UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| 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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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.☒
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). ☒
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 ☐ | |
| ☐ | Smaller
reporting company | ||
| Emerging
growth company |
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. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of July 15, 2022, there were shares of common stock, par value $0.0001, issued and outstanding.
Nestbuilder.com Corp.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | 3 | |
| ITEM 1 | Financial Statements | 4 |
| ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
| ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk | 24 |
| ITEM 4 | Controls and Procedures | 24 |
| PART II – OTHER INFORMATION | 26 | |
| ITEM 1 | Legal Proceedings | 26 |
| ITEM 1A | Risk Factors | 26 |
| ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 26 |
| ITEM 3 | Defaults Upon Senior Securities | 26 |
| ITEM 4 | Mine Safety Disclosures | 26 |
| ITEM 5 | Other Information | 26 |
| ITEM 6 | Exhibits | 27 |
| 2 |
PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
| 3 |
| ITEM 1 | Financial Statements |
NESTBUILDER.COM CORP.
BALANCE SHEETS
| May 31, 2022 | November 30, 2021 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Paycheck protection SBA loan | ||||||||
| Convertible promissory nates payable and accrued interest | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Stockholders’ Deficit: | ||||||||
| Series A preferred stock, par value $; shares authorized, shares issued and outstanding | ||||||||
| Common stock, par value $; shares authorized; shares issued and outstanding at May 31, 2022 and shares issued and outstanding at November 30, 2021 | ||||||||
| Treasury Stock, at cost ( shares) | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements
| 4 |
NESTBUILDER.COM CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months ended | For the six months ended | |||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| Real estate media revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Marketing and promotions | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses): | ||||||||||||||||
| Gain on forgiveness of PPP and SBA loans | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Loss on extinguishment of debt | ( | ) | ||||||||||||||
| Total other income (expenses), net | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||
| Net loss per common share: | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements
| 5 |
NESTBUILDER.COM CORP
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THREE AND SIX MONTHS ENDED MAY 31, 2022 AND 2021
(Unaudited)
Treasury Stock | Additional | Stock | Total | |||||||||||||||||||||||||
| Common Stock | Par | Paid | Accumulated | Subscription | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Value | in Capital | Deficit | Receivable | Deficit | ||||||||||||||||||||||
| Balance November 30, 2020 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| Net operating loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance February 28, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net operating loss | - | |||||||||||||||||||||||||||
| Balance May 31, 2021 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Balance November 30, 2021 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Issuance of common stock for cash | ( | ) | ||||||||||||||||||||||||||
| Fair value of common stock issued for debt extinguishment | ||||||||||||||||||||||||||||
| Issuance of warrants, vested immediately, with convertible notes | - | |||||||||||||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance February 28, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Cash received for stock subscription receivable | - | |||||||||||||||||||||||||||
| Exercise of warrants for cash | ||||||||||||||||||||||||||||
| Fair value of common stock issued for debt extinguishment | ||||||||||||||||||||||||||||
| Restricted stock | ||||||||||||||||||||||||||||
| Net operating loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance May 31, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements
| 6 |
NESTBUILDER.COM CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
| For the six months ended | ||||||||
| May 31, 2022 | May 31, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Gain on forgiveness of PPP and SBA loans | ( | ) | ( | ) | ||||
| Amortization of warrants issued with debt | ||||||||
| Loss on extinguishment of debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Increase in accrued interest | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from convertible note payable | ||||||||
| Proceeds from issuance of common shares | ||||||||
| Cash received for stock subscription receivable | ||||||||
| Proceeds from Paycheck Protection SBA Loan | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Increase in Cash | ||||||||
| Beginning of year | ||||||||
| End of year | $ | $ | ||||||
| Schedule of Non-Cash Investing and Financing Activities: | ||||||||
| Conversion debt settlement | $ | $ | ||||||
| Warrants amended with debt settlement | $ | $ | ||||||
| Warrants issued with convertible notes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements
| 7 |
NESTBUILDER.COM CORP.
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
May 31, 2022 and 2021
(UNAUDITED)
NOTE 1: ORGANIZATION AND NATURE OF BUSINESS
Organization
We
were incorporated in the State of
We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees (video creation and production and referral fees from our LoseTheAgent.com website). At the core of our programs is our proprietary video creation technology which allows for an automated conversion of data (text, video slices and pictures of home listings) to a video with voice over and music. We provide video search, storage and marketing capabilities on multiple platform dynamics for web and mobile. Once a home, personal or community video is created using our proprietary technology, it can be published to social media, email or distributed to multiple real estate websites.
In addition, we own and operate the web site LoseTheAgent.com, which is a site dedicated to peer-to-peer real estate transactions between home sellers and buyers - the so called For Sale By Owner segment. We currently have approximately 100,000 home listings across all 50 states. We monetize the website by charging fees for both listing a home for sale and picking up possible buyers’ messages of interest. We also plan on generating additional revenues by monetizing seller/buyer data with targeted, interested parties. The web site is fully functional and is being marketed via various online platforms.
Products and Services
We currently offer the following products and services:
Enterprise Video Production: We service large and small broker accounts in the North America Real Estate Market in compiling listings into a Video format and distributing to those franchisor’s websites, brokers and agents and lead generation platforms 24/7. Some of these multiyear contracts produced over 10 million video listings from 2012-2014. These volumes, however, have declined beginning in 2017. We currently have the ability to produce over 15,000 videos per day.
| 8 |
The Virtual Tour (VT): This program was developed and implemented to allow agents to access specific video based product strategies that are designed specifically to increase the SEO rank and traffic credit to real estate franchise systems and/or their brokers.
LoseTheAgent.com: We own and operate the web site LoseTheAgent.com, which is a site dedicated to peer-to-peer real estate transactions between home sellers and buyers - the so called For Sale By Owner (FSBO) segment. We currently have approximately 100,000 home listings across all 50 states. We monetize the website by charging fees for both listing a home for sale and picking up possible buyers’ messages of interest. We also plan on generating additional revenues by monetizing seller/buyer data with targeted, interested parties. The web site is functional and is being marketed via various online platforms.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10K and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the six months ended May 31, 2022 are not indicative of the results that may be expected for the year ending November 30, 2022 or for any other future period. These unaudited financial statements and the unaudited condensed notes thereto should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the year ended November 30, 2021, filed with the Securities and Exchange Commission (the “SEC”) on December 30, 2021.
Cash and Cash Equivalents
The
Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of
less than 90 days to be cash and cash equivalents. There were
Property and Equipment
All
expenditures on the acquisition for property and equipment are recorded at cost and capitalized as incurred, provided the asset benefits
the Company for a period of more than one year. Expenditures on routine repairs and maintenance of property and equipment are charged
directly to operating expense. The property and equipment are depreciated based upon its estimated useful life after being placed in
service. The estimated useful life of computer equipment is
Impairment of Long-Lived Assets
In accordance with Accounting Standards Codification (“ASC”) 360-10, “Property, Plant, and Equipment”, the Company periodically reviews its long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not impair any long-lived assets as of May 31, 2022, and November 30, 2021.
Website Development Costs
The Company accounts for website development costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day-to-day operation of the website are expensed as incurred.
| 9 |
Fair Value of Financial Instruments
ASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820) defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC 820 also describes three levels of inputs that may be used to measure fair value:
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial instruments consist principally of cash, accounts payable, accrued liabilities and other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short- term nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single model for revenue arising from contracts with customers and supersedes current revenue recognition guidance. The core principle of the guidance is that an entity should 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. We adopted the standard effective December 1, 2018, with no cumulative adjustment needed as of this date. All of our revenue is generated from the United States of America.
Revenue is recognized when all of the following criteria are met:
●Identification of the contract, or contracts, with a customer - A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and the parties are committed to perform, and (iii) we determine that collection of substantially all consideration to which it will be entitled in exchange for goods or services that will be transferred is probable based on the customer’s intent and ability to pay the promised consideration.
●Identification of the performance obligations in the contract - Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, we apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised goods or services are accounted for as a combined performance obligation.
●Determination of the transaction price - The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. We typically estimate the transaction price impact of discounts offered to the customers for early payments on receivables or rebates based on channel partner sales achievements. Constraints are applied when estimating variable considerations based on historical experience where applicable.
●Allocation of the transaction price to the performance obligations in the contract - All current contracts are of a single performance obligation thus the entire transaction price is allocated to the single performance obligation. We determine standalone selling price taking into account available information such as historical selling prices of the performance obligation, geographic location, overall strategic objective, market conditions and internally approved pricing guidelines related to the performance obligation.
●Recognition of revenue when, or as, we satisfy performance obligation - We satisfy performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at or over the time the related performance obligation is satisfied by transferring a promised good or service to a customer.
| 10 |
Cost of Revenues
Cost of revenues includes costs attributable to services sold and delivered. These costs include engineering costs incurred to maintain our networks.
Advertising Expense
Advertising
costs are charged to expense as incurred and are included in marketing and promotions expense in the accompanying financial statements.
Advertising expense for the six months ended May 31, 2022, and May 31, 2021 were $
The Company computes share based payments in accordance with Accounting Standards Codification 718-10 “Compensation” (ASC 718-10). ASC 718-10 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services at fair value, focusing primarily on accounting for transactions in which an entity obtains employees services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of an entity’s equity instruments or that may be settled by the issuance of those equity instruments. In March 2005, the SEC issued SAB No. 107, Share-Based Payment (“SAB 107”) which provides guidance regarding the interaction of ASC 718-10 and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of ASC 718-10. The Company estimates the fair value of stock options by using the Black-Scholes option pricing model. Additionally, the Company has early adopted ASU 2018-07 during fiscal year 2019. In June 2018, the FASB issued ASU 2018-07 Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07), which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities and net operating loss and tax credit carryforwards given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.
ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company has applied for an extension of time to file with the Internal Revenue Service for its most recent tax filing.
The Company recognizes expenses for tax penalties and interest assessed by the Internal Revenue Service and other taxing authorities upon receiving valid notice of assessments. The Company has received no such notices as of May 31, 2022.
Basic earnings 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.
Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share is equal to basic because the common stock equivalents are anti-dilutive. The Company’s anti-dilutive common stock equivalents include the following:
| May 31, 2022 | November 30, 2021 | |||||||
| Shares on issuance of warrants outstanding | ||||||||
| Shares on convertible promissory notes | ||||||||
| 11 |
Concentrations, Risks and Uncertainties
The
Company’s operations and revenue are related to the real estate industry and its prospects for success are tied indirectly to interest
rates and the general housing and business climates in the United States. Financial instruments and related items, which potentially
subject the Company to concentration of credit risk consists primarily of cash. The Company places its cash with high credit quality
institutions. At times, such deposits may be in excess of the FDIC insurance limit of $
Recently Issued Accounting Standards
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued and not implemented 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.
At
May 31, 2022, the Company had working capital of $
In order to meet its working capital needs through the next twelve months and to fund the growth of our business, the Company may consider plans to raise additional funds through the issuance of additional shares of common or preferred stock and or through the issuance of debt instruments. Although the Company intends to obtain additional financing to meet our cash needs, the Company may be unable to secure any additional financing on terms that are favorable or acceptable to it, if at all.
COVID-19 Update
In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The pandemic has had significant impacts around the globe and in many locations in which we operate. While the impacts have not caused a material adverse financial impact to our business to date, the future impacts remain uncertain. The extent to which the COVID-19 pandemic may impact our business going forward will depend on numerous evolving factors that we cannot reliably predict. The effect, if any, of the COVID-19 pandemic would not be fully reflected in our results of operations and overall financial performance until future periods.
As of May 31, 2022, COVID-19 has not had a material impact on our results of operations or financial condition.
| 12 |
Note 4: PROPERTY AND EQUIPMENT
At May 31, 2022 and November 30, 2021, the Company’s property and equipment are as follows:
| Estimated Life (in years) | May 31, 2022 | November 30, 2021 | ||||||||||
| Office equipment | $ | $ | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||||
| $ | $ | |||||||||||
The Company’s fixed assets are fully depreciated.
NOTE 5: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The Company’s accounts payable and accrued expenses are as follows:
| May 31, 2022 | November 30, 2021 | |||||||
| Trade payables and accruals | $ | $ | ||||||
| Total accounts payable and accrued expenses | $ | $ | ||||||
| 13 |
NOTE 6: RELATED PARTY TRANSACTIONS
Convertible Promissory Notes
During the six months ended May 31, 2022, Mr. Aliksanyan, our Chief Executive Officer and board member, Mr. Grbelja, our Chief Financial Officer and board member, and Mr. McLeod, our Secretary and board member, converted promissory notes for common stock as part of a Note Conversion and Warrant Amendment Agreement (See Note 7 and Note 9).
Common Stock Purchase Warrants
On
February 4, 2022, the Company issued
On
May 5, 2022, Mr. Aliksanyan, our Chief Executive Officer and board member, Mr. Grbelja, our Chief Financial Officer and board member,
and Mr. McLeod, our Secretary and board member, exercised their warrants to purchase common stock. A total of
Common Stock Purchase Warrant Amendments
On
May 26, 2022 the Company amended the 2019 and 2022 warrant agreements to reduce the exercise price from $
Restricted Stock Awards
On February 4, 2022, the Company issued shares of restricted common stock to its officers and directors at a price per share of $, the fair market value at the date of issuance. Pursuant to the terms of the Restricted Stock Award Agreements, the restricted common stock vests in a series of eight (8) successive equal quarterly installments beginning on the date of grant, provided that the grantee continuously provides services to the Company as an employee, officer, director, contractor or consultant through the applicable vesting date. The foregoing vesting schedule is subject to acceleration in the event of the service provider’s death, disability, termination without cause, or a change in control of the Company. There was $ of related party stock based compensation included in general and administrative expenses and $ of related party unvested restricted stock based compensation expense as of May 31, 2022 that will be recognized through February 28, 2024.
| 14 |
NOTE 7: STOCKHOLDERS’ DEFICIT
The
total number of shares of all classes of stock that the Company shall have the authority to issue is
Common Stock
On
February 4, 2022, the Company issued shares of restricted common stock at $ per share to its officers, contracted consultants
and professionals. Pursuant to the terms of the Restricted Stock Award Agreements, the restricted common stock vests
in a series of eight (8) successive equal quarterly installments beginning on the date of grant, provided that the grantee continuously
provides services to the Company as an employee, officer, director, contractor or consultant through the applicable vesting date. The
foregoing vesting schedule is subject to acceleration in the event of the service provider’s death, disability, termination without
cause, or a change in control of the Company. There was $ of stock based compensation included in general and administrative expense
and $ of unvested restricted stock based compensation expense as of May 31, 2022 that will be recognized through May 31, 2024.
As of May 31, 2022,
On
February 7, 2022, our existing noteholders exercised their conversion rights and were issued shares of common stock at $
On
February 28, 2022, the company issued shares of its common stock at $ in exchange for $
On
May 11, 2022, our remaining noteholders exercised their conversion rights and were issued shares of common stock at $ for
a total value of $
| 15 |
Common Stock Purchase Warrants
2021 Warrants
In
June 2021, the Company issued an additional
In
September 2021, the Company issued an additional
2022 Warrants
In
January 2022, the Company issued an additional
On
February 4, 2022, the Company issued
On
February 7, 2022, the Company and the purchasers under the Securities Purchase Agreement executed
Note Conversion and Warrant Amendment Agreements pursuant to which they amended the common stock purchase warrants issued pursuant to
the Securities Purchase Agreement, dated December 10, 2020, to reduce the exercise price per share from $
On
May 5, 2022, a portion of our existing common stock warrant holders exercised their purchase right to purchase
On
May 26, 2022, the Company executed a Warrant Amendment Agreement pursuant to which they amended the common stock purchase warrants issued
pursuant to the 2019 warrants and 2022 warrants, reducing the exercise price per share from $
| 16 |
A summary of the Company’s outstanding common stock warrants as of May 31, 2022 is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Exercise | Intrinsic | |||||||||||
| Warrants | Price | Value | ||||||||||
| Outstanding, November 30, 2021 | $ | $ | ||||||||||
| Warrants granted and issued | $ | $ | ||||||||||
| Warrants exercised | ( | ) | $ | $ | ||||||||
| Outstanding, May 31, 2022 | $ | $ | ||||||||||
| Common stock issuable upon exercise of warrants | $ | $ | ||||||||||
The following table summarizes information about common stock warrants outstanding at May 31, 2022:
| Warrants Outstanding | Warrants Exercisable | |||||||||||
| Number Outstanding at | Weighted Average | Weighted Average | Number Exercisable at | Weighted Average | ||||||||
| May 31, 2022 | Remaining Life | Exercise Price | May 31, 2022 | Exercise Price | ||||||||
| Years | $ | $ | ||||||||||
| Expected volatility | % | |||
| Expected dividends | % | |||
| Expected term (in years) | ||||
| Risk-free rate | % |
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NOTE 8: CONTINGENCIES
On August 17, 2018, we entered into employment agreements with Alex Aliksanyan, our former Chief Executive Officer and a director, and Thomas M. Grbelja, our Chief Financial Officer, Secretary and a director.
Pursuant
to the employment agreement with Alex Aliksanyan (the “Aliksanyan Employment Agreement”), Mr. Aliksanyan agreed to serve
as our Chief Executive Officer, and we agreed to pay Mr. Aliksanyan an annual base salary of $
Pursuant
to the employment agreement with Thomas M. Grbelja (the “Grbelja Employment Agreement”), Mr. Grbelja agreed to serve as our
Chief Financial Officer, devoting a minimum of
On February 4, 2022, we entered into a Settlement Agreement with each of Alex Aliksanyan, our Chief Executive Officer and Director, William McLeod, our Secretary and Director, and Thomas Grbelja, our Chief Financial Officer and Director, pursuant to which, among other things, each of the foregoing individuals terminated all agreements with us, including any effective employment agreements, and released us of any and all claims he may have had against us, including for owed but unpaid compensation, and we agreed to issue to each such individual a new compensation package consisting of restricted common stock and warrants to purchase common stock.
NOTE 9: CONVERTIBLE PROMISSORY NOTES PAYABLE
From
December 10, 2020 through January 27, 2021, we entered into a Securities Purchase Agreement, by and among us and the purchasers named
thereunder, pursuant to which we issued to each of seven investors a Senior Convertible Promissory Note in the principle amount of up
to $
The
Notes bear interest at the rate of
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Pursuant
to the terms of the Notes, the holders of the Notes have the right, at their option, at any time, to convert the principal amount of
the Notes, and any accrued interest, into our common stock at a conversion of $ per share. However, each holder of a Note will not
have the right to convert any portion of his Note if the holder (together with his affiliates) would beneficially own in excess of
On
February 7, 2022, the existing noteholders exercised their conversion rights and were issued common shares at $ for a total
value of $
On
May 11, 2022, our remaining noteholders exercised their conversion rights and were issued shares of common stock at $ for
a total value of $
NOTE 10: PAYCHECK PROTECTION PROGRAM/SBA LOAN
In
March 2021, the Company obtained an additional Paycheck Protection Program (2) loan and the SBA Economic Development Incentive Loan in
the amount of $
The
Company applied for and received forgiveness from the SBA in December 2021 in the amount of $
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| ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects
The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.
Overview
We were incorporated in the State of Nevada on January 10, 2017 as a wholly owned subsidiary of RealBiz Media Group, Inc., a Delaware corporation (“RealBiz”). On July 31, 2018, RealBiz effectuated our spin-off from RealBiz. Upon completion of the spin-off, RealBiz stockholders owned 100% of the outstanding shares of our common stock.
We are engaged in the business of providing digital media and marketing services for the real estate industry. We currently generate revenue from service fees (video creation and production) and referral fees from our LoseTheAgent.com website. At the core of our programs is our proprietary video creation technology which allows for an automated conversion of data (text, photos and video slices) to a video with voice over and music. We provide video search, storage and marketing capabilities on multiple platform dynamics for web and mobile. Once a home, personal or community video is created using our proprietary technology, it can be published to social media, email or distributed to multiple real estate websites. In addition, we own and operate the web site LoseTheAgent.com, which is a site dedicated to peer-to-peer real estate transactions between home sellers and buyers - the so called For Sale By Owner segment. We currently have approximately 100,000 home listings across all 50 states. We monetize the website by charging fees for both listing a home for sale and picking up possible buyers’ messages of interest. We also plan on generating additional revenues by monetizing seller/buyer data with targeted, interested parties. The web site is fully functional and is being marketed via various online platforms.
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Results of Operations for the Three Months Ended May 31, 2022 and May 31, 2021
Revenues
Total revenue for the three months ended May 31, 2022 amounted to $13,055 as compared to $15,115 for the three months ended May 31, 2021, a decrease of $2,060 or 14%. The decrease is primarily a result of declining legacy virtual tour business, due primarily to the loss of our top two franchise accounts, who took their video production business in house. We envision these trends continuing for the foreseeable future and see significant risks to the future of our legacy business.
Cost of Revenue
Cost of revenues totaled $4,138 for the three months ended May 31, 2022, compared to $4,406 for the three months ended May 31, 2021, representing a decrease of $268 or 6%. Cost of revenues consists primarily of engineering and server costs incurred in connection with maintenance of our online networks.
Operating Expenses
Our operating expenses, which include marketing and promotion, salaries and benefits and general and administrative expenses, increased $215,007 to $226,941 for the three months ended May 31, 2022, compared to $11,973 for the three months ended May 31, 2021. Marketing and promotion expenses decreased $185, salaries and benefits decreased $14,568.
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General and administrative expenses amounted to $226,885 and ($2,875) for the three months ended May 31, 2022 and May 31, 2021, respectively. A breakdown of general and administrative expenses is as follows:
| Three months Ended | ||||||||||||
| May 31, | ||||||||||||
| Expense | 2022 | 2021 | Increase/(Decrease) | |||||||||
| Professional Fees | $ | 11,958 | $ | (4,448 | ) | $ | 16,406 | |||||
| Stock based compensation | 208,022 | - | 208,022 | |||||||||
| Dues and Subscriptions | 582 | 574 | 8 | |||||||||
| Other | 6,323 | 999 | 5,324 | |||||||||
| Total | $ | 226,8858 | $ | (2,875 | ) | $ | 229,760 | |||||
Other Income (Expenses)
Our other income (expense), net, decreased by $13,030 for the three months ended May 31, 2022, versus the prior year. A summary of other income (expense) is as follows:
| Three Months Ended | ||||||||||||
| May 31, | ||||||||||||
| 2022 | 2021 | Increase/(Decrease) | ||||||||||
| Interest expense | $ | (50) | $ | - | $ | 50 | ||||||
| Gain of forgiveness of PPP #1 | $ | $ | 13,080 | $ | (13,080) | |||||||
| Total | $ | (50) | $ | 13,080 | $ | (13,030) | ||||||
Net Income/Loss
We had net loss of $218,074 for the three months ended May 31, 2022, compared to net income of $11,855 for the three months ended May 31, 2021, a decrease of $229,929 due to the changes described above.
Results for Six Month Period Ended May 31, 2022 and 2021
Revenues
Total revenue for the six months ended May 31, 2022 was $24,511 compared to $31,093 for the six months ended May 31, 2021, a decrease of $6,582 or 21%. The decrease is primarily a result of declining legacy virtual tour business. Our legacy “on demand” video business has been declining on average 35% per year over the past two years. This trend is driven by our once unique technology being commoditized and offered as a “free” tool by many real estate web site producers.
Cost of Revenue
Cost of revenues totaled $7,812 for the six months ended May 31, 2022, compared to $8,884 for the six months ended May 31, 2021, representing a decrease of $1,072 or 12%. Cost of revenues consists primarily of engineering and server costs incurred in connection with maintenance of our online networks. The decline this year is primarily related to reduced engineering costs to maintain the website also a decline in revenue volume.
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Operating Expenses
Our operating expenses, which include salaries and benefits, marketing and promotion and general and administrative expenses, increased 300,205 for the six months ended May 31, 2022, compared to $33,067 for the six months ended May 31, 2021. The overall increase in operating expenses was substantially due to a decrease in marketing and promotional expenses of $230, lower salaries and benefits of $14,568 offset by an increase in general and administrative costs of $315,003. A breakdown of general and administrative expenses is as follows:
| Six Months Ended | ||||||||||||
| May 31, | ||||||||||||
| Expense | 2022 | 2021 | Increase/(Decrease) | |||||||||
| Professional Fees and legal fees | $ | 48,170 | $ | 14,133 | $ | 34,037 | ||||||
| Dues & subscriptions | 1,153 | 1,653 | (500) | |||||||||
| Stock based compensation | 277,356 | - | 277,356 | |||||||||
| Other | 6,504 | 2,394 | 4,110 | |||||||||
| Total | $ | 333,183 | $ | 18,180 | $ | 315,003 | ||||||
Other Income (Expenses)
Our other expense, net, increased by $77,509 for the six months ended May 31, 2022 versus the prior year. A summary of other income is as follows:
| Six Months Ended | ||||||||||||
| May 31, | ||||||||||||
| 2022 | 2021 | Increase/(Decrease) | ||||||||||
| Interest expense | $ | (7,308) | $ | - | $ | (7,308 | ) | |||||
| Gain of forgiveness of PPP #1 | $ | 15,077 | $ | 13,080 | $ | 1,997 | ||||||
| Loss on extinguishment of debt | $ | (72,198) | - | (72,198 | ) | |||||||
| Total | $ | (64,429) | $ | 13,080 | $ | (77,509) | ||||||
Net Income/Loss
We had a net loss of $381,002 for the six months ended May 31, 2022, compared to net income of $2,222 for the six months ended May 31, 2021, a decrease of $383,224 due to the increases in stock-based compensation of $277,356 and loss on the extinguishment of debt of $72,198.
Liquidity and Capital Resources; Anticipated Financing Needs
On May 31, 2022, we had $107,571 cash on-hand, an increase of $87,949 from the beginning of the year balance of $19,622.
Net cash used in operating activities was $41,761 for the six months ended May 31, 2022, an increase of $20,622 from $21,139 of cash used in operations during the six months ended May 31, 2021. This increase was primarily due a larger operating loss during the current fiscal quarter.
Net cash provided by financing activities was $129,710 for the six months ended May 31, 2022, from the exercise price paid by investors to exercise common stock purchase warrants in the amount of $6,710, the issuance of convertible promissory notes payable of $20,000 and proceeds from the issuance of common stock in the amount of $103,000. Net cash provided by financing activities was $40,577 for the six months ended May 31, 2021.
Our ability to continue as a going concern on a long-term basis is dependent upon our ability to generate sufficient cash flow from operations to meet our obligations on a timely basis, to obtain additional financing and ultimately attain profitability.
Based solely on our own internal estimates without the benefit of any independent third-party evaluation, we anticipate that our cash and cash flow will not be sufficient to satisfy our cash requirements over the next twelve months and we will likely require significant external financing. The magnitude of the additional financing and its timing is not yet precisely known. In the event that we are able to secure a sufficient amount of additional financing on a timely basis and on generous terms, it may include the issuance of equity or debt securities, obtaining credit facilities, or entering into other financing arrangements on such terms as then existing market conditions require. In the event that we were to issue additional equity or debt securities, stockholders may experience significant dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. And in the case of any issuance of one or more debt securities, the debt covenants may restrict our operating ability and our ability to raise additional financing from debt. Our ability to obtain additional capital on terms that are reasonable cannot be assured. We may be forced to obtain additional capital on terms that could limit our long-term ability to remain in business or otherwise materially restrict our operations.
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Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have identified the policies below as critical to our understanding of the results of our business operations. We discuss the impact and any associated risks related to these policies on our business operations throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.
In the ordinary course of business, we have made a number of estimates and assumptions in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Actual results could differ significantly from those estimates and assumptions. The following critical accounting policies are those that are most important to the portrayal of our financial statements. These policies require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a summary of our significant accounting policies, including the critical accounting policies discussed below, refer to Note 2 — “Summary of Significant Accounting Policies” included in the “Notes to Financial Statements”,
| ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk |
As a smaller reporting company, we are not required to provide the information required by this Item.
| ITEM 4 | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Disclosure controls and procedures include, without limitation, controls and other procedures that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of May 31, 2022.
Management has identified control deficiencies regarding the lack of segregation of duties. Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.
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To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which should enable us to implement adequate segregation of duties within the internal control framework.
These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our financial statements may not be prevented or detected on a timely basis. In light of this material weakness, we performed additional analyses and procedures in order to conclude that our unaudited financial statements for the quarter ended May 31, 2022, included in this Quarterly Report on Form 10-Q were fairly stated in accordance with GAAP. Accordingly, management believes that despite our material weaknesses, our unaudited financial statements for the quarter ended May 31, 2022 are fairly stated, in all material respects, in accordance with GAAP.
Limitations on Effectiveness of Controls and Procedures
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the transition period or our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
| ITEM 1 | Legal Proceedings |
In the ordinary course of business, we may from time to time be involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
| ITEM 1A | Risk Factors |
As a smaller reporting company, we are not required to provide the information required by this Item.
| ITEM 2 | Unregistered Sales of Equity Securities and Use of Proceeds |
On May 5, 2022, we issued a total of 335,505 shares of our common stock to eight investors in connection with the exercise of Common Stock Purchase Warrants issued pursuant to that certain Securities Purchase Agreement dated December 10, 2020. Each of the Common Stock Purchase Warrants was exercised at $0.02 per share. In connection with the foregoing, Alex Aliksanyan, our Chief Executive Officer and Director, received 30,505 shares of our common stock; Thomas Grbelja, our Chief Financial Officer and Director, received 50,000 shares of our common stock; and William McLeod, our Secretary and Director, received 50,000 shares of our common stock. The issuances of common stock were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, and the holders were all either accredited or sophisticated investors familiar with our operations.
On April 11, 2022, we issued a total of 29,066 shares of our common stock to two investors pursuant to Note Conversion and Warrant Amendment Agreements dated February 7, 2022. The issuances of common stock were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, and the holders were all either accredited or sophisticated investors familiar with our operations.
| ITEM 3 | Defaults Upon Senior Securities |
There is no information required to be disclosed by this Item.
| ITEM 4 | Mine Safety Disclosures |
There is no information required to be disclosed by this Item.
| ITEM 5 | Other Information |
None.
| 26 |
| ITEM 6 | Exhibits |
* Furnished herewith
| 27 |
SIGNATURES
Pursuant to the requirements 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.
| Nestbuilder.com Corp. | ||
| Dated July 15, 2022 | By: | /s/ Alex Aliksanyan |
| Name: | Alex Aliksanyan | |
| Title: | Chief Executive Officer | |
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