UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Documents Incorporated by Reference
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NESTBUILDER.COM CORP.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2021
TABLE OF CONTENTS
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PART I
Cautionary Statement Regarding Forward Looking Statements
This Annual 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 possible or assumed future results of operations of the Company 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.
ITEM 1 – BUSINESS
History
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.
The Company
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. LoseTheAgent.com website traffic increased 105% in users and 114% in page views over the 11 months ending November 30, 2021, compared to the same period ending November 30, 2020. After adjusting for the discontinuance of advertising and marketing expenditures in February 2020, LoseTheAgent.com website traffic almost tripled in users and more than doubled in page views (176% in users and 147% in page views) over the 9 months ending November 30, 2021, compared to the same period ending November 30, 2020 (periods during which we spent $0 on LoseTheAgent.com advertising and marketing). 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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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.
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.
Growth Strategy
Key Elements of our growth strategy during fiscal 2021 include:
Focus on growing the number of home listings on LoseTheAgent.com. While we have experienced growth in the number of listings of FSBO homes, we plan to continue to seek interested home buyers via targeted Internet and social media platforms. In addition, we believe a public relations campaign could boost awareness of our brand and increase listings volume.
Leverage our proprietary video technology. While our proprietary video technology has been developed for the real estate industry, we believe this technology can be applied to other industries as well. In particular, we believe that the used car sale industry could benefit from our automated and seamless development engine. We will continue to explore these and other similar opportunities.
Design and develop technology for the real estate industry. We will continue working to develop technologies to increase sales and efficiencies for the real estate professional.
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Background and Industry Trends
According to the National Association of Realtors (NAR) data, for sale by owner (FSBO) transactions represented over 7% of all home sales in the United States in 2021. While NAR considers private sales between people familiar to each other, such as family members, as FSBO home sales, we believe this percentage is still impressive. In the Year 2022, trends are expected to expand the FSBO segment as technology replaces the search/find capabilities of the MLS and property owners seeking to save on commissions take on additional roles typically carried out by real estate agents.
We believe that the real estate market is undergoing a dramatic change not dissimilar to that previously experienced by traditional stock brokerages. We believe that the most critical aspect driving this change is the advent of the Internet as a tool for searching for and researching real estate, eliminating the commitments of time and expense involved with visiting multiple properties in person. According to the National Association of Realtors’ 2014 “Member Profile,” 89% of home buyers use the internet to search for a home, up from 74% in 2010. This mirrors the 69% who use a realtor for their search. Note: many buyers use both the internet and a realtor in their search. In addition, home sellers can use the Internet to check home valuations, track the housing market and research comparable sales information. The majority of consumers used the Internet frequently to search for homes (81%), with consumers aged 33 or younger being higher than average (92%) and 59-67 year olds below (although still high at 69%). Searches are often conducted on mobile devices such as iPhones (47%), iPads (40%) or Androids (24%). One of the most significant trends for our business is that 70% of homebuyers search for and watch video home tours. Also, real estate searches on Google have grown 253% over the past four years.
The increased use of technology throughout the entire process of a typical residential real estate transaction is an important development in the real estate market. For instance, electronic communication and electronic data storage permits a real estate brokerage to quickly reproduce standard real estate transaction documents, store such documents and store other important information about customers and properties, and communicate quickly with other parties involved in real estate transactions (e.g., title companies, insurers, surveyors, inspectors and governmental agencies), all of which permits increased efficiencies in the process of buying and selling a home. The technological changes and developments generally make it possible to achieve a greater volume of transactions with less effort and expense.
We believe the technological developments in the real estate market and the increased amount of information available to and used by ordinary consumers appear to be circumstances that are similar to those developments that eventually gave rise to the non-traditional stock brokerages which have intruded upon the market dominance of traditional stock brokerages over the past two decades. For example, we note that the non-traditional stock brokerages developed their services and products to compete primarily on the bases of price, consumer effort and technology. Their websites, such as TD Ameritrade or e-Trade, provide not only trading capacity for the average consumer, but also a tremendous amount of information about companies. In this regard, we note that there has recently been a proliferation of various Internet-related real estate businesses that seek to provide either specific and limited services or information relating to residential real estate transactions (e.g., ForSaleByOwner.com, BuyOwner.com, Realtor.com, Trulia.com and Zillow.com). Like the non-traditional stock brokerages, these businesses typically rely on consumer effort, technology and price as the bases for competition.
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However, the market models of Zillow/Trulia and Realtor are now in direct conflict with the enterprises that own the listings and that make the actual sales. The Zillow group’s main revenues are generated by advertising the listing as though another agent owned the listing, an agent that had paid Zillow for such display. Unaware, the consumer thus interacts with the displayed agent thinking they are the one that controls the listing. Then the display agent contacts the true agent and askes to 50/50 split the commission due on the sale. As the consumer power of the Zillow group has grown exponentially, they have substantially cut into the profits of the enterprises and agents that actually own the listings. Thus, the battle lines are now drawn between the Zillow group and groups such as Realogy member of companies and Keller Williams.
We foresee direct and continuous pushback in 2022 by the enterprises against the Zillow group, in trying to neutralize their marketing power and take ownership back of their listings. As publicly owned companies the Zillow group can only grow revenues by increasing advertising rates to the agent community which strikes deep into agent discontent with the enterprises and the resulting demand in action. This competitive model is unique to the real estate industry and clearly will not follow the path of the aforementioned financial portals.
Website and Mobile Applications
Our product, LoseTheAgent.com, is a complex web site produced completely by our internal technology group. We believe our technology team has utilized the latest technologies in order to make LoseTheAgent easy to use and functionally convenient. Visitors are able to search our thousands of listings, gain critical information about properties, and after making an informed choice, directly contact owners of target properties. After making contact with an owner, a dialog commences between the two parties that may result in a potentially advantageous sale for both parties. Our use of map data increases site usability where visitors can search using state, city or even neighborhood.
We are utilizing our proprietary technology along with our industry contracts to create two separate and very important critical paths for real estate professionals and their organizations to follow. By using our video processing capabilities combined with micro-site and website building techniques we have created an agent/broker micro-site product that leverages best practices in SEO (search engine optimization) on the agent/brokers behalf and delivers a web and mobile friendly rich media experience to consumers. This solution provides the broker a significant increase in organic ranking in local searches, increased site traffic and by doing so, reduces the agent/broker dependency on traditional listing aggregators. Secondly, by integrating marketing capabilities into a single powerful platform, we have taken the direct-to-agent sales model and offered to the property owner through SoloSeller, our proprietary marketing toolset. This strategy lowers risk threshold by giving home sellers a set of tools to market their homes on social media and the Internet as well as providing a pathway to developing accelerating revenue stream via a monthly subscription model. While the former video generator intensive model for us will continue to be our primary revenue generator, we believe that our SoloSeller will become the next generation of marketing for the FSBO home seller.
LoseTheAgent saw growth in traffic, audience and revue in 2021. While the real estate market was reeling from COVID, we experienced growth. For the 9 months ending November 2021, page views and users were up more than double (+114% for page views and + 105% for users) and revenues were up more than 40%. Interestingly, according to NAR only 4% of FSBO sellers utilized videos of their homes in the sale process. This represents an opportunity for us as video is a key element of the virtual search/tour paradigm. We hope to expand marketing efforts to reach the thousands of listing owners on the web site, encouraging them to utilize our proprietary video technology for a minimal fee.
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Market and Competition
The FSBO segment represents 7% of home sale transactions according to NAR 2020 projections; however, the segment remains nascent. We believe the advent of Internet based technology has made much of the practical functionality reserved to real estate professionals irrelevant. Even so, there doesn’t appear to be a market leader focusing solely on the FSBO segment, likely because of challenges related to monetization of FSBO market opportunities. While Zillow has expanded the category dramatically by introducing a listing process for interested FSBO sellers, this runs against the revenue interest of Zillow and may potentially adversely impact agents that are the mainstay of Zillow revenues. Other players such as forsalebyowner.com and fsbo.com have been around for decades but have not had the financing to fuel market expansion and growth. As a result, we believe the existing competition in the FSBO market does not preclude us from achieving success in this market. We believe the key is to develop a formula for monetization so that the few web sites in the FSBO segment can fuel the category expansion the market is demanding.
The National Association of Realtors has approximately 1.2 million members, of which we estimate roughly half are active and associated with at least one real estate brokerage firm.
Presently, Zillow is the largest independent real estate market site, as measured by homes in its database and unique visitors to its website. In 2015, Zillow completed its acquisition of Trulia making it the single most powerful name in the real estate web marketplace. A full 29% of web property searches were conducted on the joint platforms in 2015. As part of the industry consolidation, NewsCorp acquired the 3rd largest real estate portal, Realtor.com. This acquisition has fueled the growth in Realtor.com both via relevance and traffic making it now the second most popular real estate directory site, after Zillow. Additionally, there are a variety of other websites which have meaningful market share and listing information. We believe a battle for the consumer mindset is now underway as the real estate enterprises enter into a competitive setting against Zillow/Trulia/Realtor/Homes. We also believe we can benefit from the acrimony as we have positioned ourselves as the friends of the enterprises and offer products and capabilities that will enhance the position of the enterprises by leveraging our technology.
Customers
We have experienced substantial customer losses in our legacy RealBiz 360 video businesses due to our proprietary Virtual Tour technology being overtaken by open-source coding and clients taking the service in house and offering as an added benefit to agents, free of charge. As a result, for the year ended November 30, 2021, our legacy business revenue was down 24%.
Industry Segments
We currently operate in one primary operating segment, real estate, mainly through web-assisted services.
Seasonality of Business
The residential real estate market has traditionally experienced seasonality, with a peak in the spring and summer seasons and a decrease in activity during the fall and winter seasons. Revenues in each quarter can be significantly affected by activity during the prior quarter, given the time lag between contract execution and closing. A typical real estate transaction has a 30-day lag between contract signing and closing of the transaction.
Impact of COVID
The pandemic introduced wide disparity and unpredictable fluctuations in the US real estate market. Residents seeking to escape the confines of large and crowded cities drove down real prices in urban areas, introducing countervailing unnatural pricing spikes in certain more rural destinations. These forces combined to make accurate forward real estate pricing almost impossible. In the FSBO segment the necessity to introduce strangers to view homes became a disease transmission risk for many older home owners. Activity in urban areas flattened as owners refused to sell into a depressed market, in popular rural areas however the exact opposite happened as owners were offered prices hereto unimaginable. This negatively impacted the FSBO segment. We anticipate robust growth in home sales, particularly in urban areas, as COVID comes under control.
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Environmental Regulation
We are not subject to environmental regulations that have a material effect upon our capital expenditures or otherwise.
Other Regulation
We are subject to governmental regulation by federal, state and local regulatory authorities with respect to our operations. We operate several Internet websites that we use to distribute information about and provide our services and content. Internet services are now subject to regulation in the United States relating to the privacy and security of personally identifiable user information and acquisition of personal information from children under the age of 13, including the federal Child Online Protection Act (COPA) and the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM). In addition, a majority of states have enacted laws that impose data security and security breach obligations. Additional federal and state laws and regulations may be adopted with respect to the Internet or other online services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. In addition, to the extent we offer products and services to online consumers outside the United States, the laws and regulations of foreign jurisdictions, including, without limitation, consumer protection, privacy, advertising, data retention, intellectual property, and content limitations, may impose additional compliance obligations on us.
Intellectual Property
We have been granted perpetual licenses of patents which the Company uses for imaging and streaming tiled images as well as 3D image and warping technologies.
Employees
The Company currently has no full-time employees.
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ITEM 1A – RISK FACTORS.
As a smaller reporting company, we are not required to provide a statement of risk factors. Nonetheless, we are voluntarily providing risk factors herein.
Any investment in our common stock involves a high degree of risk. You should consider carefully the following information, together with the other information contained in this annual report, before you decide to buy our common stock. If one or more of the following events actually occurs, our business will suffer, and as a result our financial condition or results of operations will be adversely affected. In this case, the market price, if any, of our common stock could decline, and you could lose all or part of your investment in our common stock.
We face risks in developing our products and services and eventually bringing them to market. We also face risks that we will lose some, or all, of our market share in existing businesses to competition, or we risk that our business model becomes obsolete. The following risks are material risks that we face. If any of these risks occur, our business, our ability to achieve revenues, our operating results and our financial condition could be seriously harmed.
Risks Relating to Our Business
We have no history of profitability.
Our business has never generated a yearly profit. As a young company, we are subject to all of the risks associated with a new business enterprise. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development, especially in challenging and competitive industries such as digital media and marketing services for the real estate industry and particularly in light of current general economic conditions.
We do not yet have a significant operating history which would provide you with meaningful information about our past or future operations. The Company has not yet achieved positive cash flow on a monthly basis during any fiscal year including the current fiscal year ending November 30, 2021, and there is significant risk to the survival of the enterprise.
There is substantial doubt about our ability to continue as a going concern.
We have had net operating losses for the years ended November 30, 2021, and 2020. Since the financial statements were prepared assuming that we would continue as a going concern, these conditions coupled with our current liquidity position raise substantial doubt about our ability to continue as a going concern. Furthermore, since we are pursuing new products and services, this diminishes our ability to accurately forecast our revenues and expenses. We expect that our ability to continue as a going concern depends, in large part, on our ability to generate sufficient revenues, limit our expenses without sacrificing customer service, and obtain necessary financing. If we are unable to raise additional capital, we may be forced to discontinue our business.
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We will require additional financing in the future, but such financing may not be available to us.
If adequate funds are not available on acceptable terms, we may be unable to fund the operation of our business or the further development, maintenance, marketing and commercialization of our products, including LoseTheAgent.com. As a result, we would likely be forced to dramatically alter or cease operations. To date, our revenues from operations have not generated cash flow sufficient to finance our operations and growth. We will require as a result significant additional capital to continue our operations. There can be no assurance given that we will be able to secure additional financing in the future.
We critically rely on our executive management, and the loss of certain members of management would materially and negatively affect us.
Our success materially depends upon the efforts of our management and other key personnel, including but not limited to our Chief Executive Officer, William McLeod, and our Chief Financial Officer, Thomas M. Grbelja. If we lose the services of any of the members of our management team, our business would be materially and adversely affected. Furthermore, we do not have “key person” life insurance, and we do not presently intend to purchase such insurance.
Our future success also depends upon our ability to attract and retain highly qualified management personnel and other employees. Any difficulties in obtaining, retaining and training qualified employees could have a material adverse effect on our results of operation or financial condition. The process of identifying such personnel with the combination of skills and attributes required to carry out our strategy is often lengthy. Any difficulties in obtaining and retaining qualified managers and employees could have a material adverse effect on our results of operation or financial condition.
We may be unable to obtain sufficient market acceptance of our services.
The market for residential real estate sales is well-established. However, the market for digital media and marketing services for residential real estate is relatively new, developing and even more uncertain. As is typical in the case of a new and rapidly evolving industry, demand and market acceptance for products and services are subject to tremendous uncertainty. Our future growth and financial performance will almost entirely depend upon consumers’ acceptance of our products and services, including specifically our LoseTheAgent.com web site. In this regard, the failure of advertisers to accept our model or the inability of our services to satisfy consumer expectations, would have a material adverse effect on our business, and could cause us to cease operations.
If we do not innovate and provide products and services that are attractive to our users, our business could be harmed.
Our success depends on our continued innovation to provide products and services that make our mobile applications, websites and other tools useful for consumers and real estate professionals, and attractive to potential advertisers. As a result, we must invest significant resources in research and development to improve the attractiveness and comprehensiveness of our products and services and effectively incorporate new mobile and Internet technologies into them. If we are unable to provide products and services that users, including real estate professionals, want to use, then users may become dissatisfied and use competitors’ mobile applications, websites and tools. If we are unable to continue offering innovative products and services, we may be unable to attract additional users or retain our current users or attract advertisers, which could harm our business, results of operations and financial condition.
If use of mobile technology and the Internet, particularly with respect to real estate products and services, does not continue to increase as rapidly as we anticipate, our business could be harmed.
Our future success substantially depends on the continued use of mobile technology and the Internet as effective media of business and communication by our consumers. Mobile technology and Internet use may not continue to develop at historical rates, and consumers may not continue to use mobile technology or the Internet as media for information exchange. Further, these media may not be accepted as viable long-term outlets for information for a number of reasons, including actual or perceived lack of security of information and possible disruptions of service or connectivity. If consumers begin to access real estate information through other media and we fail to innovate, our business may be negatively impacted.
We rely on third parties for key aspects of the process of providing services to our customers, and any failure or interruption in the services provided by these third parties could harm our ability to operate our business and damage our reputation.
We rely on third-party vendors, including website providers and information technology vendors. Any disruption in access to the websites developed and hosted by these third-party providers or any failure of these third-party providers to handle current or higher volumes of use could significantly harm our business. Any financial or other difficulties our providers face may have negative effects on our business, the nature and extent of which we cannot predict. We exercise little or no control over all of these third-party vendors, which increases our vulnerability to problems with the services they provide.
In addition, we license technology and related databases from third parties to facilitate aspects of our website and connectivity operations. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services could materially and negatively impact our relationship with our customers and adversely affect our brand and our business. It is possible that such errors, failures, interruptions or delays could even expose us to liabilities to our customers or other third parties.
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Interruption or failure of our information technology and communications systems would impair our ability to effectively provide our services, which could in turn damage our reputation and harm our business.
Our ability to provide our services critically depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems would likely result in interruptions in our service to customers and the closings of real estate transactions from which we principally derive revenue. Accordingly, interruptions in our service would likely reduce our revenues and profits, and our brand could be damaged, perhaps irreparably, if people believe our system and services are unreliable.
To our knowledge, our systems are vulnerable to damage or interruption from terrorist or malicious attacks, floods, tornados, fires, power loss, telecommunications failures, computer viruses and other attempts to harm our systems, and similar types of events. Some of our systems are not fully redundant (i.e., backed up), and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, or a decision to close a facility we are using without adequate notice for financial reasons, could result in lengthy interruptions in our service. Any unscheduled interruption in our service would likely place a burden on our entire organization and result in an immediate loss of revenue. The steps we have taken to increase the reliability and redundancy of our systems are expensive, reduce our operating margin and even then may not be successful in reducing the frequency or duration of unscheduled downtime.
Any failure to maintain the security of the information relating to our company and customers, whether as a result of cybersecurity attacks on our information systems or otherwise, could damage our reputation, result in litigation or other legal actions against us, cause us to incur substantial additional costs, and materially adversely affect our business and operating results.
We receive and store in our digital information systems certain personal information about our customers. Some of that information is stored digitally in connection with our digital platforms. We also utilize third-party service providers for a variety of reasons, including, without limitation, for encryption and authentication technology, content delivery to customers, back-office support, and other functions. Such providers may have access to information we hold about our customers. In addition, our eCommerce operations depend upon the secure transmission of confidential information over public networks, including information permitting cashless payments.
Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated. Cyber threats and cyber-attackers can be sponsored by countries or sophisticated criminal organizations or be the work of single “hackers” or small groups of “hackers.” As cyber threats evolve, change and become more difficult to detect and successfully defend against, one or more cyber-attacks might defeat our or a third-party service provider’s security measures in the future and obtain the personal information of customers.
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Employee error or malfeasance, faulty password management or other irregularities may also result in a defeat of our or our third-party service providers’ security measures and a breach of our or their information systems. Moreover, hardware, software or applications we use may have inherent defects of design, manufacture or operations or could be inadvertently or intentionally implemented or used in a manner that could compromise information security. We or our third-party service providers may not discover any security breach and loss of information for a significant period of time after the security breach occurs.
Any breach of our security measures or any breach, error or malfeasance of those of our third-party service providers and loss of our confidential information, or any failure by us to comply with applicable privacy and information security laws and regulations, could cause us to incur significant costs to protect any customers whose personal data was compromised and to restore their confidence in us and to make changes to our information systems and administrative processes to address security issues and compliance with applicable laws and regulations.
In addition, such events could be widely publicized and could materially adversely affect our reputation with our customers and shareholders, could harm our competitive position, and could result in a material reduction in our net sales, thereby materially adversely affecting our operations, net sales, results of operations, financial condition, cash flows and liquidity. Such events could also result in the release to the public of confidential information about our operations and financial condition and performance and could result in litigation or other legal actions against us or the imposition of penalties, fines, fees or liabilities, which may not be covered by our insurance policies. Moreover, a security breach could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to upgrade further the security measures we employ to guard personal information against cyber-attacks and other attempts to access such information and could result in a disruption of our operations, particularly our digital retail operations.
We accept payments using credit and debit cards, and we may offer new payment options over time, which may have information security risk implications. As an online business accepting debit and credit cards for payment, we are subject to various industry data protection standards and protocols, such as payment network security operating guidelines and the Payment Card Industry Data Security Standard. We cannot be certain that the security measures we maintain to protect all of our information technology systems are able to prevent, contain or detect any cyber-attacks, cyber terrorism, or security breaches from known cyber-attacks or malware that may be developed in the future. To the extent that any cyber-attack or incursion in our or one of our third-party service provider’s information systems results in the loss, damage or misappropriation of information, we may be materially adversely affected by claims from customers, financial institutions, regulatory authorities, payment card networks and others. In certain circumstances, payment card association rules and obligations to which we are subject under our contracts with payment card processors make us liable to payment card issuers if information in connection with payment cards and payment card transactions that we hold is compromised, which liabilities could be substantial. In addition, the cost of complying with stricter and more complex data privacy, data collection and information security laws and standards could be significant to us.
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Our operations are dependent upon our ability to protect our intellectual property, which could be costly.
Our technology is the cornerstone of our business and our success will depend in part upon protecting any technology we use or may develop from infringement, misappropriation, duplication and discovery, and avoiding infringement and misappropriation of third-party rights. Our intellectual property is essential to our business, and our ability to compete effectively with other companies depends on the proprietary nature of our technologies. We do not have patent protection for our proprietary video on demand technology. We rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop, maintain, and strengthen our competitive position. Although we intend to have confidentiality provisions in the agreements we enter into with our employees and independent contractors, there can be no assurance that such agreements can fully protect our intellectual property, be enforced in a timely manner or that any such employees or consultants will not violate their agreements with us.
Furthermore, we may have to take legal action in the future to protect our trade secrets or know-how, or to defend them against claimed infringement of the rights of others. Any legal action of that type could be costly and time-consuming to us, and there can be no assurance that such actions will be successful. The invalidation of key proprietary rights which we own or unsuccessful outcomes in lawsuits to protect our intellectual property may have a material adverse effect on our business, financial condition and results of operations.
If we cannot adequately protect our intellectual property rights, our competitors may be able to compete more directly with us, which could adversely affect our competitive position and, as a result, our business, financial condition and results of operations.
We are, and may in the future become, subject to a variety of federal and state laws, many of which are unsettled and still developing and which could subject us to claims or otherwise harm our business.
We are currently subject to a variety of, and may in the future become subject to additional, federal and state laws that are continuously evolving and developing, including laws regarding the real estate industry, mobile- and Internet-based businesses and other businesses that rely on advertising, as well as privacy and consumer protection laws. These laws can be costly to comply with, require significant management time and effort, and subject us to claims, government enforcement actions, civil and criminal liability or other remedies, including suspension of business operations. These laws may conflict with each other, and if we comply with the laws of one jurisdiction, we may find that we are violating laws of another jurisdiction. Additionally, our ability to provide a specific target audience to advertisers is a significant competitive advantage. Any legislation reducing this ability would have a negative impact on our business and results of operations.
If we are unable to comply with these laws or regulations, if we become liable under these laws or regulations, or if unfavorable regulations or unfavorable interpretations of existing regulations by courts or regulatory bodies are implemented, we could be directly harmed and forced to implement new measures to reduce our exposure to this liability and it could cause the development of product or service offerings in affected markets to become impractical. This may require us to expend substantial resources or to discontinue certain products or services, limit our ability to expand our product and services offerings, or expand into new markets or otherwise harm our business, results of operations and financial condition. In addition, the increased attention focused on liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business and results of operations.
The efforts of the National Association of Realtors or other organizations could prevent us from operating our business and could lead to the imposition of significant restrictions on our operations.
The National Association of Realtors, which represents real estate brokerages, has issued rules that attempt to block access of web-assisted real estate companies to the Multiple Listing System (MLS) and may adopt additional rules intended to reduce or eliminate competition from web-assisted (online) discount real estate businesses such as ours. Our business is dependent upon the ability to access the MLS to be competitive. We can give no assurance that the National Association of Realtors will not be successful in preventing our access to the MLS, or that it or another organization will not be successful in adopting rules or imposing other restrictions on web-assisted real estate businesses such as ours. Such adoption or imposition of regulations or restrictions would have a material adverse effect on our business.
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We compete in a dynamic and nascent industry, and we may invest significant resources to pursue strategies that do not prove effective.
The industry for residential real estate information marketplaces and related marketing and advertising services on mobile and Web is in early stages of development, and significant shifts in consumer and professional behaviors occur constantly and rapidly. We continue to learn a great deal about the behaviors and objectives of residential real estate market participants as the industry evolves. We may not successfully anticipate or keep pace with industry changes, and we may invest considerable financial, personnel, and other resources to pursue strategies that do not, ultimately, prove effective such that our results of operations and financial condition may be harmed.
Competition in the traditional and online residential real estate industry is intense.
The residential real estate industry is highly competitive. We believe that important competitive factors in this industry include (but are not limited to) price, service, and ease of use. We presently face competition from numerous companies engaged in traditional residential real estate marketing services and we expect online competition to increase in the future from existing and new competitors. Most of our current and potential competitors have substantially greater financial, marketing and technical resources than us, as well as significant operating histories. Accordingly, we may not be able to compete successfully against new or existing competitors. Furthermore, competition may reduce the prices we are able to charge for our services, thereby potentially lowering revenues and margins, which would likely have a material adverse effect on our results of operation and financial condition.
We face competition to attract consumers to our website, which could impair our ability to continue to grow the number of users who use our website, which would harm our business, results of operations and financial condition.
Our success depends on our ability to continue to attract additional consumers to our mobile applications and website. Our existing and potential competitors include companies that operate, or could develop, national and local real estate websites. These companies could devote greater technical and other resources than we have available, have a more accelerated time frame for deployment and leverage their existing user bases and proprietary technologies to provide products and services that consumers might view as superior to our offerings. Any of our future or existing competitors may introduce different solutions that attract consumers or provide solutions similar to our own but with better branding or marketing resources. If we are not able to continue to grow the number of consumers who use our mobile applications and websites, our business, results of operations and financial condition would be harmed.
The online residential real estate industry is subject to significant and rapid technological change.
The online residential real estate industry is subject to rapid innovation and technological change, shifting customer preferences, new service introductions and competition from traditional real estate brokerage firms. Competitors in this market have frequently taken different strategic approaches and have launched substantially different products or services in order to exploit the same perceived market opportunity. Although we believe that we are offering a unique solution, there can be no assurance that our services will be competitive technologically or otherwise, or that any other services developed by us will be competitive.
Our ability to compete in this industry will depend upon, among other things, broad acceptance of our services and on our ability to continually improve current and future services we may develop to meet changing customer requirements. There can be no assurance that we will successfully identify new service or product opportunities and develop and bring to the market new and enhanced solutions in a timely manner, that such products or services will be commercially successful, that we will benefit from such development, or that products and services developed by others will not render our products and services noncompetitive or obsolete. If we are unable to penetrate markets in a timely manner in response to changing market conditions or customer requirements, or if new or enhanced products or services do not achieve a significant degree of market acceptance, our business would be materially and adversely affected.
We depend on the real estate industry, and changes to that industry, or declines in the real estate market or increases in mortgage interest rates, could reduce the demand for our products and services.
Our financial results significantly depend on real estate shoppers using our services. Real estate shopping patterns depend on the overall health of the real estate market. Changes to the regulation of the real estate industry, including mortgage lending, may negatively impact the prevalence of home ownership and the ability of market participants to close transactions. Changes to the real estate industry, declines in the real estate market or increases in mortgage interest rates could reduce demand for our services. Real estate markets also may be negatively impacted by a significant natural disaster, such as earthquake, fire, flood or other disruption. In addition, real estate, rental, and mortgage professionals are subject to comprehensive federal, state, and local laws and regulations which may cause them to significantly alter, decrease, or terminate their purchase of our products and services. Seasonality, micro- and macroeconomic factors, government regulation, and other similar factors may decrease consumer usage as well as sales to our advertisers and other customers, which could harm our results of operations and financial condition.
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We have identified material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future. If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in the value of our common stock.
Our initial evaluation of our internal controls resulted in our conclusion that our disclosure controls and procedures and that our internal control over financial reporting were not effective. Effective internal controls are necessary for us to provide reliable financial reports. All internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. In our case, our failure to achieve and maintain an effective internal control environment could cause us to be unable to produce reliable financial reports or prevent fraud. This may cause investors to lose confidence in our reported financial information, which could in turn have a material adverse effect on the value of our common stock.
Our lack of an independent audit committee and audit committee financial expert at this time may hinder our Board of Directors’ effectiveness in fulfilling the functions of the audit committee without undue influence from management and until we establish such committee will prevent us from obtaining a listing on a national securities exchange.
Although our common stock is not listed on any national securities exchange, for purposes of independence we use the definition of independence applied by NASDAQ. Currently, we have no independent audit committee. Our full Board of Directors functions as our audit committee and is currently comprised of three directors, none of whom are considered to be “independent” in accordance with the requirements set forth in NASDAQ Listing Rule 5605(a)(2). An independent audit committee plays a crucial role in the corporate governance process, assessing a company’s processes relating to our risks and control environment, overseeing financial reporting, and evaluating internal and independent audit processes. The lack of an independent audit committee may prevent the Board of Directors from being independent from management in its judgments and decisions and its ability to pursue the responsibilities of an audit committee without undue influence. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified, independent directors, the management of our business could be compromised.
Our Board of Directors acts as our compensation committee, which presents the risk that compensation and benefits paid to those executive officers who are board members and other officers may not be commensurate with our financial performance.
A compensation committee consisting of independent directors is a safeguard against self-dealing by company executives. Our Board of Directors acts as the compensation committee and determines the compensation and benefits of our executive officers, administers our employee stock and benefit plans, and reviews policies relating to the compensation and benefits of our employees. Our lack of an independent compensation committee presents the risk that our executive officers on the board may have influence over their personal compensation and benefits levels that may not be commensurate with our financial performance.
Limitations on director and officer liability and indemnification of our Company’s officers and directors by us may discourage stockholders from bringing a lawsuit against an officer or director.
Our Company’s certificate of incorporation and bylaws provide, with certain exceptions as required by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director or officer, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing a lawsuit against a director or officer for breach of fiduciary duty and may reduce the likelihood of derivative litigation by stockholders on the Company’s behalf against a director or officer.
We are responsible for the indemnification of our officers and directors.
Should our officers and/or directors require us to contribute to their defense in an action brought against them in their capacity as such, we may be required to spend significant amounts of our capital. Our articles of incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of us. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.
We are obligated to indemnify RealBiz against certain damages, costs and expenses.
In connection with our separation from RealBiz, on October 27, 2017, we, RealBiz, Anshu Bhatnagar and Alex Aliksanyan entered into a Contribution and Spin-Off Agreement, as amended by a First Amendment to Contribution and Spin-Off Agreement dated as of January 29, 2018 (the “Spin-Off Agreement”). Under the Spin-Off Agreement, we are required to indemnify RealBiz against damages, costs and expenses resulting from events occurring at RealBiz prior to January 2, 2017. As a result, if an event occurring at RealBiz prior to January 2, 2017 results in liability for which RealBiz is obligated to pay, then we may be subject to liabilities from our indemnification obligations, which could materially adversely affect our financial condition and our ability to continue as a going concern.
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A novel strain of coronavirus, the COVID-19 virus, may adversely affect our business operations and financial condition.
In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. The pandemic may adversely affect our potential customers’ operations, our employees and our employee productivity. It may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. These supply chain effects, and the direct effect of the virus and the disruption on our employees and operations, may negatively impact both our ability to meet customer demand and our revenue and profit margins. Our employees are working remotely and using various technologies to perform their functions. We might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.
Our Ability to Use Our Net Operating Loss Carryforwards and Certain Other Tax Attributes May Be Limited.
As of November 30, 2021, we had federal net operating loss carryforwards of approximately $365,221. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income or income tax liability may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by certain “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. If we experience one or more ownership changes in the future as a result of future transactions in our stock, our ability to utilize net operating loss carryforwards could be limited. Furthermore, our ability to utilize net operating loss carryforwards of any companies that we have acquired or may acquire in the future may be limited. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards, other pre-change tax attributes, or net operating loss carryforwards of any acquired companies to offset our federal taxable income or reduce our federal income tax liability may be subject to limitation.
Certain of our officers may have a conflict of interest.
Certain of our officers are currently working for us on a part-time basis. These officers also work at other jobs and have discretion to decide what time they devote to our activities, which may result in a lack of availability when needed due to responsibilities at other jobs.
Risks Relating to Our Common Stock
There is currently a limited public trading market for our common stock and one may never develop.
There currently is a limited public trading market for our securities, and it is not assured that any such public market will develop in the foreseeable future. Moreover, there can be no assurance that even if our common stock is approved for listing on an exchange or is quoted in the over-the-counter market in the future, that an active trading market will develop or be sustained. Therefore, we cannot predict the prices at which our common stock will trade in the future, if at all. As a result, our investors may have limited or no ability to liquidate their investments.
Trading in our common stock is conducted on the OTC Pink under the symbol “NBLD”, as we currently do not meet the initial listing criteria for any registered securities exchange. The OTC Pink and OTC Markets are less recognized markets than the registered securities exchanges and is often characterized by low trading volume and significant price fluctuations. These and other factors may further impair our stockholders’ ability to sell their shares when they want to and/or could depress our stock price. As a result, stockholders could find it difficult to dispose of, or obtain accurate quotations of the price of our securities because smaller quantities of shares could be bought and sold, transactions could be delayed and security analyst and news coverage of our Company may be limited. If a public market for our common stock does develop, these factors could result in lower prices and larger spreads in the bid and ask prices for our shares of common stock.
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Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. By way of example, on November 26, 2021, the reported low sale price of our common stock was $0.03, and the reported high sale price was $0.37, with no discernable announcements or developments by us or third parties. We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or prospects. In addition, the recent outbreak of the novel strain of coronavirus (COVID-19) has caused broad stock market and industry fluctuations. The stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:
● investor reaction to our business strategy;
● the success of competitive products or technologies;
● regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products;
● variations in our financial results or those of companies that are perceived to be similar to us;
● our ability or inability to raise additional capital and the terms on which we raise it;
● declines in the market prices of stocks generally;
● our public disclosure of the terms of any financing which we consummate in the future;
● our failure to become profitable;
● our failure to raise working capital;
● announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments;
● cancellation of key contracts;
● our failure to meet financial forecasts we publicly disclose;
● trading volume of our common stock;
● sales of our common stock by us or our stockholders;
● general economic, industry and market conditions; and
● other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the recent outbreak of the novel coronavirus (COVID-19), and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability
These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Since the stock price of our common stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors.
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Because our common stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.
Our common stock is deemed to be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed on a national securities exchange, or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This risk-disclosure document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get their money back.
If applicable, the penny stock rules may make it difficult for stockholders to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, stockholders may not always be able to resell their shares of our common stock publicly at times and prices that they feel are appropriate.
We may be unable to make, on a timely basis, the changes necessary to operate effectively as an independent, publicly owned company.
We have historically operated our business as part of a larger public company. Following consummation of the spin-off, we have been required to file with the SEC annual, quarterly and current reports that are specified in Section 13 of the Exchange Act. We have also been required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. In addition, we have become subject to other reporting and corporate governance requirements, including certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which impose significant compliance obligations upon us.
We expect to devote significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act, including costs associated with auditing and legal fees and accounting and administrative staff. In addition, Section 404(a) under the Sarbanes-Oxley Act requires that we assess the effectiveness of our controls over financial reporting. Our future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results, cause us to fail to meet our financial reporting obligations, or cause us to suffer adverse regulatory consequences or violate applicable stock exchange listing rules. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the value of our stock and our access to capital.
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Compliance with the reporting requirements of federal securities laws can be expensive.
We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial. If we do not provide current information about our company to market makers, they will not be able to trade our stock. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financials, the value of our stock, and the ability of stockholders to resell their stock.
Our shareholders’ ownership may be substantially diluted in the future.
In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present stockholders. We expect to need to issue a substantial number of shares of common stock or other securities convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations, and other business purposes. Additional shares of common stock issued by us in the future, including shares issued upon exercise of the warrants and the outstanding notes, will dilute an investor’s investment in the Company.
Our directors and executive officers have the ability to exert significant control in matters requiring shareholder approval and could delay, deter, or prevent a change in control of our company.
Alex Aliksanyan, a Director, Thomas M. Grbelja, our Chief Financial Officer, Secretary and a Director, and William McLeod, our Chief Executive Officer and a Director, collectively own 7,853 shares of our outstanding common stock. In addition, Alex Aliksanyan holds warrants to purchase up to 420,000 shares of our common stock, Thomas Grbelja holds warrants to purchase up to 230,000 shares of our common stock, and William McLeod holds warrants to purchase up to 150,000 shares of our common stock. They cannot exercise their warrants if at the time of such exercise, when added to the other shares of our common stock owned by each such holder or which can be acquired by each such holder upon exercise or conversion of any other instrument, would cause the holder to own more than 4.99% of our outstanding common stock. Each holder has the right to waive this exercise limitation, in whole or in part, upon and effective after 61 days prior written notice to us. If Mr. Aliksanyan, Mr. Grbelja and Mr. McLeod exercised all of their warrants, they would own approximately 17%, 9.6% and 6.0%, respectively, of our issued and outstanding shares of common stock. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because they control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these shareholders could result in management making decisions that are in the best interest of those shareholders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock. Investors who purchase our common stock should be willing to entrust all aspects of operational control to our current management team.
Our board of directors has historically had significant control over us and we have yet to establish committees comprised of independent directors.
We only have three directors. Because of such limited number of directors, each of our board members has significant control over all corporate issues. In addition, all three of our directors serve as executive officers. We have not established board committees comprised of independent members, and we do not have an audit or compensation committee comprised of independent directors. Our three directors perform these functions, despite not all being independent directors. Thus, there is potential conflict in that our directors are also engaged in management and participate in decisions concerning management compensation and audit issues that may affect management performance.
We do not expect to pay dividends on our common stock in the foreseeable future.
We have not paid cash dividends on our common stock to date and we do not expect to pay dividends on our common stock for the foreseeable future, and we may never pay dividends. Consequently, the only opportunity for investors to achieve a return on their investment may be if an active trading market develops, and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit, neither of which we can guarantee will ever take place. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, and growth plans.
Our certificate of incorporation grants our Board of Directors, without any action or approval by our stockholders, the power to designate and issue preferred stock with rights, preferences and privileges that may be adverse to the rights of the holders of our common stock.
The total number of shares of all classes of stock that the Company shall have the authority to issue is 275,000,000 shares consisting of: (i) 250,000,000 shares of common stock, par value $0.0001, of which 1,673,237 shares are issued and outstanding as of the date of this report and (ii) 25,000,000 shares of preferred stock, par value $0.0001 per share, none of which are currently outstanding.
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Pursuant to authority granted by our certificate of incorporation and applicable state law, our Board of Directors, without any action or approval by our stockholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of other classes or series of capital stock, including preferred stock that may be issued could be superior to the rights of the shares of common stock offered hereby. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to the shares of our common stock. Finally, any issuances of additional capital stock (common or preferred) will dilute the percentage of ownership interest of our stockholders and may dilute the per-share book value of the Company.
If we issue additional equity securities or issue convertible debt to raise capital, it may have a dilutive effect on shareholders’ investment.
If we raise additional capital through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution in their percentage ownership of us. Moreover, any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Certain provisions of the Nevada Revised Statutes of the State of Nevada, our Articles of Incorporation, and our bylaws may have anti-takeover effects which may make an acquisition of our company by another company more difficult.
Our Articles of Incorporation and bylaws contain provisions that permit us to issue, without any further vote or action by the stockholders, up to 25,000,000 shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting powers, if any, of the shares of the series, and the preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.
Our bylaws provide that special meetings of stockholders may be called only by the Board of Directors, any two directors, or the President. Stockholders are not permitted to call a special meeting of stockholders, to require that the board call such a special meeting, or to require that our board request the calling of a special meeting of stockholders.
These provisions in our Articles of Incorporation and Bylaws may have anti-takeover effects, which could delay, defer or prevent a takeover attempt that a holder of our common stock might consider in its best interest.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this annual report, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are only predictions and involve known and unknown risks and uncertainties, including the risks outlined under “Risk Factors” and elsewhere in this annual report.
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Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We are not under any duty to update any of the forward-looking statements after the date of this annual report to conform these statements to actual results, unless required by law.
ITEM 1B – UNRESOLVED STAFF COMMENTS
This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however, we are voluntarily disclosing that all written comments from the Commission staff regarding our periodic or current reports under the Securities Exchange Act of 1934 received within the last 180 days before the end of our last fiscal year have been resolved.
ITEM 2 – PROPERTIES
Our principal executive offices are currently located at 201 W. Passaic St #301, Rochelle Park, NJ 07662. We currently share office space with Thomas M. Grbelja, our Chief Financial Officer, Secretary and a director. We do not currently pay rent for our principal executive offices. The office space is approximately 1,000 square feet of office space. The space is utilized for general office purposes and it is our belief that the space we currently occupy is adequate for our immediate needs. Additional space may be required as we expand our operations. We do not foresee any significant difficulties in obtaining any required additional space. We currently do not own any real property.
ITEM 3 – LEGAL PROCEEDINGS
In the ordinary course of business, we are from time to time 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, other than as set forth herein, 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 4 – MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
On November 16, 2021, the Financial Industry Regulatory Authority authorized a broker dealer to initiate a priced quotation of our common stock on the OTC Pink of the OTC Markets Group, Inc. under the symbol “NBLD”. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Our common stock only trades on a limited or sporadic basis and should not be deemed to constitute an established public trading market.
Holders
As of December 30, 2021, there are 1,673,237 shares of our common stock issued and outstanding and held by approximately 220 shareholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Dividend Policy
We have not paid any dividends on our common stock and do not expect to do so in the foreseeable future. We intend to apply our earnings, if any, in expanding our operations and related activities. The payment of cash dividends in the future will be at the discretion of the Board of Directors and will depend upon such factors as earnings levels, capital requirements, our financial condition and other factors deemed relevant by the Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
On August 20, 2019, we issued Common Stock Purchase Warrants to six individuals for the purchase of up to an aggregate of 1,192,500 shares of our Common Stock. Alex Aliksanyan, our former Chief Executive Officer and a Director, was issued warrants to purchase up to 420,000 shares of our Common Stock. Thomas Grbelja, our Treasurer, Secretary and a Director, was issued warrants to purchase up to 230,000 shares of our Common Stock. William McLeod, our current Chief Executive Officer and a Director, was issued warrants to purchase up to 150,000 shares of our Common Stock.
As of November 30, 2021, we had the following warrants outstanding:
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | -0- | -0- | -0- | |||||||||
| Equity compensation plans not approved by security holders | 1,192,500 | $ | 0.20 | -0- | ||||||||
| Total | -0- | -0- | -0- | |||||||||
Recent Sales of Unregistered Securities
There are no events required to be disclosed by this Item.
ITEM 6 – SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide the information required by this Item.
| 22 |
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). 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; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; 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 Annual 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.
Overview
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. LoseTheAgent.com website traffic increased 105% in users and 114% in page views over the 11 months ending November 30, 2021, compared to the same period ending November 30, 2020. After adjusting for the discontinuance of advertising and marketing expenditures in February 2020, LoseTheAgent.com website traffic jumped 176% in users and 147% in page views over the 9 months ending November 30, 2021, compared to the same period ending November 30, 2020 (periods during which we spent $0 on LoseTheAgent.com advertising and marketing). 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.
| 23 |
Going Concern
As a result of our financial condition, management has indicated in a footnote to our financial statements as of November 30, 2021 their uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively balance many factors and begin to generate sufficient revenue to fund our operations. If we are not able to do this, we may not be able to continue as an operating company. At our current revenue and burn rate, our cash on hand will not cover our operating expenses for the next twelve months. There is no assurance that our existing cash flow will ever be adequate to satisfy our existing operating expenses and capital requirements.
Results of Operations for the Year Ended November 30, 2021, compared to Year Ended November 30, 2020
Revenue
Total revenue for the year ended November 30, 2021, was $61,050 compared to $73,374 for the year ended November 30, 2020, a decrease of 16%. The decrease is primarily a result of declining legacy virtual tour business.
Cost of Revenue
Cost of revenues totaled $16,942 for year ended November 30, 2021, compared to $39,587 for the year ended November 30, 2020, representing a decrease of $22,645 or 57%. Cost of revenues consists primarily of engineering and server costs incurred in connection with maintenance of our online networks. The decline in costs is primarily due to a reduction in server costs.
| 24 |
Operating Expenses
Our operating expenses, which include salaries and benefits, selling and promotion, amortization and depreciation and general and administrative expenses, decreased 26% to $84,258, for the year ended November 30, 2021, compared to $113,842 for the year ended November 30, 2020, a decrease of $29,584. The decrease was substantially due to a decrease in salary and benefit expense of $23,327, decreases in selling and promotional expense of $17,020 and an increase of general and administrative expenses of $10,762 A breakdown of general and administrative expenses is as follows:
| Fiscal Year Ended | ||||||||||||
| November 30, | ||||||||||||
| Expense | 2021 | 2020 | Increase/(Decrease) | |||||||||
| Professional fees | $ | 56,463 | $ | 44,615 | $ | 11,848 | ||||||
| Insurance | 250 | 2,477 | (2,227 | ) | ||||||||
| Dues & subscriptions | 2,992 | 2,928 | 64 | |||||||||
| Miscellaneous | 5,063 | 3,986 | 1,077 | |||||||||
| Total | $ | 64,768 | $ | 54,006 | $ | 10,762 | ||||||
Other Income (Expenses)
During the current year, we obtained forgiveness of our PPP # 1 loan in the amount of $13,080 from the SBA. During the year ended November 30, 2020, we repurchased our convertible promissory notes for their holders at a discount to the principle and accrued interest owed and recognized a gain on those transactions.
| Fiscal Year Ended | ||||||||||||
| November 30, | ||||||||||||
| Expense | 2021 | 2020 | Increase/(Decrease) | |||||||||
| Gain on settlement of convertible notes | $ | - | $ | 10,438 | $ | (10,438 | ) | |||||
| Gain on forgiveness of PPP #1 loan from SBA | 13,080 | - | 13,080 | |||||||||
| Total | $ | 13,080 | $ | 10,438 | $ | 2,642 | ||||||
Net Income/Loss
We had net loss of $27,070 for the year ended November 30, 2021, compared to a net loss of $69,617 for the year ended November 30, 2020, for a decrease of $42,547.
Liquidity and Capital Resources
Introduction
Our principal needs for liquidity have been to fund operating losses and working capital requirements. Our principal source of liquidity as of November 30, 2021, consisted of cash of $19,622. We expect that working capital requirements will continue to be our principal need for liquidity over the near term. Working capital requirements are expected to increase as a result of our anticipated growth.
We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations. Management’s plan to meet our operating expenses in the short term is through equity and/or debt financing.
| 25 |
Cash Requirements
On November 30, 2021, we had $19,622 cash on-hand, an increase of $15,498 from the prior year balance of $4,124. Based on our current revenues, cash on hand, and our current net monthly burn rate of approximately $5,000 we will need to continue to raise money from the issuance of equity to fund short term operations.
Sources and Uses of Cash
Operations
Net cash used by operating activities was $44,682 for the year ended November 30, 2021, a decrease of $41,889 from $86,571 used in operating activities in the year ended November 30, 2020. This decrease was primarily due to the net loss from the year.
Investments
There were no investing activities for the years ended November 30, 2021, and 2020, respectively.
Financing
Net cash provided by financing activities was $60,180 for the year ended November 30, 2021, as compared to net cash used by financing activities of $172,420 for the year ended November 30, 2020.
Off-balance sheet arrangements
As of November 30, 2021, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital resources that are material to investors.
Critical accounting policies and estimates
Our critical accounting policies are set forth in Note 2 – Summary of Significant Accounting Policies, to our financial statement footnotes.
Recent accounting pronouncements
We have evaluated recent pronouncements and do not expect their adoption to have a material impact on our financial position or statements.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
| 26 |
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| 27 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Nestbuilder.com Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Nestbuilder.com Corp (the Company) as of November 30, 2021 and 2020, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended November 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended November 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has accumulated deficit of $616,062 as of November 30, 2021. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
| /s/ Assurance Dimensions | |
| Assurance Dimensions | |
| We have served as the Company’s auditor since 2018. | |
| Margate, Florida | |
| December 30, 2021 |
ASSURANCE DIMENSIONS CERTIFIED PUBLIC ACCOUNTANTS & ASSOCIATES
also d/b/a McNAMARA and ASSOCIATES, PLLC
TAMPA BAY: 4920 W Cypress Street, Suite 102 | Tampa, FL 33607 | Office: 813.443.5048 | Fax: 813.443.5053
JACKSONVILLE: 4720 Salisbury Road, Suite 223 | Jacksonville, FL 32256 | Office: 888.410.2323 | Fax: 813.443.5053
ORLANDO: 1800 Pembrook Drive, Suite 300 | Orlando, FL 32810 | Office: 888.410.2323 | Fax: 813.443.5053
SOUTH FLORIDA: 2000 Banks Road, Suite 218 | Margate, FL 33063 | Office: 754.800.3400 | Fax: 813.443.5053 www.assurancedimensions.com
| F-1 |
NESTBUILDER.COM CORP.
Balance Sheets
| November 30, 2021 | November 30, 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Paycheck protection SBA loan | ||||||||
| Convertible promissory notes payable and accrued interest | - | |||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Convertible Series A Preferred stock, $ par value shares authorized; shares issued and outstanding on November 30, 2021, and November 30, 2020. | - | - | ||||||
| Common stock, $ par value; shares authorized; shares issued and outstanding at November 30, 2021 and November 30, 2020. | ||||||||
| Additional paid-in-capital | ||||||||
| Treasury stock, at cost ( shares) | ( | ) | ( | ) | ||||
| Accumulated (deficit) | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
| F-2 |
NESTBUILDER.COM CORP.
Statements of Operations
| For the years ended | ||||||||
| November 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenues | ||||||||
| Real estate media revenue | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Salaries and benefits | ||||||||
| Selling and promotions expense | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Gain on forgiveness of paycheck protection program loan #1 | - | |||||||
| Gain on settlement of convertible promissory notes | - | |||||||
| Total other income (expense) | ||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding – basic and diluted | ||||||||
| Basic and diluted net (loss) per common share | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these financial statements.
| F-3 |
NESTBUILDER.COM
CORP.
Statement of Changes in Stockholders’ Equity (Deficit)
| Preferred Stock | Common Stock | Treasury Stock | Additional | Total Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Par Value | Paid-In Capital | Accumulated Deficit | Equity ( Deficit) | |||||||||||||||||||||||||
| Balance, November 30, 2019 | - | $ | $ | ( | ) | $ | | |||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Repurchase of Series A convertible preferred shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, November 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, November 30, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
NESTBUILDER.COM CORP.
Statements of Cash Flows
| For the years ended | ||||||||
| November 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Gain on forgiveness of paycheck protection program loan #1 | ( | ) | - | |||||
| Gain on settlement of promissory notes | - | ( | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in accrued interest on notes payable | - | |||||||
| Increase (decrease) in accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash provided by investing activities | - | - | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of convertible promissory notes | - | ( | ) | |||||
| Repurchase of Preferred Stock Series A shares | - | ( | ) | |||||
| Proceeds from PPP and EIDL loans | ||||||||
| Proceeds from issuance of convertible promissory notes | - | |||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of year | ||||||||
| Cash at end of year | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
NESTBUILDER.COM CORP.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 2021
NOTE 1: ORGANIZATION AND NATURE OF BUSINESS
Organization
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.
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.
| F-6 |
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.
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
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.
| F-7 |
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.
| F-8 |
● 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.
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 selling and promotions expense in the accompanying financial statements.
Advertising expense for the year ended November 30, 2021, and 2020 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.
| F-9 |
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
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 November 30, 2021.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has recorded a full valuation allowance against its net deferred tax assets because it is not currently able to conclude that it is more likely than not that these assets will be realized. The amount of deferred tax assets considered to be realizable could be increased in the near term if estimates of future taxable income during the carryforward period are increased.
As of November 30, 2021, the Company had unused
net operating loss carry forwards of $
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:
| November 30, 2021 | November 30, 2020 | |||||||
| Shares on issuance of warrants as share-based compensation | ||||||||
| Shares on convertible promissory notes | - | |||||||
| F-10 |
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 Pronouncements
The Company has reviewed the FASB issued ASU accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this new guidance will have on its financial statements.
| F-11 |
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
November 30, 2021, the Company had a working capital deficit 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.
In December 2019, a novel coronavirus (“COVID-19”) emerged and has subsequently spread worldwide. The World Health Organization has declared COVID-19 a pandemic resulting in federal, state, and local governments mandating various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus.
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 November 30, 2021, COVID-19 has not had a material impact on our results of operations or financial condition.
NOTE 4: PROPERTY AND EQUIPMENT
At November 30, 2021 and November 30, 2020 Company’s property and equipment are as follows:
| Estimated Life (in years) | November 30, 2021 | November 30, 2020 | ||||||||||
| Office equipment | | $ | $ | |||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||||
| $ | $ | |||||||||||
The
Company has recorded
NOTE 5: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The Company’s accounts payable and accrued expenses are as follows:
| November 30, | November 30, | |||||||
| 2021 | 2020 | |||||||
| Trade payables and accruals | $ | $ | ||||||
| Total accounts payable and accrued expenses | $ | $ | ||||||
| F-12 |
NOTE 6: RELATED PARTY TRANSACTIONS
Convertible Promissory Notes
On
August 17, 2018, William McLeod, our Chief Executive Officer, President and a Director, Thomas M. Grbelja, our Treasurer, Secretary and
a Director, and Alex Aliksanyan, a director and our former Chief Executive Officer, were each issued
a convertible promissory note, dated August 17, 2018, in the principal amount of $
On
April 17, 2020, William McLeod, our Chief Executive Officer, President and a Director, Thomas M. Grbelja, our Treasurer, Secretary and
a Director, and Alex Aliksanyan, a Director and our former Chief Executive Officer, executed a Satisfaction and General Release of Promissory
Note, pursuant to which they accepted a discounted payoff of their convertible promissory notes in the amount of $
During
the current fiscal year Mr. Aliksanyan, a board member of the Company, was issued a convertible promissory note in the amount of $
Series A Convertible Preferred Stock
Included
in the year ended November 30, 2019, Mr. McLeod, director and President purchased Series A preferred shares in exchange for $
| F-13 |
NOTE 7: STOCKHOLDERS’ DEFICIT
The
total number of shares of all classes of stock that the Company shall have the authority to issue is
On
October 9, 2020, we entered into Stock Repurchase Agreements with three shareholders, pursuant to which we agreed to repurchase from
such shareholders a total of shares of Series A Convertible Preferred Stock, at a per-share purchase price of $ per share,
for a total of $. One of these shareholders was William McLeod, our Chief Executive Officer, from whom we repurchased a total
of shares of Series A Convertible Preferred Stock in exchange for $
| F-14 |
Common stock warrants
On
August 20, 2019, the Company issued
During
December 2020, the Company issued
In
June 2021, the Company issued an additional
In
September 2021, the Company issued an additional
The grant date fair value was zero.
A summary of the Company’s outstanding common stock warrants as of November 30, 2021, is as follows:
| Weighted | ||||||||||||
| Average | ||||||||||||
| Exercise | Intrinsic | |||||||||||
| Warrants | Price | Value | ||||||||||
| Outstanding, November 30, 2020 | $ | $ | ||||||||||
| Warrants granted and issued | $ | $ | ||||||||||
| Warrants exercised | $ | $ | ||||||||||
| Warrants exchanged | $ | $ | ||||||||||
| Outstanding, November 30, 2021 | $ | $ | ||||||||||
| Common stock issuable upon exercise of warrants | $ | $ | ||||||||||
The following table summarizes information about common stock warrants outstanding on November 30, 2021:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||
| Number Outstanding at | Weighted Average | Weighted Average | Number Exercisable at | Weighted Average | ||||||||||||
| November 30 2021 | Remaining Life | Exercise Price | November 30, 2021 | Exercise Price | ||||||||||||
| Years | $ | $ | ||||||||||||||
| Years | ||||||||||||||||
| Years | ||||||||||||||||
| Years | ||||||||||||||||
| Years | $ | $ | ||||||||||||||
| Expected volatility | % | |||||||
| Expected dividends | % | |||||||
| Expected term (in years) | - | years | ||||||
| Risk-free rate | % to | % |
| F-15 |
NOTE 8: COMMITMENTS AND 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
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
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
As
of November 30, 2021, the total balance of those notes payable are $
| F-16 |
NOTE 10: PAYCHECK PROTECTION PROGRAM/SBA LOAN
On
May 6, 2020, the Company obtained a $
In
March 2021, the Company obtained an additional Paycheck Protection Program (2) loan in the amount of $
The
Company applied for and received forgiveness from the SBA on May 24, 2021, on the first loan Paycheck Protection Program Loan in the
amount of $
NOTE 11: INCOME TAXES
The Company accounts for income taxes considering deferred tax assets and liabilities which represent the future tax consequences of the differences between financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year the change is enacted.
The difference between the effective income tax rate and the applicable statutory federal income tax rate is summarized as follows:
| 2021 | 2020 | |||||||
| Statutory federal rate | ( | )% | ( | )% | ||||
| Permanent differences, PPP forgiveness | % | % | ||||||
| Change in valuation allowance | % | % | ||||||
| Effective tax rate | % | % | ||||||
At November 30, 2021 and 2020 the Company’s deferred tax assets were as follows:
| 2021 | 2020 | |||||||
| Tax benefit of net operating loss carry forward | $ | $ | ||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||
| Provision for income tax | ||||||||
| Deferred tax assets (liabilities) | ||||||||
| Net deferred tax assets- net operating losses | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | |||||||
| F-17 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company has recorded a full valuation allowance against its net deferred tax assets because it is not currently able to conclude that it is more likely than not that these assets will be realized. The amount of deferred tax assets considered to be realizable could be increased in the near term if estimates of future taxable income during the carryforward period are increased.
As
of November 30, 2021, the Company had unused net operating loss carry forwards of $
| F-18 |
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no events required to be disclosed under this Item.
ITEM 9A - CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief 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, as of November 30, 2021, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of November 30, 2021, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(b).
Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. 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 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 if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets; | |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
| 28 |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting as of November 30, 2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, Management identified the following three material weaknesses that have caused management to conclude that, as of November 30, 2021, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:
1. We do not have a formal policy or written procedures for the approval, identification, and reporting of related-party transactions. Our controls are not adequate to ensure that all material transactions and developments with related parties will be properly identified, approved and reported. In our assessment of our disclosure controls and procedures, management evaluated the impact of our failure to have policies and procedures for the identification, approval and reporting of related-party transactions and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. In our assessment of our disclosure controls and procedures, management evaluated the impact of our failure to have written documentation of our internal controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. In our assessment of our disclosure controls and procedures, management evaluated the impact of our failure to have segregation of duties and has concluded that the control deficiency that resulted represented a material weakness.
| 29 |
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only our management’s report in this Annual Report.
(c) Remediation of Material Weaknesses
To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.
We also intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective internal controls once resources become available.
(d) Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended November 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B – OTHER INFORMATION
There are no events required to be disclosed by the Item.
| 30 |
PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the names, ages, and biographical information of each of our current directors and executive officers, and the positions with us held by each person, and the date such person became a director or executive officer. Our executive officers are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Family relationships among any of the directors and officers are described below.
| Name | Age | Position(s) | ||
| Alex Aliksanyan | 71 | Former Chief Executive Officer and Director | ||
| Thomas M. Grbelja | 63 | Chief Financial Officer, Secretary, and Director | ||
| William McLeod | 69 | President, Chief Executive Officer and Director |
Alex Aliksanyan, age 71, has served as a director since our inception, and served as our President from October 28, 2017, to August 17, 2018. He served as our Chief Executive Officer from August 17, 2018 until April 2020. Mr. Aliksanyan comes to the Company with more than 25 years of Strategic Technology Planning, Implementation and Marketing experience. Mr. Aliksanyan also previously served as CEO and President of iCruise.com which he founded in 2000. Prior thereto, Mr. Aliksanyan had served as a marketing consultant for several brands such as Citibank, Disney and Hillshire Farms and held executive marketing positions at Nestle and Altria Inc.. He is considered in the travel industry as a pioneer in the area of e-commerce. Mr. Aliksanyan received his Bachelors’ Degree in Physics from New York University and an advanced degree in marketing from the Stern School of Business in New York.
Thomas M. Grbelja¸ age 63, has served as our Treasurer and Secretary since October 28, 2017, and has served as our Chief Financial Officer, Treasurer, Secretary and one of our directors since August 17, 2018. Mr. Grbelja has spent over 40 years as a Certified Public Accountant providing a wide variety of professional accounting, tax and financial consulting services to professional service, manufacturing, and construction industry participants. Since 1990, he has served as the President and a Founding Member of Burke Grbelja & Symeonides, LLC, Certified Public Accountants, an accounting firm based in Rochelle Park, New Jersey. In addition, between 1983 and 1990, Mr. Grbelja worked as an accountant at Coopers & Lybrand, where he was responsible for the overall audit engagement, including filings with the SEC, for certain large, publicly traded companies. He received his undergraduate degree in accounting at Fairleigh Dickinson University and is a Certified Public Accountant.
William (Bill) McLeod, age 69, served as our President and as one of our directors since August 17, 2018. He has served as our Chief Executive Officer since April 17, 2020. Mr. McLeod has been a real estate business investor since 1978. He has been active in real estate development for over thirty-five years. He is currently the managing partner for McLeod Investment, LLC. Bill has also been active in medical surgical equipment sales until 2006. He remains a partner in Skype Comfort and Shoes Etc., both closely held medical equipment companies. Mr. McLeod brings to the Board his extensive senior leadership experience, his significant real estate industry experience, and significant professional relationships in the real estate and investment industries.
| 31 |
Family Relationships
There are no family relationships among any of our officers, directors, or greater-than-10% shareholders.
Other Directorships; Director Independence
Other than as set forth above, none of our officers and directors is a director of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
According to the NASDAQ definition, we do not have any independent directors because all our directors are also executive officers.
Committees
We do not currently have an audit committee or an audit committee financial expert, nor do we have any other committees of the Board of Directors.
Involvement in Certain Legal Proceedings
None of our officers or directors has, in the past ten years, filed bankruptcy, been convicted in a criminal proceeding or is named in a pending criminal proceeding, been the subject of any order, judgment, or decree of any court permanently or temporarily enjoining him from any securities activities, or any other disclosable event required by Item 401(f) of Regulation S-K.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us, none of the current required parties are delinquent in their 16(a) filings except as follows: Form 4s for Alex Aliksanyan, Thomas M. Grbelja, and William McLeod required to be filed within two (2) days after their purchase of senior convertible promissory notes from us on December 10, 2020.
| 32 |
Board Meetings
During the fiscal year ended November 30, 2021, the Board of Directors met on one occasion.
Code of Ethics
We have not adopted a written code of ethics, primarily because we believe and understand that our officers and directors adhere to and follow ethical standards without the necessity of a written policy.
ITEM 11 - EXECUTIVE COMPENSATION
Narrative Disclosure of Executive Compensation
On August 17, 2018, we entered into employment agreements with Alex Aliksanyan, our 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 $120,000 per year. The initial term of the Aliksanyan Employment Agreement is 12 months and may be extended by mutual agreement between us and Mr. Aliksanyan. On or about August 28, 2018, we entered into an oral agreement with Mr. Aliksanyan, as memorialized by a First Amendment to Employment Agreement dated September 25, 2018, pursuant to which Mr. Aliksanyan agreed to continue receiving his 2017 annual salary of $36,000 per year in exchange for continued employment and our agreement to adopt an employee stock option plan or similar plan for compensating, incentivizing, retaining and attracting employees prior to June 30, 2019, from which Mr. Aliksanyan would be eligible to receive equity securities from time to time in the discretion of our board of directors. On April 17, 2020, we terminated the employment of Alex Aliksanyan as our Chief Executive Officer, effective as of April 20, 2020. On April 20, 2020, we and Mr. Aliksanyan entered into that certain Separation and Release of Claims Agreement, dated April 20, 2020, whereby Mr. Aliksanyan terminated his Employment Agreement, dated August 17, 2018, as amended, and provided a release of claims to us in exchange for a lump sum payment equal to $1,500, representing one month of his base salary.
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 50% of his time and attention to his duties as Chief Financial Officer. We agreed to pay Mr. Grbelja an annual base salary of $70,000 per year. The initial term of the Grbelja Employment Agreement is 12 months and may be extended by mutual agreement between us and Mr. Grbelja. On or about August 28, 2018, we entered into an oral agreement with Mr. Grbelja, as memorialized by a First Amendment to Employment Agreement dated September 25, 2018, pursuant to which Mr. Grbelja agreed to continue receiving his 2017 annual salary of $24,000 per year in exchange for continued employment and our agreement to adopt an employee stock option plan or similar plan for compensating, incentivizing, retaining and attracting employees prior to June 30, 2019, from which Mr. Grbelja would be eligible to receive equity securities from time to time in the discretion of our board of directors.
| 33 |
Summary Compensation Table
The following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, and Chief Financial Officer for the fiscal years ended November 30, 2021 and 2020.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
| Alex Aliksanyan (1) | 2020 | 19,790 | -0- | -0- | -0- | -0- | -0- | -0- | 19,790 | |||||||||||||||||||||||||||
| Director | 2021 | 10,440 | -0- | -0- | -0- | -0- | -0- | -0- | 10,440 | |||||||||||||||||||||||||||
| Thomas M. Grbelja (2) | 2020 | 18,540 | -0- | -0- | -0- | -0- | -0- | -0- | 18,540 | |||||||||||||||||||||||||||
| CFO and Secretary | 2021 | 6,540 | -0- | -0- | -0- | -0- | -0- | -0- | 6,540 | |||||||||||||||||||||||||||
| William McLeod (3) | 2020 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||
| President | 2021 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | |||||||||||||||||||||||||||
| (1) | On October 28, 2017, Mr. Aliksanyan was appointed as our President. As compensation for such services, Mr. Aliksanyan received a salary of $36,000 per year. On August 17, 2018, we entered into an employment agreement with Mr. Aliksanyan, as amended by a First Amendment to Employment Agreement, pursuant to which we pay him a salary of $36,000 per year in exchange for his agreement to serve as our Chief Executive Officer. On April 17, 2020, we terminated the employment of Alex Aliksanyan as our Chief Executive Officer, effective as of April 20, 2020. |
| (2) | On October 28, 2017, Mr. Grbelja was appointed as our Treasurer and Secretary. As compensation for such services, Mr. Grbelja received a salary of $24,000 per year. On August 17, 2018, we entered into an employment agreement with Mr. Grbelja, as amended by a First Amendment to Employment Agreement, pursuant to which we pay him a salary of $24,000 per year in exchange for his agreement to serve as our Chief Financial Officer and Secretary, devoting a minimum of 50% of his time and attention to such duties. |
| (3) | Mr. McLeod was appointed as our President on August 17, 2018. Mr. McLeod does not have a written employment agreement and receives no salary for his services. |
Officer and Director Compensation
On August 20, 2019, we issued Common Stock Purchase Warrants to the following officers and directors: Alex Aliksanyan, our Chief Executive Officer and a Director, was issued warrants to purchase up to 420,000 shares of our Common Stock. Thomas Grbelja, our Treasurer, Secretary and a Director, was issued warrants to purchase up to 230,000 shares of our Common Stock. William McLeod, our President and a Director, was issued warrants to purchase up to 150,000 shares of our Common Stock.
Each Common Stock Purchase Warrant is exercisable, by its holder, in whole or in part, at any time between August 20, 2019 and August 20, 2024, into shares of our Common Stock as follows: (i) by a cash payment to us at a cash exercise price equal to $0.20 per share, or (ii) by notice of election to exercise the warrant in a cashless exercise to obtain a number of shares of our Common Stock computed using the following formula: X = Y(A-B)/A; where X = the number of shares of Common Stock to be issued to the holder, Y = the number of shares of Common Stock purchasable under the warrant, A = the fair market value of one share of Common Stock on the date of determination, and B = the per share exercise price of $0.20.
For the years ended November 30, 2021, and 2020, none of the members of our Board of Directors received compensation for his or her service as a director. We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity.
Outstanding Equity Awards at Fiscal Year-End
We do not currently have a stock option or grant plan.
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of December 30, 2021, certain information with respect to our equity securities owned of record or beneficially by (i) each Officer and Director; (ii) each person who owns beneficially more than 5% of each class of our outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
| Name and Address | Common Stock Ownership(1) | Percentage of Common Stock Ownership(2) | ||||||
| Alex Aliksanyan (3)(4) | - | - | ||||||
| Thomas M. Grbelja (3)(4) | 7,010 | 0.42 | % | |||||
| William McLeod (3)(4) | 843 | 0.050 | % | |||||
| All Officers and Directors as a Group (2 Persons) | 7,853 | 0.047 | % | |||||
| (1) | The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table. | |
| (2) | Based on 1,673,237 shares of common stock issued and outstanding as of December 30, 2021. | |
| (3) | Indicates one of our officers or directors. | |
| (4) | Unless otherwise noted, the address is c/o Nestbuilder.com Corp., 201 W. Passaic Street, Suite 301, Rochelle Park, NJ 07662. |
We are not aware of any person who owns of record, or is known to own beneficially, five percent or more of our outstanding securities of any class, other than as set forth above. There are no classes of stock other than as set forth above.
There are no current arrangements which will result in a change in control.
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ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Convertible Notes and Warrants
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 $10,000 (each, a “Note” and collectively, the “ Notes”) and a Common Stock Purchase Warrant to purchase up to 50,000 shares of our common stock at an exercise price of $0.10 per share (each, a “Warrant”, and collectively, the “Warrants”). The investors included Alex Aliksanyan, a Director, Thomas M. Grbelja, our Treasurer, Secretary and a Director and William McLeod, our Chief Executive Officer and Director.
The Notes bear interest at the rate of 10.0% per annum and mature on July 31, 2022. We may agree with the noteholders from time to time to accept loan advances under the Notes up to the principal amount of the Notes. As of the date of this filing, the investors have made aggregate loan advances under the Notes of $47,160, which includes an additional $16,000 that was advanced under the existing agreement on or about June 20, 2021 and an additional $3,601 during September 2021.
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 $0.07 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 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the conversion, as such a percentage ownership is determined in accordance with the terms of the Note. Each holder has the right to waive the foregoing conversion limitations, in whole or in part, upon and effective after 61 days prior written notice to us.
Each Warrant is exercisable in whole or in part, at any time or from time to time, before December 31, 2022. Each Warrant may only be exercised with respect to the then-vested shares of our common stock underlying each Warrant. Each Warrant vests with respect to five (5) shares of our common for each dollar advanced to us under the Note issued with each Warrant. The holder of a Warrant may not exercise the Warrant if at the time of such exercise the amount of our common stock issued for the exercise, when added to other shares of our common stock owned by such holder or which can be acquired by such holder upon exercise or conversion of any other instrument, would cause the holder to own more than 4.99% of our outstanding common stock. Each holder has the right to waive this exercise limitation, in whole or in part, upon and effective after 61 days prior written notice to us.
Series A Convertible Preferred Stock
On May 31, 2019, we entered into a Stock Purchase Agreement with William McLeod, our Chief Executive Officer and a Director, pursuant to which we issued to Mr. McLeod a total of 280,000 shares of Series A Convertible Preferred Stock, at a per-share purchase price of $0.25 per share, for a total of $70,000.
The holders of shares of Series A Convertible Preferred Stock are entitled to receive dividends equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of Common Stock when, as, and if such dividends are paid on shares of Common Stock. Each share of Series A Convertible Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share, into one share of our Common Stock. In addition, each share of Series A Convertible Preferred Stock will automatically convert into one share of our Common Stock upon completion of certain corporation transactions, including a reorganization, merger, sale of substantially all of our assets, or the disposition of more than 50% of our voting power. Each share of Series A Convertible Preferred Stock is entitled to the number of votes to which the holders thereof would be entitled if they converted their shares of Series A Convertible Preferred Stock at the time of voting. As long as shares of Series A Convertible Preferred Stock are outstanding, we cannot (i) directly or indirectly, enter into, create, incur or assume any new indebtedness for borrowed money, or (ii) incur any liens on our assets, without the vote or written consent of the holders of at least a majority of the then outstanding shares of the Series A Convertible Preferred Stock. With respect to the distribution of assets upon the liquidation, dissolution or winding up of the Company, the Series A Convertible Preferred Stock ranks senior to the Common Stock and subsequent series of preferred stock that may be issued by us in the future.
On October 9, 2020, we entered into Stock Repurchase Agreements with three shareholders, pursuant to which we agreed to repurchase from such shareholders a total of 640,000 shares of Series A Convertible Preferred Stock, at a per-share purchase price of $0.1875 per share, for a total of $120,000. One of these shareholders was William McLeod, our Chief Executive Officer, from whom we repurchased a total of 280,000 shares of Series A Convertible Preferred Stock in exchange for $52,500.
Warrants
On August 20, 2019, we issued Common Stock Purchase Warrants to the following officers and directors: Alex Aliksanyan, our Chief Executive Officer and a Director, was issued warrants to purchase up to 420,000 shares of our Common Stock. Thomas Grbelja, our Treasurer, Secretary and a Director, was issued warrants to purchase up to 230,000 shares of our Common Stock. William McLeod, our President and a Director, was issued warrants to purchase up to 150,000 shares of our Common Stock.
Each Common Stock Purchase Warrant is exercisable, by its holder, in whole or in part, at any time between August 20, 2019 and August 20, 2024, into shares of our Common Stock as follows: (i) by a cash payment to us at a cash exercise price equal to $0.20 per share, or (ii) by notice of election to exercise the warrant in a cashless exercise to obtain a number of shares of our Common Stock computed using the following formula: X = Y(A-B)/A; where X = the number of shares of Common Stock to be issued to the holder, Y = the number of shares of Common Stock purchasable under the warrant, A = the fair market value of one share of Common Stock on the date of determination, and B = the per share exercise price of $0.20.
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Convertible Notes
On August 17, 2018, we issued an aggregate of $75,000 in Convertible Promissory Notes (the “Notes”) to six investors, including Alex Aliksanyan, our Chief Executive Officer and a director, Thomas M. Grbelja, our Chief Financial Officer, Secretary and a director, and William McLeod, President and a director. The Notes bear interest at the rate of 2.5% per annum and mature on February 28, 2021. 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 price of $0.12 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 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Note. Each Holder has the right to waive the foregoing conversion limitation, in whole or in part, upon and effective after 61 days prior written notice to us. These promissory notes were repaid in total on April 29, 2020 for $67,500.
Employment Agreements
On August 17, 2018, we entered into employment agreements with Alex Aliksanyan, our former Chief Executive Officer and a current 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 $120,000 per year. The initial term of the Aliksanyan Employment Agreement is 12 months and may be extended by mutual agreement between us and Mr. Aliksanyan. On or about August 28, 2018, we entered into an oral agreement with Mr. Aliksanyan, as memorialized by a First Amendment to Employment Agreement dated September 25, 2018, pursuant to which Mr. Aliksanyan agreed to continue receiving his 2017 annual salary of $36,000 per year in exchange for continued employment and our agreement to adopt an employee stock option plan or similar plan for compensating, incentivizing, retaining and attracting employees prior to June 30, 2019, from which Mr. Aliksanyan would be eligible to receive equity securities from time to time in the discretion of our board of directors. On April 17, 2020, we terminated the employment of Alex Aliksanyan as our Chief Executive Officer, effective as of April 20, 2020. On April 20, 2020, we and Mr. Aliksanyan entered into that certain Separation and Release of Claims Agreement, dated April 20, 2020, whereby Mr. Aliksanyan terminated his Employment Agreement, dated August 17, 2018, as amended, and provided a release of claims to us in exchange for a lump sum payment equal to $1,500, representing one month of his base salary.
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 50% of his time and attention to his duties as Chief Financial Officer. We agreed to pay Mr. Grbelja an annual base salary of $70,000 per year. The initial term of the Grbelja Employment Agreement is 12 months and may be extended by mutual agreement between us and Mr. Grbelja. On or about August 28, 2018, we entered into an oral agreement with Mr. Grbelja, as memorialized by a First Amendment to Employment Agreement dated September 25, 2018, pursuant to which Mr. Grbelja agreed to continue receiving his 2017 annual salary of $24,000 per year in exchange for continued employment and our agreement to adopt an employee stock option plan or similar plan for compensating, incentivizing, retaining and attracting employees prior to June 30, 2019, from which Mr. Grbelja would be eligible to receive equity securities from time to time in the discretion of our board of directors.
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Principal Executive Offices
Thomas M. Grbelja, our Chief Financial Officer, Secretary and a director, currently provides us with office space located at 201 W. Passaic St #301, Rochelle Park, NJ 07662. We do not currently pay Mr. Grbelja rent for our principal executive offices.
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees billed for the years ended November 30, 2021, and 2020 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K or 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $25,500 for 2021 and $27,000 for 2020.
Audit - Related Fees
There were no fees billed for services reasonably related to the performance of the audit or review of the financial statements outside of those fees disclosed above under “Audit Fees” for the fiscal years ended November 30, 2021 and 2020.
Tax Fees
For the fiscal years ended November 30, 2021, and 2020, our principal accountants did not render any services for tax compliance, tax advice, and tax planning work.
All Other Fees
None.
Of the fees described above for the years ended November 30, 2021, and 2020, all were approved by the entire Board of Directors.
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PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a)(1) | Financial Statements |
The following financial statements are filed as part of this report:
| (a)(2) | Financial Statement Schedules |
We do not have any financial statement schedules required to be supplied under this Item.
| (a)(3) | Exhibits |
Refer to (b) below.
| (b) | Exhibits |
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| (1) | Incorporated by reference from our registration statement on Form 10, filed with the Commission on December 22, 2017. | |
| (2) | Incorporated by reference from Amendment No. 1 to our registration statement on Form 10/A, filed with the Commission on February 20, 2018. | |
| (3) | Incorporated by reference from Amendment No. 5 to our registration statement on Form 10/A, filed with the Commission on July 23, 2018. | |
| (4) | Incorporated by reference from our Current Report on Form 8-K, filed with the Commission on June 3, 2019. | |
| (5) | Incorporated by reference from our Current report on Form 8-K, filed with the Commission on December 14, 2020. |
* Furnished herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Nestbuilder.com Corp. | ||
| Dated: December 30, 2021 | /s/ William McLeod | |
| By: | William McLeod | |
| Its: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Dated: December 30, 2021 | /s/ William McLeod | |
| By: | William McLeod | |
| Its: | Chief Executive Officer and Director | |
| Dated: December 30, 2021 | /s/ Thomas M. Grbelja | |
| By: | Thomas M. Grbelja | |
| Its: | Chief Financial Officer, Secretary and Director |
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