10-K: Cannonau Corp. Reports Net Profit After Debt Forgiveness in 2023 Annual Filing

Sentiment:

Annual Results 12 April 2024 3:37 PM

Cannonau Corp. reports a net profit for 2023 primarily due to debt forgiveness, despite minimal revenue and a going concern warning from auditors.

Capital raiseThe company is dependent on the ability to raise equity or debt financing to continue as a going concern.The company has historically sought funding from officers, directors, and family members.

Worse than expectedThe company's financial results are worse than expected due to the lack of revenue, the write-off of all assets, and the going concern warning from auditors.

Summary

Cannonau Corp., formerly Pacific Blue Energy Corp., filed its annual report on Form 10-K for the fiscal year ended December 31, 2023.
The company reported a net profit of $338,397 for 2023, a significant turnaround from a net loss of $85,950 in 2022.
This profit was primarily due to a $371,562 gain from debt forgiveness, offsetting a $8,929 write-off of assets.
Revenue for 2023 was $1,835, compared to $0 in 2022.
Operating expenses decreased from $85,950 in 2022 to $24,397 in 2023, mainly due to reduced compensation, administrative, and professional expenses.
The company's cash balance was $0 at the end of 2023, down from $157 in 2022.
Total assets decreased from $9,025 in 2022 to $0 in 2023, due to the write-off of all assets.
Total liabilities decreased from $347,261 in 2022 to $0 in 2023, primarily due to debt forgiveness.
The company's auditors have issued a going concern opinion, citing the lack of profitable operations and dependence on external financing.
As of April 12, 2024, there were 241,377,178 shares of common stock outstanding.

Sentiment

Score: 2

Explanation: The document reveals a company with severe financial difficulties, a lack of operational activity, and a going concern warning, indicating a very negative outlook from an investment perspective.

Positives

The company achieved a net profit of $338,397 in 2023, a significant improvement from the previous year.
Operating expenses were significantly reduced in 2023.
The company eliminated all liabilities through debt forgiveness.
Revenue increased from $0 in 2022 to $1,835 in 2023.

Negatives

The company's cash balance is $0.
All assets were written off, resulting in a total asset value of $0.
The company's auditors have issued a going concern opinion.
The company has minimal revenue of $1,835 for the year.

Risks

The company's ability to continue as a going concern is in doubt due to its lack of profitability and dependence on external financing.
The company has no cash reserves.
The company has no employees.
The company has not commenced a planned principal operation.
The company has a significant accumulated deficit of $3,449,932.

Future Outlook

The company's future is uncertain, with a going concern warning from auditors and dependence on external financing. The company plans to continue developing its CBD based products.

Management Comments

Management is responsible for establishing and maintaining internal control over financial reporting.
Management believes that as of December 31, 2020, our internal control over financial reporting was not effective.
Management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.

Industry Context

The company's shift to CBD-based products reflects a broader trend in the market, but the company's financial struggles and lack of operations make it an outlier compared to more established players in the industry.

Comparison to Industry Standards

The company's financial performance is significantly below industry standards for companies in the CBD sector, which typically have established revenue streams and operational infrastructure.
Unlike many companies in the sector, Cannonau Corp. has no employees and no physical properties.
The company's reliance on debt forgiveness for profitability is not a sustainable business model and is not typical of companies in the sector.
The going concern warning from the auditors is a significant red flag, indicating a high risk of business failure, which is not typical for established companies in the sector.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Audit Committee	The board of directors does not have an audit committee, and the functions of the audit committee are currently performed by our Corporate Secretary, with assistance by expert independent accounting personnel and oversight by the entire board of directors.	2023-12-31	This is a deficiency in corporate governance as the board is not independent and does not have a financial expert.
Audit Committee Financial Expert	The board of directors has determined that we do not have an audit committee financial expert serving on our audit committee within the meaning of Item 407(d)(5) of Regulation S-K.	2023-12-31	This is a deficiency in corporate governance as the board does not have a financial expert.
Code of Ethics	We have not adopted a code of ethics for our executive officers, directors and employees.	2023-12-31	This is a deficiency in corporate governance as the company does not have a code of ethics.
Nominating Committee	We have not yet established a nominating committee. Our board of directors, sitting as a board, performs the role of a nominating committee.	2023-12-31	This is a deficiency in corporate governance as the board is not independent.
Compensation Committee	We have not established a compensation committee. Our board of directors, sitting as a board, performs the role of a compensation committee.	2023-12-31	This is a deficiency in corporate governance as the board is not independent.

Legal Proceedings

As of the date of this Annual Report, management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties.
As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings.
Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

Related Party Transactions

On May 21, 2019, the Company issued 100,000,000 shares of common stock to settle $ 5,000 in debt with a related party.
On February 25, 2020, convertible notes to related parties of $ 3,260 were converted into 9,055,556 shares of common stock.
On March 20, 2020, convertible notes of $ 4,370 were converted into 12,138,888 shares of common stock.
On May 29, 2020, convertible notes to related parties of $ 1,142 were converted into 30,000,000 shares of common stock.
On July 6, 2020, convertible notes to related parties of $6,858 were converted into 180,473,684 shares of common stock
On July 21, 2020, convertible notes to related parties of $362 were converted into 9,526,316 shares of common stock.
On February 18, 2020, the Company executed a promissory note of $ 1,500 with the legal custodian of the Company.
On February 25, 2020, the Company executed a promissory note of $1,760 with the legal custodian of the Company.
On March 13, 2020, the Company executed a promissory note of $2,610 with the legal custodian of the Company.
On March 20, 2020, the Company executed a promissory note of $1,760 with the legal custodian of the Company.
During the year ended December 31, 2020, the legal custodian additionally advanced the Company $27,117 to pay operating expenses.
On July 2, 2020, the Company executed a promissory note of $3,000 with the Chief Executive Officer of the Company.
During the year ended December 31, 2020, the Chief Executive Officer additionally advanced the Company $33,813 to pay operating expenses.

Stakeholder Impact

Shareholders face significant risk due to the company's financial instability and going concern warning.
Employees are not currently impacted as the company has no employees.
Customers are not currently impacted as the company has not commenced a planned principal operation.
Suppliers and creditors are at risk due to the company's financial instability.
The company's ability to meet its obligations to stakeholders is uncertain.

Next Steps

The company needs to secure additional financing to continue operations.
The company needs to develop and implement a viable business plan.
The company needs to address the material weaknesses in its internal controls.
The company needs to find a replacement for the audit committee financial expert.

Key Dates

Date	Description
2007-04-03	Company incorporated in Nevada as Descanso Agency, Inc.
2009-09	Company ceased travel industry operations.
2009-10-16	Company name changed to Pacific Blue Energy Corp.
2009-11-06	Company implemented a 4-for-1 forward stock split.
2010-04-05	Company acquired 100% interest in Ship Ahoy LLC.
2019-08-22	Company name changed to Cannonau Corp.
2023-12-31	End of fiscal year 2023.
2024-04-12	Date of the annual report filing.

Keywords

Cannabidiol, CBD, Debt Forgiveness, Going Concern, Financial Statements, Annual Report, Form 10-K, Net Profit, Operating Expenses, Financial Reporting

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