022, the transactions contemplated by the Exchange Agreement were deemed formally closed. EE UK and its wholly owned subsidiary, EE Zim, will now operate as first- and second tier, respectively, wholly owned subsidiaries of the Company.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
We are a development stage corporation with limited operations and no revenues from our business operations. We do not anticipate that we will generate significant revenues until we have raised significant funds. There is no assurance we will ever generate revenue even if we raised all necessary funds.
GOING CONCERN
Our financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We are in start-up stage operations and have not generated any revenues. Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months.
We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in services and products.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.
COVID-19
In December 2019, a novel strain of COVID-19 was reported in China. Since then, the COVID-19 has spread globally including across North America and the United States. The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020.
Specifically, we caution that our business could be materially and adversely affected by the risks, or the public perception of the risks, related to the outbreak of COVID-19. To date, COVID has directly impacted the ability we have to participate in trade show events and other in-person marketing. Although retailers which may carry our products may be considered essential businesses and therefore be allowed to remain operational, they may experience significantly reduced demand. The risk of a pandemic, or public perception of the risk, could cause customers to avoid public places, including retail properties, and could cause temporary or long-term disruptions in our supply chains and/or delays in the delivery of our inventory to our customers. Further, such risks could also adversely affect retail customers’ financial condition, resulting in reduced spending on our products, which are marketed as premium products. “Shelter-in-place” or other such orders by governmental entities could also disrupt our operations, if our employees or the employees of our sourcing partners who cannot perform their responsibilities from home, are not able to report to work. Risks related to an epidemic, pandemic, or other health crisis, such as COVID-19, could also lead to the complete or partial closure of one or more of our co-packing facilities or operations of our sourcing partners.
CRITICAL ACCOUTNING POLICIES
Please refer to Note 2 - Summary of Significant Accounting Policies in the accompanying Notes to the Condensed Financial Statements.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction with our unaudited financial statements for the period ended June 30, 2022, which are included herein.
Our operating results for the three and six months ended June 30, 2022, and 2021 and the changes between those periods for the respective items are summarized as follows.
Three months ended June 30, 2022, compared to three months ended June 30, 2021:
| | Three Months Ended | | | | |
| | June 30, | | | | |
| | 2022 | | | 2021 | | | Changes ($) | |
Revenues | | $ | - | | | $ | - | | | $ | - | |
Operating expenses | | | 28,697 | | | | 11,070 | | | | 17,627 | |
Interest expense | | | - | | | | 3,012 | | | | (3,012 | ) |
Net loss | | $ | 28,697 | | | $ | 14,082 | | | $ | 14,615 | |
The Company has not generated revenues for the three months ended June 30, 2022 and 2021.
Our financial statements report a net loss of $28,697 for the three months ended June 30, 2022, compared to a net loss of $14,082 for the three months ended June 30, 2021. Operating expenses consists primarily of professional fees.
During the three months ended June 30, 2022 and 2021, the Company recognized $0 and $3,012 for interest on a convertible note.
Six months ended June 30, 2022, compared to Six months ended June 30, 2021:
| | Six Months Ended | | | | |
| | June 30, | | | | |
| | 2022 | | | 2021 | | | Changes ($) | |
Revenues | | $ | - | | | $ | - | | | $ | - | |
Operating expenses | | | 31,922 | | | | 11,070 | | | | 20,852 | |
Interest expense | | | - | | | | 3,012 | | | | (3,012 | ) |
Net loss | | $ | 31,922 | | | $ | 14,082 | | | $ | 17,840 | |
The Company has not generated revenues for the six months ended June 30, 2022 and 2021.
Our financial statements report a net loss of $31,922 for the six months ended June 30, 2022, compared to a net loss of $14,082 for the six months ended June 30, 2021. Operating expenses consists primarily of professional fees.
During the six months ended June 30, 2022 and 2021, the Company recognized $0 and $3,012 for interest on a convertible note.
Liquidity and Capital Resources
The following table provides selected financial data about our company as of June 30,2022 and December 31, 2021, respectively.
Working Capital
| | June 30, | | | December 31, | | | | |
| | 2022 | | | 2021 | | | Changes ($) | |
Cash | | $ | - | | | $ | - | | | $ | - | |
Current assets | | | - | | | | 10,750 | | | | (10,750 | ) |
Current liabilities | | | 54,917 | | | | 33,745 | | | | 21,172 | |
Working capital (Deficiency) | | $ | (54,917 | ) | | $ | (22,995 | ) | | $ | (31,922 | ) |
As at June 30, 2022 and December 31, 2021, our total current assets were $0 and $10,750, respectively.
As at June 30, 2022, our current liabilities were $54,917 compared to $33,745 in current liabilities as at December 31, 2021. Working capital deficiency was $54,917 as of June 30,2022 compared to working capital deficiency of $22,995 as of December 31, 2021. The increase in working capital deficiency was resulted from an increase in current liabilities offset with a decrease in current assets. The increase in current liabilities is primarily of due to related party for payments made for operating expenses and an increase in accounts payable.
Cash Flows
| | Six Months Ended | | | | |
| | June 30, | | | | |
| | 2022 | | | 2021 | | | Changes ($) | |
Cash Flows used in Operating Activities | | $ | - | | | $ | (6,480 | ) | | $ | 6,480 | |
Cash Flows used in Investing Activities | | | - | | | | - | | | | - | |
Cash Flows provided by Financing Activities | | | - | | | | 6,480 | | | | (6,480 | ) |
Net Change in Cash During Period | | $ | - | | | $ | 5,544 | | | $ | (5,544 | ) |
Operating Activities
During the six months ended June 30, 2022 and 2021, cash flows used in operating activities were $0 and $6,480, respectively. For the six months ended June 30, 2022, net cash flows used in operating activities was $0, consisting of a net loss of $31,922, reduced by an increase in accounts payable of $4,993, expenses paid by related party of $16,179 and reduced by a decrease in prepaid expenses of $10,750. For the six months ended June 30, 2021, net cash flows used in operating activities was $6,480, consisting of a net loss of $14,082, reduced by an increase in accounts payable of $4,590 and accrued interest of $3,012.
PLAN OF OPERATION
Our plan of operation for the following twelve months is to transform the Company with the following:
On April 13, 2022, the Company entered into a definitive Share Exchange Agreement (the “Exchange Agreement”) with the stockholders of Eco Equity Limited, a company organized under the laws of England and Wales (“EE UK”). Pursuant to the terms of the Exchange Agreement, the Company will acquire 100% of the issued and outstanding shares of capital stock of EE UK, in exchange for the issuance of 42,000,000 restricted newly issued, fully paid and non-assessable shares of common stock of the Company (the “Exchange Shares”) at a ratio of 0.0763 Exchange Share for each of the surrendered shares transferred by the EE UK stockholders, which will represent fifty-six percent (56%) of all issued and outstanding shares of Company common stock at the time of the closing of the transaction. The Exchange Shares were valued at $71,404 or $.0017 per share. As the Company’s stock is thinly traded, the value assigned to the Exchange Shares to be issued under the Exchange Agreement was the last sale of Company’s common stock during October 2020 for $.0017 per share. In addition, we will assume all assets and liabilities of EE UK, which includes EE UK’s wholly owned subsidiary, Eco-Equity Zimbabwe (Private) Limited, a Zimbabwe-registered company (“EE Zim”). On July 13, 2022, the transactions contemplated by the Exchange Agreement were deemed formally closed. EE UK and its wholly owned subsidiary, EE Zim, will now operate as first- and second tier, respectively, wholly owned subsidiaries of the Company.
The Company, though its EE ZIM subsidiary, holds a license for medicinal cannabis cultivation and extraction and will be conducting operations in the vicinity of Harare, the capital city of Zimbabwe. We are dedicated to making the clean, safe, and premium quality cannabis concentrates and extracts. Our products will consist of EU-GMP (European Union – Good Manufacturing Practice) certified cannabis flower, concentrates, and extracts distributed through export as wholesale transactions to qualified and licensed cannabis establishments in the European Union (EU). Our current indoor facilities near Harare provide a total space of approximately 975 square meters (about 10,500 square feet) with plans to increase that to 38,000 square meters (about 408,800 square feet), all located on 150 hectares (about 370 acres) of leased farmland. Together, the facilities, when expanded, and the land give us the ability to increase the capacity of our operations to meet the expected growth of our business over the next few years through expanded sales, both within the EU, as well as in other nations where the sale and use of medicinal cannabis is permitted by those governments.
On October 17, 2021, the Board of Directors of the Company which, at that time, consisted solely of Laura De Leon Castro, elected two new additional directors, Timothy Ambrose and Jon-Paul Doran. On October 18, 2021, Laura De Leon Castro resigned as President, Chief Executive Officer, Secretary, Treasurer, and a Director and Chairman of the Board of Directors of the Company. Ms. De Leon Castro’s resignation was not the result of any disagreements with the Company regarding our operations, policies, practices or otherwise. Concurrently, Timothy Ambrose was elected as Chairman of the Board of Directors and Jon-Paul Doran was elected as President, Chief Executive Officer, and Secretary of the Company. The appointment of Mr. Ambrose and Mr. Doran was considered a change in control of the Company.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.
Our management, with the participation of our CEO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Based upon this evaluation, our CEO concluded that our disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is described below.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2022. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on this evaluation, management concluded that that our internal control over financial reporting was not effective as of June 30, 2022. Our CEO concluded we have a material weakness due to lack of segregation of duties, a limited corporate governance structure, and a lack of a formal management review process over preparation of financial information. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our system of internal control. Therefore, while there are some compensating controls in place, it is difficult to ensure effective segregation of accounting and financial reporting duties. Management reported the following material weaknesses:
| • | Lack of segregation of duties in certain accounting and financial reporting processes including the initiation, processing, recording and approval of disbursements; |
| • | Our corporate governance responsibilities are performed by the Board of Directors, none of whom are independent under applicable standards; we do not have an audit committee or compensation committee. Our Board of Directors acts primarily by written consent without meetings which results in several of our corporate governance functions not being performed concurrent (or timely) with the underlying transactions, including evaluation of the application of accounting principles and disclosures relating to those transactions; and |
| • | Certain reports that we prepare, and accounting and reporting conclusions reached in connection with the financial statement preparation process are not subjected to a formal review process that includes multiple levels of review and are not submitted timely to the Board of Directors for review or approval. |
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full-time staff. We believe that this is typical in many development-stage companies. We may not be able to fully remediate the material weakness until we commence mining operations at which time, we would expect to hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.
This Quarterly does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the SEC rules that permit us to provide only management’s report in this Quarterly Report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any legal proceedings, and we are not aware of any pending or potential legal actions.
Item 1A. Risk Factors.
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the six months ended June 30, 2022, we had no sales of unregistered equity securities.
Item 3. Defaults Upon Senior Securities.
During the six months ended June 30, 2022, we had no senior securities issued and outstanding.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
EXHIBIT SCHEDULE
(1) Incorporated by reference from the Company’s Registration Statement on Form S-1, SEC File No. 333-229638 as declared effective by the Commission on April 9, 2019.
(2) Incorporated by reference from the Company’s Annual Report on Form 10-K, filed with the SEC on July 1, 2022.
# Filed herewith.
## Furnished, not filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on September 16, 2022.
CRUCIAL INNOVATIONS CORP. | |
| | |
By | /s/ Jon-Paul Doran | |
| Jon-Paul Doran | |
| President and Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on September 16, 2022.
Signature | | Title | |
| | | |
/s/ Jon-Paul Doran | | | |
Jon-Paul Doran | | President, Chief Executive Officer, Treasurer, Secretary, and Director (Principal Executive Officer and Principal Accounting Officer) | |
/s/ Timothy Ambrose | | |
Timothy Ambrose | | Chairman of the Board of Directors |
