This report contains certain forward-looking statements and information relating
to us that are based on the beliefs and assumptions made by our management as
well as information currently available to the management. When used in this
document, the words "anticipate," "believe," "estimate," "expect," and similar
expressions are intended to identify forward-looking statements. Such statements
reflect our current views with respect to future events and are subject to
certain risks, uncertainties, and assumptions. If one or more of these risks or
uncertainties materialize, or if underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated, or expected.
You should read the following discussion of our financial condition and results
of operations together with the audited consolidated financial statements and
notes to the financial statements included elsewhere in this Annual Report. This
discussion contains forward-looking statements that involve risks and
uncertainties. The forward-looking statements are not historical facts, but
rather are based on current expectations, estimates, assumptions and projections
about our industry, business and future financial results. Our actual results
could differ materially from the results contemplated by these forward-looking
statements due to a number of factors, including those discussed under "Item 1A.
Risk Factors" and other sections in this Annual Report.
General
The following discussion highlights Kid Castle results of operations and the
principal factors that have affected our financial condition as well as our
liquidity and capital resources for the periods described and provides
information that management believes is relevant for an assessment and
understanding of the statements of financial condition and results of operations
presented herein. The following discussion and analysis are based on Pacific
Ventures' audited Financial Report, which we have prepared in accordance with
United States generally accepted accounting principles. You should read this
discussion and analysis together with such financial statements and the related
notes thereto.
Kid Castle Educational Corporation, a Delaware corporation, ("Kid Castle," "the
Company," "We," "KDCE," "Us" or "Our') used to provide children educational
services in Taiwan, Republic of China. The current structure of the Company
resulted from a purchase of voting control of the Company by Cannabinoid
Biosciences, Inc. (CBDZ), which CBDZ spun out to its shareholders prior to
becoming an operating subsidiary of Kid Castle.
Basis of Presentation
The audited financial statements for our fiscal years ended December 31, 2019
and 2018 include a summary of our significant accounting policies and should be
read in conjunction with the discussion below. In the opinion of management, all
material adjustments necessary to present fairly the results of operations for
such periods have been included in these audited financial statements. All such
adjustments are of a normal recurring nature.
Overview
On October 21, 2019, the company sold one (1) million shares of its preferred
shares (one preferred share is convertible 1,000 share of common stocks) of the
company to Cannabinoid Biosciences, Inc., a California corporation. The issuance
of the preferred shares to Cannabinoid Biosciences, Inc gave to Cannabinoid
Biosciences, Inc, the controlling vote to control and dominate the affairs of
the company. Following the share sales to Cannabinoid Biosciences, Inc., the
purchaser converted 70,000 of the preferred shares for 70,000,000 shares of the
Company's current outstanding shares of common stock. Following the change of
control, all the former officers of company resigned their appointments and Mr.
Frank I Igwealor was appointed as the Company's Chief Executive Officer, Chief
Financial Officer and Chairman of the Board of Directors effective October 23,
2019. Furthermore, Mr. Igwealor, Dr. Solomon SK Mbagwu, MD, and Ms. Patience C
Ogbozor were also nominated as new director of the Company.
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Furthermore, on November 8, 2019, Cannabinoid Biosciences, Inc., elected to
convert 830,000 of the preferred shares for it purchased from Kid Castle on
October 21, 2019 into 830,000,000 shares of the Company's current outstanding
shares of common stock.
The current structure of the Company resulted from a purchase of voting control
of the Company by Cannabinoid Biosciences, Inc. (CBDZ), which CBDZ spun out to
its shareholders prior to becoming an operating subsidiary of Kid Castle.
Strategy
The acquisition of control by the shareholders of Cannabinoid Biosciences, Inc.
and subsequent rollup of CBDZ into the Company transformed our business model by
incorporating the business plan of CBDZ whose stated intention was to merge into
Kid Castle in a transaction that would make CBDZ a subsidiary of Kid Castle.
This merger brought the Company into the following areas of the legal CBD
business: (1) Ownership interest in certain businesses that extract, purchase
and distribute Bulk Pure CBD, Isolate, Hemp Oil, THC-free CBD Distillate and
Crude CBD Oil; (2) Partnerships with local farmers to grow farm bill compliant
hemp biomass; (3) Partnerships with extract facilities across the U.S. who
manufacture hemp-based ingredients to meet the specific needs financial products
in form of asset-backed loans, business property mortgages and other financial
products to qualified individuals/businesses in the legal-CBD businesses.
The Merged Company ("CBDZ and KDCE" or "KDCE" or "CBDZ") will prioritize
establishment of CBD process control, protocols, and formulations
standardization. The Merged Company will step up and pioneer the process to
standardize and reorganize this market, establish process control (benchmarks
and protocols), and create formulation standards for the CBD industry. Through
Kid Castle, CBDZ seeks to control the production and distribution of verities of
consumer cannabidiol (CBD) formulation under private brands in the United
States. CBDZ's goal is to bring standardization to the CBD industry, the same
way that John D Rockefeller's Standard Oil brought standardization to crude
refining in the United States in the nineteenth century. Our process
standardization would entail steps that include (a) ethanol extraction system,
(b) winterization to remove fats; (c) multiple rounds of rotary evaporation are
used to remove plant material and other unnecessary components; (d) extract
decarboxylation to transform into a crystalline structure with a proprietary
post-processing technique; and (e) get the extract tested by third-party
laboratories, package it, and get it ready for shipment.
Plan of Operations for the Next Twelve Months
Kid Castle will need approximately $1,500,000 to sustain operations for the next
12 months. Our plan is to achieve meaningful revenue from our proprietary
trading and CBD acquisitions to meet our operating needs. However, we may not be
able to increase our revenue sufficiently to meet these needs in time. It is
also unlikely that we will be able to generate $1,500,000 in net income to
satisfy all of our obligations and cover our operating cost for the next 12
months. Our ability to continue operations will be dependent upon the
successfully long-term or permanent capital in form of equity financing, the
support of creditors and shareholders, and, ultimately, the achievement of
profitable operations. There can be no assurances that we will be successful,
which would in turn significantly affect our ability to be successful in our new
business plan. If not, we will likely be required to reduce operations or
liquidate assets. We will continue to evaluate our projected expenditures
relative to our available cash and to seek additional means of financing in
order to satisfy our working capital and other cash requirements.
Critical Accounting Policies, Estimates and New Accounting Pronouncements
Management's discussion and analysis of its financial condition and plan of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires that we make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. At each balance sheet date, management evaluates its estimates. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions. The
estimates and critical accounting policies that are most important in fully
understanding and evaluating our financial condition and results of operations
include those stated in our financial statements and those listed below:
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Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, we had zero cash flows from operations for the twelve months ended
December 31, 2019 and 2018. These conditions raise substantial doubt as to our
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if we are unable to continue as a going
concern. Management intends to finance these deficits by making additional
shareholder notes and seeking additional outside financing through either debt
or sales of its Common Stock.
Recently Adopted Accounting Standards
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU
requires lessees to recognize a lease liability, on a discounted basis, and a
right-of-use asset for substantially all leases, as well as additional
disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU
2018-11, Leases (Topic 842), which provides an optional transition method of
applying the new lease standard.
In considering its qualitative disclosure obligations under ASC 842-20-50-3, the
Company determined that it has no leases subject to treatment under ASC
842-20-50-3.
The adoption of this guidance resulted in no significant impact to our results
of operations or cash flows.
Revenue Recognition
For annual reporting periods after December 15, 2017, the Financial Accounting
Standards Board ("FASB") made effective ASU 2014-09 "Revenue from Contracts with
Customers" to supersede previous revenue recognition guidance under current U.S.
GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue
Recognition. The guidance presents a single five-step model for comprehensive
revenue recognition that requires an entity to recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for
those goods or services. Two options are available for implementation of the
standard which is either the retrospective approach or cumulative effect
adjustment approach. The guidance became effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that
reporting period, with early adoption permitted. As we have no operations at
this time that generate revenue, we determined that upon adoption of ASC 606
there were no adjustments converting from ASC 605 to ASC 606.
Income Taxes
We recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns in accordance with applicable accounting guidance for accounting for
income taxes, using currently enacted tax rates in effect for the year in which
the differences are expected to reverse. We record a valuation allowance when
necessary to reduce deferred tax assets to the amount expected to be realized.
For the year ended December 31, 2019 and December 31, 2018, due to cumulative
losses, we recorded a valuation allowance against our deferred tax asset that
reduced our income tax benefit for the period to zero. As of December 31, 2019
and December 31, 2018, we had no liabilities related to federal or state income
taxes and the carrying value of our deferred tax asset was zero.
Loss Contingencies
Consistent with ASC 450-20-50-1C, if the Company determines that there is a
reasonable possibility that a material loss may have been incurred, or is
reasonably estimable, regardless of whether the Company accrued for such a loss
(or any portion of that loss), the Company will confer with its legal counsel,
consistent with ASC 450. If the material loss is determinable or reasonably
estimable, the Company will record it in its accounts and as a liability on the
balance sheet. If the Company determines that such an estimate cannot be made,
the Company's policy is to disclose a demonstration of its attempt to estimate
the loss or range of losses before concluding that an estimate cannot be made,
and to disclose it in the notes to the financial statements under Contingent
Liabilities.
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Net Income (Loss) Per Common Share
We report net income (loss) per common share in accordance with ASC 260,
"Earnings per Share." This statement requires dual presentation of basic and
diluted earnings with a reconciliation of the numerator and denominator of the
earnings per share computations. Basic net income (loss) per share is computed
by dividing net income attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the period and
excludes the effects of any potentially dilutive securities. Diluted net income
(loss) per share gives effect to any dilutive potential common stock outstanding
during the period. The computation does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive effect on
earnings.
Related Party Transactions
We follow ASC subtopic 850-10, "Related Party Transactions," for the
identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related parties include: a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of Section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g) other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
Material related party transactions are required to be disclosed in the
financial statements, other than compensation arrangements, expense allowances,
and other similar items in the ordinary course of business. However, disclosure
of transactions that are eliminated in the preparation of or combined financial
statements is not required in those statements. The disclosures shall include:
a) the nature of the relationship(s) involved; b) a description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which statements of operation are
presented, and such other information deemed necessary to an understanding of
the effects of the transactions on the financial statements; c) the dollar
amounts of transactions for each of the periods for which statements of
operations are presented and the effects of any change in the method of
establishing the terms from that used in the preceding period; and d) amounts
due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Results of Operations
Comparison of Fiscal Years 2019 and 2018
Our general and administrative expenses were $150,133 for the twelve months
ended December 31, 2019, versus $5,710 for the same period in 2018. We do not
have enough information to recognize either revenue or expenses in the periods
under review.
Liquidity and Capital Resources
Comparison of Fiscal Years 2019 and 2018
Our financial statements are prepared using accounting principles generally
accepted in the United States of America applicable to a going concern, which
contemplates the realization of assets and the liquidation of liabilities in the
normal course of business. We have limited business and income and for the year
ended December 31, 2019, we reported a net loss of $143,944 and an accumulated
deficit of $7,795,312 As of December 31, 2019. This is compared to net loss of
$5,710 and an accumulated deficit of $7,651,368 As of December 31, 2018. These
conditions raise substantial doubt about our ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of these uncertainties. Our ability to continue as a going concern is dependent
upon our ability to raise additional debt or equity funding to meet our ongoing
operating expenses and ultimately in merging with another entity with
experienced management and profitable operations. No assurances can be given
that we will be successful in achieving these objectives.
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Future financing of our operation depends largely on our controlling
shareholder, Cannabinoid Biosciences, Inc, advancing most or all of our
operating budget.
We have not established operations and will be dependent upon obtaining
financing to pursue any future extensive acquisitions and activities. For these
reasons, our auditors stated in their report on our audited financial statements
that they have substantial doubt that we will be able to continue as a going
concern without further financing.
Off-Balance Sheet Arrangements
As of December 31, 2019, we did not engage in any off-balance sheet arrangements
as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC under the
Securities Exchange Act of 1934.
Contractual Obligations
Not applicable.
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