NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2023
NOTE 1 - DESCRIPTION OF BUSINESS AND HISTORY
Description of business
The Company was originally incorporated on May
17, 2017, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected
mergers and acquisitions. On May 23, 2018, the Certificate of Incorporation of the Company was amended to effect a change in the Company’s
name from “Iris Grove Acquisition Corporation” to “CannAssist International Corporation”. On September 28, 2021,
the Certificate of Incorporation of the Company was amended a second time to effect a change in the Company’s name from “CannAssist
International Corporation” to the name “Electronic Servitor Publication Network, Inc.” The Company’s common stock
trades on the OTCQB Venture Market under the stock ticker symbol “XESP,” previously from “CNSC,” effective January
26, 2022. The Company's corporate office is located at 400 1ST Ave N., Ste. 100, Minneapolis, MN 55401. The URL of the Company’s
website is https://www.xespn.com. The Company’s telephone number is (833) 991-0800.
The Company’s business focuses on driving
growth for Brands through effective digital interactions within current and new communities. The
Company’s proprietary technology, the Digital Engagement Engine, utilizes a combination of automation, unique data management, and
a modern workflow built on a microservices architecture to achieve greater reach and lift for content providers.
On July 1, 2021, and effective on October 9, 2021,
Mark Palumbo, a former officer and director of the Company, and Forty 7 Select Holdings LLC, an entity controlled by Greg Shockey (who
was an existing shareholder of the Company), entered into an agreement pursuant to which Mark Palumbo transferred all of his 1,000 shares
of Series A Preferred Stock (representing 100% of the Company’s issued and outstanding Series A Preferred Stock), of the Company
to Forty 7 Select Holdings LLC in a private transaction. The Series A Preferred Stock provides the holder thereof the right to vote 60%
of the Company’s voting shares on any and all shareholder matters and thereby constituted a change of control of the Company. Further,
Mark Palumbo contributed 7,500,000 shares of common stock held by him to the treasury of the Company for cancellation at no cost (the
“Contribution”).
On July 23, 2021, the Company entered into a Technology
License Agreement with Phitech Management, LLC, an entity controlled by Peter Hager (“Licensor”), to use, market, promote
and distribute certain technology relating to content provisioning including the related patent applications, trade-secrets and associated
knowhow, including methods, techniques, specifications, procedures, information, systems, knowledge and business processes required to
practice and carry on business in the field of data collection, security and management (the “Technology”). The initial term
of the License is 10-years (the “Initial Term”) and shall automatically be renewed for successive 1-year terms (each, a “Renewal
Term”) unless the Company elects to terminate the License by giving 30 days’ written notice prior to commencement of a Renewal
Term. In exchange for the License of the Technology, the Company issues to the Licensor 10,000,000 restricted shares of its common stock
(which is an amount equal to $2,500,000 divided by $0.25, which was the closing market price of the Company’s common stock on the
trading day prior to the effective date of the License Agreement). On October 9, 2021, at the Closing of the Technology License Agreement,
the Company received the License to the Technology and issued Licensor 10,000,000 restricted shares of the Company’s common stock,
at a cost basis of $0.25 per share.
On July 23, 2021, the Company and Mark Palumbo
entered into an agreement (the “Spin-Off Agreement”) whereby, at the Closing, the Company shall transfer 100% of the issued
and outstanding membership units of Xceptor LLC, an entity that was a wholly-owned subsidiary of the Company, to Mark Palumbo (along with
the assets and liabilities associated with the prior business) for nominal consideration as a condition of the Change-in-Control (the
“Spin-Off”). Furthermore, at the Closing, that certain Technology License Agreement entered into by and between the Company
and Mark Palumbo dated April 29, 2019 (the “Palumbo License Agreement”) shall be terminated and the Company shall assign all
rights to the underlying Intellectual Property (as defined in the Palumbo License Agreement) to Mark Palumbo. On October 9, 2021, at the
Closing of the Spin-Off Agreement, the Company transferred 100% of the issued and outstanding membership units of Xceptor LLC to Mark
Palumbo (along with the assets and liabilities associated with the prior business) in exchange for nominal consideration, and the Palumbo
License Agreement was terminated.
As a result of the transactions described above,
the Company is strategically aligning its business to support its mission in becoming the premier content management and distribution
platform for content providers in the global markets through the Company’s continued development and acquisitions of publication
and monetization products, services, and technologies.
Effective October 9, 2021, as a result of the
transactions described above, the business of the Company changed to focus on Electronic Sports Gaming technology and the development
of related infrastructure, specifically the development and commercialization of a technology platform specifically designed for the Electronic
Sports and Electronic Gaming markets. The platform will provide an omni-channel publishing tool, with talent identity protection and monetization
tools provided in line with interaction and media creation services. Further publication and monetization products and services will be
developed and acquired to support these efforts.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The Company’s unaudited financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”),
and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments,
consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results
of operations and cash flows of the Company as of and for the three month period ending March 31, 2023 and not necessarily indicative
of the results to be expected for the full year ending December 31, 2023. These unaudited 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, 2022.
Use of Estimates
The preparation of financial statements in conformity
with 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. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation
insurable amount (“FDIC”).
Cash equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the periods ended March
31, 2023 and December 31, 2022.
Recently issued accounting pronouncements
The Company has implemented all new applicable
accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements
unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued
that might have a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has no current source of revenue and an accumulated deficit of $6,629,810 as of March 31, 2023. The Company’s
continuation as a going concern is dependent upon its ability to generate revenue to satisfy its obligations on a timely basis and ultimately
to attain profitability. There is no guarantee that the Company’s activities will generate sufficient revenues to sustain its operations,
or its ability to sell its services to generate consistent profitability. In order to maintain operations, the Company may have to raise
additional capital from equity financing and/or from its officers, directors, or principal stockholders, subject to terms obtainable and
satisfactory to the Company. There is no guarantee that the Company will be able to raise additional funds or to do so at an advantageous
price. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned
uncertainties.
NOTE 4 - NOTES PAYABLE
On May 19, 2022, the Company issued a note payable
for $10,000 to a third party. The note matures in one year and bears interest at 6% per annum. As of March 31, 2023, there is $519 of
interest accrued on this note.
On May 20, 2022, the Company issued a note payable
for $10,000 to a third party. The note matures in one year and bears interest at 6% per annum. As of March 31, 2023, there is $518 of
interest accrued on this note.
On June 10, 2022, the Company issued a note payable
for $7,630 to a third party. The note matures in 6 months and bears interest at 10% per annum. As of March 31, 2023, there is $615 of
interest accrued on this note.
On October 18, 2022, the Company issued a note
payable for $25,000 to a third party. The note matures in one year and bears interest at 8% per annum. As of March 31, 2023, there is
$899 of interest accrued on this note.
On January 6, 2023, the Company issued a note
payable for $15,000 to a third party. The note matures on July 6, 2023, and bears interest at 8.5% per annum. As of March 31, 2023, there
is $293 of interest accrued on this note.
On March 13, 2023, the Company issued a note payable
for $12,000 to a third party. The note matures on September 13, 2023, and bears interest at 8.5% per annum. As of March 31, 2023, there
is $50 of interest accrued on this note.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the year ended December 31, 2022, Forty
7 Select Holdings LLC (“Forty 7”) advanced the Company $27,643, to pay for general operating expenses. Forty 7 is controlled
by Greg Shockey, an existing shareholder of the Company. As of March 31, 2023, the balance due to Forty 7 is $50,268.
On January 10, 2023, the Company issued a note
payable for $15,000 to Forty 7. The note matures on July 10, 2023, and bears interest at 8.5% per annum. As of March 31, 2023, there is
$279 of interest accrued on this note.
Refer to Note 7 for options to purchase shares
of common stock issued to related parties.
NOTE 6 – PREFERRED STOCK
The Company has designated 1,000 shares of Series
A Preferred Stock. The shares of Series A Preferred Stock have a par value of $0.0001 per share. The Series A Preferred Shares do not
have a dividend rate or liquidation preference and are not convertible into shares of common stock. Series A Preferred Stock, voting together
as a class, have the right to vote 60% of the Company’s voting shares on any and all shareholder matters (the “Majority Voting
Rights”). Additionally, the Company shall not adopt any amendments to the Company’s Bylaws, Articles of Incorporation, as
amended, make any changes to the Certificate of Designations establishing the Series A Preferred Stock, or effect any reclassification
of the Series A Preferred Stock, without the affirmative vote of at least a majority of the outstanding shares of Series A Preferred Stock.
However, the Company may, by any means authorized by law and without any vote of the holders of shares of Series A Preferred Stock, make
technical, corrective, administrative or similar changes to such Certificate of Designations that do not, individually or in the aggregate,
adversely affect the rights or preferences of the holders of shares of Series A Preferred Stock. Other than the Majority Voting Rights,
the Series A Preferred Stock does not have any other dividend, liquidation, conversion, or redemption rights, whatsoever.
NOTE 7 – OPTIONS
In the first quarter of 2022, the Company entered
into an Employment Agreement with Thomas Spruce, an officer and director of the Company. This Employment Agreement has a term of 2 years
and automatically renews for an additional 6-month term unless terminated earlier. This agreement is terminable by each of the parties
upon written notice. Under this Employment Agreement, the Company pays a base salary of $1.00 per year and issued options to purchase
500,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over a period of
two years and expire 10 years from the date of grant.
Effective April 12, 2022, the Company entered
into an Advisory Agreement with Greg Shockey, an affiliate of the Company and service provider. Under this Advisory Agreement, the Company
issued options to purchase 240,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options
vest over a period of 1 year contingent upon service and expire 10 years from the date of grant.
Effective April 12, 2022, the Company entered
into an Advisory Agreement with Danijella Dragas, a third-party service provider. Under this Advisory Agreement, the Company issued options
to purchase 240,000 restricted shares of the Company’s common stock at a strike price of $0.39 per share. The options vest over
a period of 1 year contingent upon service and expire 10 years from the date of grant. On March 23, 2023, the Advisory Agreement was cancelled,
thereby terminating Danijella Dragas and forfeiting 60,000 unvested options.
On May 27, 2022, the Company entered into an Addendum
to Employment Agreement with Thomas Spruce, which granted Mr. Spruce options to purchase an additional 250,000 restricted shares of the
Company’s common stock at a strike price of $0.15 per share. The options vest immediately from the date of the grant and expire
10 years from the date of grant.
On November 16, 2022, the Company entered into
an Employment Agreement with Jim Kellogg, which granted Mr. Kellogg options to purchase 300,000 restricted shares of the Company’s
common stock at a strike price of $0.10 per share. The options vest over a period of 1 year contingent upon service and expire 10 years
from the date of grant.
On February 1, 2023, the Company entered into
an Advisor Agreement with Greg Shockey, which supersedes his previous Advisor Agreement with the Company, whereby, in exchange for business
development and strategy consulting, investor relations, and facilitating meetings with targeted investors, as well as other services,
the Company agreed to issue Greg Shockey options to purchase 60,000 restricted shares of common stock at signing and an additional 1,200,000
shares of restricted common stock every year thereafter for three years.
On February 1, 2023, Peter Hager was appointed
as the Company’s President and Chief Executive Officer. Per the terms of the employment agreement Mr. Hager was granted options
to purchase 6,400,000 restricted shares of the Company’s common stock, at the commencement of his initial term of services, for
an exercise price $0.06 per share, vesting in installments of 500,000 shares per fiscal quarter with the first vesting date of April 1,
2023 and 1,000,000 options to purchase restricted shares of the Company’s common stock, at the commencement of his first renewal
term of service.
On February 1, 2033, Thomas Spruce was appointed
as the Company’s Secretary and Chief Operations Officer. Per the terms of the employment agreement Mr. Spruce was granted options
to purchase 1,750,000 restricted shares of the Company’s common stock, at the commencement of his initial term of services, for
an exercise price $0.06 per share, vesting with respect to the first 250,000 shares on February 1, 2023 and vesting with respect to the
remaining 1,500,000 shares in installments of 125,000 shares per fiscal quarter with the first vesting date of April 1, 2023 and 250,000
options to purchase restricted shares of the Company’s common stock, at the commencement of his first renewal term of service.
Options issued with the following inputs | |
| | |
Options issued in the three months ended March
31, 2023, with the following inputs:
Options | |
| 11,810,000 | |
Share price | |
$ | 0.066 | |
Exercise Price | |
$ | 0.06 | |
Term | |
| 10 years | |
Volatility | |
| 209.39 | % |
Risk Free Interest Rate | |
| 3.39 | % |
Dividend rate | |
| — | |
A summary of the status of the Company’s
outstanding stock options and changes during the year is presented below:
Schedule of options activity | |
| | | |
| | | |
| | | |
| | |
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contract Term | | |
Aggregate Intrinsic Value | |
Outstanding at December 31, 2021 | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Granted | |
| 2,030,000 | | |
$ | 0.36 | | |
| 10 | | |
$ | — | |
Cancelled | |
| (250,000 | ) | |
$ | — | | |
| — | | |
$ | — | |
Exercised | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Outstanding at December 31, 2022 | |
| 1,780,000 | | |
$ | 0.35 | | |
| 9.81 | | |
$ | — | |
Granted | |
| 11,810,000 | | |
$ | 0.06 | | |
| 10 | | |
$ | — | |
Cancelled | |
| (60,000 | ) | |
$ | — | | |
| — | | |
$ | — | |
Exercised | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Outstanding at March 31, 2023 | |
| 13,530,000 | | |
$ | 0.09 | | |
| 9.75 | | |
$ | — | |
Exercisable at March 31, 2023 | |
| 2,220,000 | | |
$ | 0.24 | | |
| 9.34 | | |
$ | — | |
Schedule of stock options activity number of shares |
|
|
|
|
|
|
Range of Exercise
Prices |
|
Number Outstanding
3/31/2023 |
|
Weighted Average
Remaining
Contractual Life |
|
Weighted Average
Exercise Price |
$0.06 – 0.39 |
|
13,590,000 |
|
9.75 years |
|
$0.09 |
NOTE 8 – WARRANTS
A summary of the status of the Company’s
outstanding stock warrants and changes during the year is presented below:
Schedule of common stock outstanding roll forward | |
| | | |
| | | |
| | | |
| | |
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contract Term | | |
Aggregate Intrinsic Value | |
Outstanding at December 31, 2021 | |
| 153,503 | | |
$ | 0.25 | | |
| 6.92 | | |
$ | — | |
Granted | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Expired | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Exercised | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Outstanding at December 31, 2022 | |
| 153,503 | | |
$ | 0.25 | | |
| 5.92 | | |
$ | — | |
Granted | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Expired | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Exercised | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Exercisable at March 31, 2023 | |
| 153,503 | | |
$ | 0.25 | | |
| 5.67 | | |
$ | — | |
Schedule of weighted average number of shares |
|
|
|
|
|
|
Range of Exercise
Prices |
|
Number Outstanding
3/31/2023 |
|
Weighted Average
Remaining
Contractual Life |
|
Weighted Average
Exercise Price |
$0.25 |
|
153,503 |
|
5.67 years |
|
$0.25 |
NOTE 9 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management
has performed an evaluation of subsequent events through the date that the financial statements were issued and has determined that there
are no material subsequent events to disclose in these financial statements.