UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-K

 

Annual Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934

 

 

For the year ended July 31, 2020

 

 

Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934

 

 

For the transition period from _____________ to _____________

 

Commission file number 000-54338

 

GREEN HYGIENICS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

26-2801338

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

13795 Blaisdell Place, Suite 202, Poway, CA

 

92064

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: 1-855-802-0299

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of exchange on which registered

 

 

 

 

 

Common Stock

 

GRYN

 

OTCMKTS

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. ☐ Yes   ☒ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes   ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes   ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes   ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for completing with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) ☐ Yes   ☒ No

 

As of January 31, 2020, the last day of registrant’s second fiscal quarter, the aggregate market value of the registrant’s common stock, $0.001 par value, held by non-affiliates, computed by reference to the price at which the common equity was last sold prior to January 31, 2020, was approximately $27,059,863. For purposes of the above statement only, all directors, executive officers and 10% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has fled all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As at October 29, 2020, the registrant had 41,918,638 shares of common stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

  

Table of Contents

 

Part I

 

 

 

 

 

 

 

Item 1.

Business

3

 

Item 1A.

Risk Factors

6

 

Item 2.

Properties

12

 

Item 3.

Legal Proceedings

12

 

Item 4.

Mine Safety Disclosures

12

 

 

 

 

 

Part II

 

 

 

 

 

 

 

Item 5.

Market for Common Equity and Related Stockholder Matters

13

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

Item 8.

Financial Statements and Supplementary Data

F-1

 

Item 9.

Changes in and Disagreements with Accountants on Financial Disclosure

21

 

Item 9A.

Controls and Procedures

21

 

 

 

 

 

PART III

 

 

 

 

 

 

 

Item 10.

Directors, Executive Officers and Control Persons

22

 

Item 11.

Executive Compensation

26

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management

27

 

Item 13.

Certain Relationships and Related Transactions

27

 

Item 14.

Principal Accounting Fees and Services

28

 

Item 15.

Exhibits

28

 

 

 

 

 

Signatures

 

29

 

 

 
2

Table of Contents

  

PART I

 

Item 1. Description of Business

  

COMPANY OVERVIEW

 

Green Hygienics Holdings Inc. (the "Company") was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources Inc. On June 30, 2010, the Company changed its name to Takedown Entertainment Inc and on July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.

 

The Company seeks to be an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for the purpose of extracting cannabidiol (“CBD”).

 

On June 1, 2017, the Company accepted the resignations of Rick Powell, Jim Loseth, and David Ashby as Directors and Officers of the Company and the Company accepted the appointment of Ronald Loudoun as President, Secretary, Treasurer, Interim Chief Financial Officer, and Director of the Company.

 

On October 30, 2018, Rick Powell (“Powell”) transferred 13,500,000 common shares of the Company by way of a Gifting Agreement to Alita Capital Inc. (“Alita”), a company controlled by Ronald Loudoun, and on October 30th, 2018, Wilderness Custom Exteriors Ltd. transferred 9,000,000 common shares by way of a Gifting Agreement to Alita.

 

Effective April 29, 2019, the Company entered into a definitive agreement with Coastal Labs, LLC (“Coastal”), a California limited liability company to acquire all of the assets of Coastal. The total consideration for the assets would be, at the Company’s election, $3,000,000 or a total of 2,000,000 shares of the Company’s common stock issuable over five years. In addition, the Company would enter into consulting agreements with each individual member of Coastal, or such entity as each respective member may designate, that sets forth ongoing compensation to each individual member of Coastal. The parties further agreed to form a new entity or arrange for the transfer of ownership of Coastal to a wholly-owned subsidiary of the Company to hold the acquired assets, to enter into an operating agreement that governs the operation of the assets, and to establish a board of directors for the subsidiary of up to 6 members, of whom 3, or half, whichever is greater, shall be nominees of Coastal. Further, the Company would assume all of Coastal’s contracts relating to sales and distribution of the products. The acquisition of the assets of Coastal has not closed, and either party may terminate the agreement at any time.

 

In June, 2019, the Company formed two wholly owned subsidiaries, Coastal Labs NC LLC (“Coastal NC”) and Green Hygienics NC LLC (“Green NC”) for the purpose of registering as an industrial hemp processor and cultivator in the State of North Carolina pursuant to the North Carolina Industrial Hemp Pilot Program.

 

On June 10, 2019, the Company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes. Since the issuance of the purchase order, the Company and US Tobacco De Mexico determined to renegotiate the purchase order due to several reasons, including production capacity and market price fluctuation. This contract has been cancelled due to the significant drop of more than 90% in wholesale price of hemp biomass which is used to make CBD hemp cigarettes. The parties are working on a modified version of the deal.

 

On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures a registration for industrial hemp cultivation as a grower.

 

On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina. The licenses were granted to the Company’s newly formed subsidiary, Coastal NC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green NC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.

  

 
3

Table of Contents

 

On August 26, 2019, the Company the completed the acquisition of 824 acres of land known as the Potrero Ranch Property, located near San Diego, California for a purchase price of $4 million. The Company is utilizing the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings that are currently being converted into greenhouses. The Company entered into an agreement payable with the seller of the property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. This debt is secured by a promissory note secured by a deed of trust on the real property. The maturity date of the debt is August 23, 2024. The Company also entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. This debt is also secured by a promissory note secured by a second charge on the deed of trust on the real property. The maturity date of this debt is August 15, 2024.

 

In October 2019, the Company entered into an agreement to purchase the real property located at 13795 Blaisdell Place, Poway, California 92064, which includes a building containing approximately 15,048 square feet of R&D space on a 0.95 acre lot, for $4,000,000, of which $2,000,000 is payable in cash or common stock of the Company, and of which $2,000,000 would be financed pursuant to a promissory note and secured by a deed of trust on the property. The Company has until January 15, 2021 to obtain the necessary financing to consummate the transaction.

 

In April 2020, the Company received USDA Organic Certification for its 824-acre farm and 400,000 square feet of greenhouse space. The Company considers the USDA Organic Certification to be one of the most recognized certifications among US consumers and provides another level of assurance to shoppers who may be concerned about the safety of CBD products. In addition to assuring that no synthetic fertilizers, pesticides, or herbicides have been used in the cultivation of hemp, the USDA organic certification ensures that farmers are using tillage and cultivation practices that maintain or improve the condition of soil and minimize soil erosion through crop rotations, cover crops and the application of plant and animal materials.

 

In July 2020, the Company planted its first large scale hemp crops for cultivation. The planting covers approximately 120 acres of land and three greenhouses. The Company anticipates harvesting these initial crops by December 31, 2020. The Company had previously planted a smaller crop in 2019 that was fully impaired due to unfavorable weather conditions. In the early growing stages, the plants were severely damaged by a sand storm and could not be salvaged.

 

We had $40,538 in cash as at July 31, 2020. We anticipate that we will incur approximately $240,000 for administrative expenses, including professional legal and accounting expenses associated with compliance with our periodic reporting requirements over the next twelve months. We will need additional funding for the cultivation and processing of industrial hemp for the purpose of extracting CBD.

 

We are contemplating raising additional capital to finance our business operations. It is anticipated that funding for the Company will come from one or more of the following means: engaging in an offering of our stock, engaging in borrowing, or locating a joint venture partner or partners. (See Liquidity and Capital Resources for more information).

   

 
4

Table of Contents

 

BANKRUPTCY OR SIMILAR PROCEEDINGS

 

We have not been the subject of a bankruptcy, receivership or similar proceedings.

 

PRODUCTS AND SERVICES

 

On August 24, 2019, the Company executed a Purchase and Sale Agreement to acquire the 824 Potrero ranch Property near San Diego, California. The Company will utilize the land and building for industrial hemp for CBD cultivation. The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products, creating trusted global consumer brands, developing valuable intellectual property and growing rapidly through strategic acquisitions and development.

 

The Company focuses on hemp cultivation and is an innovative, full-scope, science-based premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for the purpose of extracting cannabidiol (“CBD”). Utilizing the land and building for the production of industrial hemp for CBD cultivation, the Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products, creating trusted global consumer brands, developing valuable intellectual property and growing rapidly through strategic acquisitions and development.

 

MARKETS AND CUSTOMERS

 

Industries as diverse as cosmetics, food and beverage, and pharmaceuticals are potential clients for the sale and purchase of CBD (cannabidiol) derived from industrial hemp. Licensed dispensaries, pharmacies, and general retail market which includes cafes, smoke shops, grocery stores are buyers for products containing CBD derived from industrial hemp.

 

COMPETITION

 

Competition in the hemp industry is increasing steadily. Some of the biggest names in the hemp industry expect to make their presence known in the global market.

 

REGULATORY CONSIDERATIONS

 

The Hemp Farming Act of 2018 removed hemp from the list of Schedule 1 controlled substances (defined as less than 0.3% THC), making it an ordinary agricultural commodity. There is the potential for the FDA to introduce new regulations for the industry.

 

EMPLOYEES

 

The Company currently has 20 plus part time and full-time employees at the Potrero Ranch property. The number of employees will fluctuate dependent of the needs at the ranch and the growth stages of the crop.

  

RESEARCH AND DEVELOPMENT EXPENDITURES

 

We have not incurred any research or development expenditures since our incorporation.

 

PATENTS AND TRADEMARKS

 

We do not own, either legally or beneficially, any patents or trademarks.

 

 
5

Table of Contents

  

Item 1A. Risk Factors

 

THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK. BEFORE MAKING A DECISION CONCERNING THE PURCHASE OF OUR SECURITIES, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN THIS ANNUAL REPORT WHEN YOU EVALUATE OUR BUSINESS.

 

Business Risks:

 

We are entering into a new business, the construction of hemp growing facilities, and we expect to incur operating losses for the foreseeable future.

 

We were incorporated on June 12, 2008. We have no way to evaluate the likelihood that our business will be successful. We have had minimal revenues as of the date of this annual report. The Company’s present business model is as an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”). The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products, creating trusted global consumer brands, developing valuable intellectual property, and growing the Company through strategic acquisitions. Potential investors should be aware of the difficulties normally encountered by fledging construction companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays encountered in connection with the regulatory hurdles surrounding this new industry.

 

We have yet to earn significant revenue to achieve profitability and our ability to sustain our operations is dependent on our ability to raise additional financing to complete our program if warranted. As a result, our independent auditors believe there is substantial doubt about our ability to continue as a going concern.

 

We have an accumulated deficit of $50,494,387 as at July 31, 2020. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of our business. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditors have expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We may have to liquidate our business and you may lose your investment. You should consider our auditor’s comments when determining if an investment in our company is suitable.

 

Because of the unique difficulties and uncertainties inherent in hemp growing facility construction and management industry, we face a high risk of business failure.

 

You should be aware that the hemp growing industry is a new industry. Consequently, the likelihood that there will be a high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the regulatory environment in which we must adhere to. These potential problems include, but are not limited to, unanticipated problems relating to obtaining a building permits, licenses to grow hemp, and the ability to market the hemp grown. If the results of our program do not reveal viable commercialization options, we may decide to abandon our venture into the hemp growing industry. Our ability to continue in the hemp growing industry will be dependent upon our possessing adequate capital resources when needed. If no funding is available, we may be forced to abandon our operations.

 

 
6

Table of Contents

  

Because of the inherent dangers involved in the hemp growing construction industry and the management of the facilities, there is a risk that we may incur liability or damages as we conduct our business.

 

The growing of hemp involves numerous hazards. As a result, we may become subject to liability for such hazards, which we cannot insure or against which we may elect not to insure. At the present time we have no insurance to cover against these hazards. The payment of such liabilities may result in our inability to complete our planned program and/or obtain additional financing to fund our program.

 

As we undertake the construction of hemp growing facilities, we will be subject to compliance with government regulation that may increase the anticipated cost of our program.

 

There are several governmental regulations that could materially increase the costs of managing the facilities. We will be subject to regulations and laws as we carry out our program. We will require licenses to grow and process hemp in the United States and Canada. There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our growing operations.

 

Because we have no operating history in the hemp industry, we may not succeed.

 

We have no specific operating history in procuring, building out or leasing real estate for agricultural purposes, specifically hemp grow facilities, or with respect to any other activity in the hemp industry. Moreover, we are subject to all risks inherent in a developing a new business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with establishing a new business and the competitive and regulatory environment in which we operate.

 

You should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages. For example, unanticipated expenses, delays and or complications with build outs, zoning issues, legal disputes with neighbors, local governments, communities and or tenants. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.

 

Because our business is dependent upon continued market acceptance by consumers, any negative trends will adversely affect our business operations.

 

We are substantially dependent on continued market acceptance and proliferation of consumers of hemp. We believe that as hemp becomes more accepted consumer demand will continue to grow. And while we believe that the market and opportunity in the hemp space continues to grow, we cannot predict the future growth rate and size of the market. Any negative outlook on the hemp industry will adversely affect our business operations.

 

Laws and regulations affecting the regulated hemp industry are constantly changing, which could detrimentally affect our proposed operations and we cannot predict the impact that future regulations may have on us.

 

Local, state, and federal hemp laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

 

 
7

Table of Contents

  

FDA regulation of hemp and the possible registration of facilities where hemp is grown could negatively affect the industry which would directly affect our financial condition.

 

The FDA may issue rules and regulations including CGMPs (certified good manufacturing practices) related to the growth, cultivation, harvesting and processing of hemp. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where hemp is grown be registered with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, we do not know what the impact would be on the hemp industry, what costs, requirements and possible prohibitions may be enforced. If we or our tenants are unable to comply with the regulations and or registration as prescribed by the FDA, we and/or our tenants may be unable to continue to operate their and our business in its current form or at all.

 

Because our business model depends upon the availability of private financing, any change in our ability to raise money will adversely affect our financial condition.

 

Our ability to operate, engage in the business activities that we have planned, and achieve positive financial performance depends, in large measure, on our ability to obtain financing in amounts and on terms that are favorable.

 

Because we are liable for hazardous substances on our properties, environmental liabilities are possible and can be costly.

 

Federal, state, and local laws impose liability on a landowner for releases or the otherwise improper presence on the premises of hazardous substances. This liability is without regard to fault for, or knowledge of, the presence of such substances. A landowner may be held liable for hazardous materials brought onto a property before it acquired title and for hazardous materials that are not discovered until after it sells the property. Similar liability may occur under applicable state law. Sellers of properties may make only limited representations as to the absence of hazardous substances. If any hazardous materials are found within our properties in violation of law at any time, we may be liable for all cleanup costs, fines, penalties, and other costs. This potential liability will continue after we sell the properties and may apply to hazardous materials present within the properties before we acquire the properties. If losses arise from hazardous substance contamination which cannot be recovered from a responsible party, the financial viability of the properties may be adversely affected. It is possible that we will purchase properties with known or unknown environmental problems which may require material expenditures for remediation.

 

If we are found non-compliant with the Americans with Disabilities Act, we will be subject to significant liabilities.

 

If any of our properties are not in compliance with the Americans with Disabilities Act of 1990, as amended (the “ADA”), we may be required to pay for any required improvements. Under the ADA, public accommodations must meet certain federal requirements related to access and use by disabled persons. The ADA requirements could require significant expenditures and could result in the imposition of fines or an award of damages to private litigants. We cannot assure that ADA violations do not or will not exist at any of our properties.

 

The recent global COVID-19 outbreak has significantly affected our business and operations.

 

The potential impact and duration of the COVID-19 pandemic on the global economy and our business are difficult to assess or predict. Potential impacts include the following:

 

 

Our customer prospects and our existing customers may experience slowdowns in their businesses, which in turn may result in reduced demand for our products, lengthening of sales cycles, loss of customers, and difficulties in collections.

 

 

 

 

Certain of our employees are working from home significantly more frequently than they have historically, which may result in decreased employee productivity and morale with increased unwanted employee attrition.

 

 

 

 

We continue to incur fixed costs and are deriving reduced or no benefit from those costs.

 

 

 

 

We may continue to experience disruptions to our growth planning, such as for facilities and expansion.

 

 

 

 

We anticipate incurring costs in returning to work, including changes to the workplace, such as space planning, food service, and amenities.

 

 

 

 

We may be subject to legal liability for safe workplace claims.

 

 

 

 

Our critical vendors could go out of business.

 

 

 

 

Our in-person marketing events, including customer user conferences, have been canceled and we may continue to experience prolonged delays in our ability to reschedule or conduct in-person marketing events and other sales and marketing activities.

 

 

 

 

Our marketing, sales, professional services, and support organizations are accustomed to extensive face-to-face customer and partner interactions, and conducting business virtually is unproven.

  

Any of the foregoing could adversely affect our business, financial condition, and results of operations. 

 

 
8

Table of Contents

 

More generally, the COVID-19 pandemic has and is expected to continue to adversely affect economies and financial markets globally, leading to a continued economic downturn, which is expected to decrease spending generally and could adversely affect demand for our products. It is not possible at this time to estimate the full impact that COVID-19 will have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

 

Moreover, to the extent the COVID-19 pandemic adversely affects our business, financial condition, and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to, those related to our ability to increase sales to existing and new customers, continue to perform on existing contracts, develop and deploy new technologies, expand our marketing capabilities and sales organization, and to generate sufficient cash flow to operate our business and meet our obligations.

 

Investment Risks:

 

Our issuance of additional shares may have the effect of diluting the interest of shareholders; our common stock shareholders do not have pre-emptive rights.

 

Any additional issuances of common stock by us from our authorized but unissued shares may have the effect of diluting the percentage interest of existing shareholders. The securities issued to raise funds may have rights, preferences, or privileges that are senior to those of the holders of our other securities, including our common stock. The board of directors has the power to issue such shares without shareholder approval. We fully intend to issue additional common shares in order to raise capital to fund our business operations and growth objectives.

 

We do not anticipate paying dividends to our common stockholders in the foreseeable future, which makes investment in our stock speculative and risky.

 

We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. The board of directors has sole authority to declare dividends payable to our stockholders. The fact that we have not paid and do not plan to pay dividends indicates that we must use all of our funds we generate for reinvestment in our business activities. Investors also must evaluate an investment in the Company solely on the basis of anticipated capital gains.

 

 
9

Table of Contents

  

Limited liability of our executive officers and directors may discourage shareholders from bringing a lawsuit against them.

 

Our Articles of Incorporation and Bylaws contain provisions that limit the liability of our directors for monetary damages and provide for indemnification of officers and directors. These provisions may discourage shareholders from bringing a lawsuit against officers and directors for breaches of fiduciary duty and may reduce the likelihood of derivative litigation against officers and directors even though such action, if successful, might otherwise have benefited the shareholders. In addition, a shareholder’s investment in the Company may be adversely affected to the extent that we pay costs of settlement and damage awards against officers or directors pursuant to the indemnification provisions of the bylaw. The impact on a shareholder’s investment in terms of the cost of defending a lawsuit may deter the shareholder from bringing suit against any of our officers or directors. We have been advised that the SEC takes the position that these article and bylaw provisions do not affect the liability of any director under applicable federal and state securities laws.

 

We are a development stage company and we expect to incur operating losses for the foreseeable future.

 

We were incorporated on June 12, 2008 and our business to date has been principally organizational activities. We have no way to evaluate the likelihood that our business will be successful. Potential investors should be aware of the difficulties normally encountered by start-up companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the business that we plan to undertake. These potential problems include, but are not limited to, additional costs and expenses that may exceed current estimates. We anticipate that we will incur increased operating expenses without realizing any revenues. We recognize that if business revenues are not forthcoming, we will not be able to continue business operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and if we are unsuccessful in addressing these risks, our business will most likely fail.

 

We have yet to earn continuous or sufficient revenue and our ability to sustain our operations is dependent on our ability to raise additional financing. There is substantial doubt about our ability to continue as a going concern.

 

We have accumulated net losses of $50,494,387 to July 31, 2020 and have not generated any material revenues to date. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of our business. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditor has expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We may have to liquidate our business and you may lose your investment. You should consider our auditor’s comments when determining if an investment in our company is suitable.

 

We may be unable to obtain additional capital that we may require to implement our business plan. This would restrict our ability to grow.

 

The proceeds from our financing efforts to date have provided us with a limited amount of working capital not sufficient to fund our proposed operations. We will require additional capital to continue to operate our business and our proposed operations. We may be unable to obtain additional capital as and when required.

 

Future acquisitions and future development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

 

We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, the capital we have received to date is not sufficient to fund our operations going forward without obtaining additional capital financing.

 

Any additional capital raised through the sale of equity may dilute your ownership percentage. This could result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

 

 
10

Table of Contents

  

Our ability to obtain needed financing may be impaired by such factors as the capital markets generally, our status as a new enterprise without a demonstrated operating history or the retention or loss of key management. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may be required to cease our operations.

 

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition.

 

The limited trading of our common stock may impair your ability to sell your shares.

 

There has been a limited trading market for our common stock since our inception. The lack of trading of our common stock and the low volume of any future trading may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. Such factors may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.

 

The market price of our common stock is likely to be highly volatile and subject to wide fluctuations.

 

Assuming we are able to establish an active trading market for our common stock, the market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

 

 

dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;

 

announcements of acquisitions or other business initiatives by our competitors;

 

market changes in the demand for products and services;

 

quarterly variations in our revenues and operating expenses;

 

changes in the valuation of similarly situated companies, both in our industry and in other industries;

 

changes in analysts’ estimates affecting us, our competitors or our industry;

 

additions and departures of key personnel;

 

fluctuations in interest rates and the availability of capital in the capital markets;

 

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and our results of operations and financial condition.

 

Our operating results may fluctuate significantly, and these fluctuations may cause our stock price to decline.

 

Our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, costs that we incur, and other factors. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.

 

 
11

Table of Contents

 

Applicable SEC rules governing the trading of “penny stocks” will limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

 

Our common stock is presently considered to be a “penny stock” and is subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and which regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the FINRA system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities.

 

Forward-looking statements

 

This Form 10-K contains forward-looking statements that involve risk and uncertainties. We use words such as anticipate, believe, will, plan, expect, future, intend, and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons.

 

Item 2. Properties

 

We currently own 824 acres of land referred to as the Potrero Ranch Property near San Diego, California, which includes some outside buildings. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outside buildings which are currently being converted into greenhouses. The Company entered into an agreement payable with the seller of the property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. This debt is secured by a promissory note secured by a deed of trust on the real property. The maturity date of the debt is August 23, 2024. The Company also entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. This debt is also secured by a promissory note secured by a second charge on the deed of trust on the real property. The maturity date of this debt is August 15, 2024.

 

In October 2019, the Company entered into an agreement to purchase the real property located at 13795 Blaisdell Place, Poway, California 92064, which includes a building containing approximately 15,048 square feet of R&D space on a 0.95 acre lot, for $4,000,000, of which $2,000,000 is payable in cash or common stock of the Company, and of which $2,000,000 would be financed pursuant to a promissory note and secured by a deed of trust on the property. The Company currently uses a portion of this facility for its corporate offices. The Company has until January 15, 2021 to obtain the necessary financing to consummate the transaction.

  

Item 3. Legal Proceedings

 

We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.

 

Item 4. Mine Safety Procedures

 

Not applicable.

 

 
12

Table of Contents

 

PART II

 

Item 5. Market for Common Equity and Related Stockholder Matters

 

Our common stock trades on the OTC Markets (QB Marketplace Tier) under the symbol “GRYN.” Very limited trading of our common stock has occurred during the past two years; therefore, only limited historical price information is available. The following table sets forth the high and low closing bid prices of our common stock (USD) for the last two fiscal years, as reported by OTC Markets Group Inc. and represents inter dealer quotations, without retail mark-up, mark-down or commission and may not be reflective of actual transactions:

 

We consider our stock to be “thinly traded” and any reported sale prices may not be a true market-based valuation of our stock. Some of the bid quotations from the OTC Bulletin Board set forth below may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

Fiscal Year ending July 31, 2020 (OTC Markets)

 

High Bid

 

 

Low Bid

 

First quarter (ended October 31, 2019)

 

$ 2.32

 

 

$ 1.00

 

Second quarter (ended January 31, 2020)

 

 

2.29

 

 

 

1.80

 

Third quarter (ended April 30, 2020)

 

 

1.76

 

 

 

0.39

 

Fourth quarter (ended July 31, 2020)

 

 

1.005

 

 

 

0.36

 

 

Fiscal Year ending July 31, 2019 (OTC Markets)

 

High Bid

 

 

Low Bid

 

First quarter (ended October 31, 2018)

 

$ 0.45

 

 

$ 0.45

 

Second quarter (ended January 31, 2019)

 

 

0.51

 

 

 

0.51

 

Third quarter (ended April 30, 2019)

 

 

0.72

 

 

 

0.72

 

Fourth quarter (ended July 31, 2019)

 

 

1.54

 

 

 

1.30

 

 

Holders

 

As of July 31, 2020, there were 79 shareholders of record of our common stock.

 

Dividends

 

Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, that our Board of Directors may deem relevant.

 

 
13

Table of Contents

  

Recent Sales of Unregistered Securities

 

On August 1, 2019, the Company issued 250,000 common shares to the CEO of the Company in exchange for services. The shares were valued at $370,000 based on OTC’s closing trade price on the date of the agreement.

 

On August 1, 2019, the Company issued 50,000 common shares to the Chief Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued at $74,000 based on OTC’s closing trade price on the date of the agreement.

 

On August 1, 2019, the Company issued 200,000 common shares to the Chief Project Manager of the Company in exchange for consulting services. The shares were valued at $296,000 based on OTC’s closing trade price on the date of the agreement.

 

On August 1, 2019, the Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued at $37,000 based on OTC’s closing trade price on the date of the agreement.

 

On August 1, 2019, the Company issued 250,000 common shares to a non-related party in exchange for consulting services. The shares were valued at $370,000 based on OTC’s closing trade price on the date of the agreement.

 

On August 1, 2019, the Company issued 50,000 common shares to Triton Funds LLC in exchange for consulting services. The shares were valued at $74,000 based on OTC’s closing trade price on the date of the agreement.

 

On April 20, 2020, the Company issued 50,000 common shares to an Independent Director of the Company in exchange for consulting services. The shares were valued at $100,000 based on OTC’s closing trade price on the date of the agreement.

 

On April 20, 2020, the Company issued 125,000 common shares to the Senior Vice President of Corporate Development of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

On April 20, 2020, the Company issued 125,000 common shares to a Senior Vice President of Business Development – Agriculture Division of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

On July 14, 2020, the Company issued 200,000 common shares to the Chief Operating Officer of the Company in exchange for services. The shares were valued at $399,360 based on OTC’s closing trade price on the date of the agreement.

 

On July 14, 2020, the Company issued 50,000 common shares to the Chief Financial Officer of the Company in exchange for services. The shares were valued at $63,500 based on OTC’s closing trade price on the date of the agreement.

 

On July 14, 2020, the Company issued 125,000 common shares to the Senior Vice President of Corporate Development of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

On July 14, 2020, the Company issued 125,000 common shares to a Senior Vice President of Business Development – Agriculture Division of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

On July 14, 2020, the Company issued in the aggregate 60,000 common shares to two independent consultants in exchange for services. The shares were valued at $48,300 in the aggregate, based on OTC’s closing trade price on the date of their respective agreements.

 

In issuing these shares, the Company relied on the exemptions afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder. 

 

On April 20, 2020, the Company issued 166,667 common shares to Triton Funds LP upon conversion of $50,000 debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

On May 8, 2020, the Company issued 214,286 common shares to Triton Funds LP upon conversion of $60,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

On May 23, 2020, the Company issued 178,571 common shares to Triton Funds LP upon conversion of $50,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

On June 8, 2020, the Company issued 153,846 common shares to Triton Funds LP upon conversion of $40,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

On June 23, 2020, the Company issued 200,000 common shares to Triton Funds LP upon conversion of $50,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

On July 22, 2020, the Company issued 321,576 common shares to Triton Funds LP upon conversion of $78,786 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

In issuing these shares the Company relied on the exemptions afforded by Section 3(a)(9) of the Securities Act of 1933, as amended, as well as Section 4(a)(2) of the Securities Act of 1933, as amended.

 

 
14

Table of Contents

  

Other Stockholder Matters

 

None.

 

Item 6. Selected Financial Data

 

Not applicable to smaller reporting companies.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

 

The independent auditors’ report on our financial statements for the years ended July 31, 2020 and 2019 includes a “going concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Management’s plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 1 to the consolidated financial statements filed herein.

 

While our financial statements are presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time, our auditors have raised a substantial doubt about our ability to continue as a going concern.

 

Results of Operations

 

Revenues

 

We are currently in the product growing and production stages and anticipate producing revenue in the next six months. We have recognized $162,374 in revenue for the year ended July 31, 2020 from license fees pursuant to a license agreement for the right to use the premises at the Potrero Ranch Property for temporary storage of construction equipment. The Company plans to continue to seek other additional similar license agreements or sub-leases of our properties.

 

Expenses

 

Operating expenses for the year ended July 31, 2020 increased to $6,685,397 compared to $1,818,511 for the year ended July 31, 2019. These expenses consisted of consulting fees, business development costs, inventory impairment, supplies, wages and general operating expenses incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports as follows: 

 

 

 

Year Ended

 

 

 

 

 

 

July 31,
2020

 

 

July 31,
2019

 

 

Change

 

Expenses:

 

 

 

 

 

 

 

 

 

Consulting Fees

 

$ 725,136

 

 

$ 152,172

 

 

$ 572,964

 

Business Development Costs

 

 

2,833,504

 

 

 

1,595,036

 

 

 

1,238,468

 

Supplies

 

 

1,150,674

 

 

 

-

 

 

 

1,150,674

 

Subcontracts

 

 

138,699

 

 

 

-

 

 

 

138,699

 

Payroll Expenses

 

 

832,110

 

 

 

-

 

 

 

832,110

 

General and Administrative

 

 

620,748

 

 

 

71,303

 

 

 

549,445

 

Inventory impairment expense

 

 

306,450

 

 

 

-

 

 

 

306,450

 

Depreciation

 

 

78,076

 

 

 

-

 

 

 

78,076

 

Total

 

$ 6,685,397

 

 

$ 1,818,511

 

 

$ 4,866,886

 

 

This increase is primarily due to a material increase in business development costs but was also due to increases in consulting fees, supplies, subcontracts, payroll expenses, and general and administrative costs, all of which resulted from our commencement of cultivation operation

 

Other income (expenses)

 

We incurred a total of $1,204,222 in interest expenses due to debt financing during the year ended July 31, 2020, which is an increase from $25,383 for the same period in 2019. The debt financing costs include $610,523 in interest expense and $593,699 in debt discount costs.

 

Net Loss

 

We incurred net losses of $7,728,245 and $1,843,894 for the years ended July 31, 2020 and 2019, respectively. These losses were the result of the revenues and expenses described above.

 

 
15

Table of Contents

  

Our auditors have issued a going concern opinion as at July 31, 2020. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have generated minimal revenue. There is no assurance we will ever generate significant revenue. The following table provides selected financial data about our company for the years ended July 31, 2020 and 2019.

 

Balance Sheet Data:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Cash

 

$ 40,538

 

 

$ 3,253

 

Deposits

 

$ -

 

 

$ 100,000

 

Inventory

 

$ -

 

 

$ 306,50

 

Fixed assets, net

 

$ 4,727,464

 

 

$ 145,138

 

Total assets

 

$ 4,768,002

 

 

$ 554,841

 

Total liabilities

 

$ 9,200,522

 

 

$ 1,194,836

 

Shareholders’ deficit

 

$ (4,432,520 )

 

$ (639,995 )

 

Liquidity and Capital Resources

 

Our cash balance at July 31, 2020 was $40,538 (2019 - $3,253) with current liabilities of $4,582,390 (2019 - $1,194,836).

 

Our current cash balance will be unable to sustain operations for the next twelve months. We will be forced to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan.

  

As of July 31, 2020, our current assets were $40,538, comprised of cash. This is a decrease in current assets from $309,703 as of July 31, 2019. Our working capital deficit as of July 31, 2020 was $4,541,852, compared to a working capital deficit of $885,133 as of July 31, 2019.

 

Working Capital

 

 

 

July 31,

2020

$

 

 

July 31,

2019

$

 

 

 

 

 

 

 

 

Current Assets

 

 

40,538

 

 

 

309,703

 

Current Liabilities

 

 

4,582,390

 

 

 

1,194,836

 

Working Capital (Deficit)

 

 

(4,541,852 )

 

 

(885,133 )

 

During the year ended July 31, 2020, we used $2,381,837 of cash for operating activities compared to generating $556,178 for the year ended July 31, 2019.

 

During the year ended July 31, 2020, we used $218,586 of cash for investing activities compared to $245,138 for the year ended July 31, 2019.

 

During the year ended July 31, 2020, we generated $2,637,708 of cash from financing activities compared to $801,437 for the year ended July 31, 2019.

 

Cash Flows

 

 

 

Year

Ended

July 31,

2020

$

 

 

Year

Ended

July 31,

2019

$

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(2,381,837 )

 

 

(556,178 )

Net cash used in investing activities

 

 

(218,586 )

 

 

(245,138 )

Net cash provided by financing activities

 

 

2,637,708

 

 

 

801,437

 

Net change in cash

 

 

37,285

 

 

 

3,121

 

 

Our current cash balance will be unable to sustain operations for the next twelve months. We will be forced to raise additional funds by issuing new debt or equity securities or otherwise. We have received approximately $300,000 since August 1, 2020, from related parties. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan.

 

 
16

Table of Contents

 

The future of our Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of acquisitions.

 

We estimate that our expenses over the next 12 months will be approximately $2,600,000, comprised of $2,400,000 in operating expenses and $200,000 in investing activities. These estimates may change significantly depending on the performance of our products in the marketplace and our ability to raise capital from shareholders or other sources.

 

We intend to meet our cash requirements for the next 12 months through a combination of debt financing and equity financing by way of private placements. We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any private placement financings on terms that will be acceptable to us. We may not raise sufficient funds to fully carry out our business plan.

 

Effective December 19, 2019, we entered into a securities purchase agreement dated as of December 19, 2019 (the “SPA”) with Triton Funds, LP, an accredited investor (the “Buyer”), pursuant to which the Company issued and sold to the Buyer (i) a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000. The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.

 

On December 31, 2019, Triton paid an initial purchase price of $100,000 at the initial closing. The Company received net proceeds of $85,000 after paying fees of $15,000. On February 20, 2020, Triton paid the purchase price balance of $500,000. During the year ended July 31, 2020, the Company made a cash payment of $250,000 on the debt and Triton converted $328,786 of the debt into 1,234,946 shares of common stock pursuant to the terms of the agreement.

 

Concurrently therewith, we entered into a registration rights agreement with the Buyer, pursuant to which we agreed to file a registration statement with the SEC for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant and to have the registration statement declared effective by the SEC at the earliest possible date. The registration was declared effective by the SEC on February 11, 2020. The Buyer paid the purchase balance, and the Note and Warrant fully vested, on February 20, 2020.

 

On March 31, 2020, we and Triton entered into a Modification Agreement, pursuant to which (i) we paid $250,000 of the principal amount of the Note, bringing the principal balance of the Note to $500,000, (ii) the maturity date of the Note was extended to August 20, 2020, (iii) the conversion price of the Note was established as 75% of the lowest trading price of our common stock during the 30 trading days prior to conversion, and (iv) the minimum volume weighted price requirement of the Note was deleted. On August 19, 2020, the Company paid the remaining principal and accrued and unpaid interest in the aggregate of $200,000 and as of that date the note balance is $-0-.

 

On April 30, 2020, we received loan proceeds in the amount of $444,850 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. We intend to use the proceeds for purposes consistent with the PPP. While we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of the loan, we cannot assure you that we will not take actions that could cause us to be ineligible for forgiveness of the loan, in whole or in part.

 

We may rely on equity sales of our common stock in order to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

 

Since August 1, 2020, the Company has entered into the following agreements to address the cash needs of the Company:

 

The Company entered into an Equity Financing Agreement (the “Financing Agreement”) dated as of September 13, 2020 with GHS Investments, LLC (“GHS”) for an equity line. Although we are not required to sell shares under the Financing Agreement, the Financing Agreement gives us the option to sell to GHS up to $25,000,000 worth of our common stock, in increments, over the period ending on the earlier of (i) the date GHS has purchased an aggregate of $25,000,000 of our common stock pursuant to the Financing Agreement, or (ii) the date that the registration statement for the registration of the secondary offering and resale of the shares to be acquired by GHS pursuant to the Financing Agreement is no longer in effect (the “Open Period”). Concurrently with the execution of the Financing Agreement, the Company issued to GHS 150,857 restricted shares of its Common stock (“Commitment Shares”) to offset transaction costs. The Commitment Shares are deemed earned upon the execution of the Financing Agreement.

 

 
17

Table of Contents

  

We will sell shares of our common stock to GHS at a price equal to 100% of the lowest closing price of our common stock during the ten (10) consecutive trading day period ending on the date on which we deliver a put notice to GHS (the “Market Price”), and we will be obligated to simultaneously deliver the number of shares equal to120% of the put notice amount based on the Market Price. In addition, the Financing Agreement (i) imposes an ownership limitation on GHS of 4.99% (i.e., GHS has no obligation to purchase shares if it beneficially owns more than 4.99% of our common stock), (ii) requires a minimum of ten (10) trading days between put notices, and (iii) prohibits any single Put Amount from exceeding $500,000.

 

Concurrently therewith, we entered into a registration rights agreement with GHS, pursuant to which we agreed to file a registration statement with the SEC for the registration of the secondary offering and resale of the shares to be acquired by GHS pursuant to the Financing Agreement and the 150,857 Commitment Shares and to have the registration statement declared effective by the SEC at the earliest possible date. The registration statement was declared effective by the SEC on September 21, 2020.

 

On September 18, 2020 (the “Effective Date”), the Company entered into a Placement Agent and Advisory Services Agreement (the “Placement Agreement”) with Boustead Securities, LLC (“BSL”), an investment banking firm that advises clients on mergers and acquisitions, capital raises, and restructuring assignments in a wide array of industries and circumstances.

 

The initial term of this Agreement shall be exclusive for six (6) months from the Company’s delivery of an offering memorandum to BSL (the “Initial Term”). After the Initial Term, the term of the Placement Agreement will automatically be extended for additional successive one (1) year periods unless either party provides written notice to the other party of its intent not to so extend the term at least thirty (30) days before the expiration of the then current term. Under the terms of the Placement Agreement, the Company has agreed to issue to BSL an advisory fee of two hundred fifty thousand (250,000) common stock shares with an issuance date of the Effective Date.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. Our Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our Company may differ materially and adversely from our Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.

 

Inventory

 

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary. During the year ended July 31, 2020, inventory of $306,450 was fully impaired due to unfavorable weather conditions. In the early growing stages, the plants were severely damaged by a sand storm and could not be salvaged.

 

Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10- 15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

 

 
18

Table of Contents

 

Related Party Transactions

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

  

Foreign Currency Translation

 

The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

 
19

Table of Contents

  

Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of July 31, 2020, and 2019, the Company does not have any potentially dilutive shares.

 

Comprehensive Loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.

    

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Off-Balance Sheet Arrangements

 

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 expenditures or capital resources that is material to investors.

 

 
20

Table of Contents

  

Item 8. Financial Statements and Supplementary Data

 

GREEN HYGIENICS HOLDINGS INC.

Financial Statements

July 31, 2020

(Expressed in U.S. dollars)

 

 

Index

 

 

 

 

Report of Independent Registered Public Accounting Firm

F-2

 

Consolidated Balance Sheets

F-3

 

Consolidated Statements of Operations

F-4

 

Consolidated Statements of Stockholders’ Deficit

F-6

 

Consolidated Statements of Cash Flows

F-5

 

Notes to the Consolidated Financial Statements

F-7

 

  

 
F-1

Table of Contents

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Green Hygienics Holdings Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of Green Hygienics Holdings Inc. (the Company) as of July 31, 2020 and 2019 and the related consolidated statements of operations, stockholders’ deficit, and cash flows each year for the two- year period ending July 31, 2020, 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 July 31, 2020 and 2019, and the results of its operations and its cash flows, in conformity with accounting principles generally accepted in the United States of America.

 

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 audits 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.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ M&K CPAS, PLLC

 

 

We have served as the Company’s auditor since 2019.

Houston, TX

 

October 29, 2020

 

 
F-2

Table of Contents

  

GREEN HYGIENICS HOLDINGS INC.

Consolidated Balance Sheets

(Expressed in U.S. dollars)

 

 

 

July 31, 2020

 

 

July 31, 2019

 

 

 

$

 

 

$

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

 

40,538

 

 

 

767

 

Trust funds

 

 

-

 

 

 

2,486

 

Inventory

 

 

-

 

 

 

306,450

 

Total Current Assets

 

 

40,538

 

 

 

309,703

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

-

 

 

 

100,000

 

Fixed Assets (Note 3), net

 

 

4,727,464

 

 

 

145,138

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

4,768,002

 

 

 

554,841

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

1,019,027

 

 

 

201,178

 

Accounts payable – related parties

 

 

302,144

 

 

 

57,500

 

Accrued interest payable

 

 

158,416

 

 

 

-

 

Deferred revenue

 

 

15,973

 

 

 

-

 

Defaulted loan payable (Note 4(a))

 

 

24,989

 

 

 

155,250

 

SBA loan payable (Note 4(b))

 

 

444,850

 

 

 

-

 

Discounted convertible note payable (Note 4(c))

 

 

171,213

 

 

 

-

 

Current portion of long-term debt

 

 

40,472

 

 

 

-

 

Due to related parties (Note 8)

 

 

2,405,306

 

 

 

780,398

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

4,582,390

 

 

 

1,194,836

 

 

 

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

 

 

Agreement payable (less current portion) (Note 5)

 

 

108,132

 

 

 

-

 

Mortgage payable (Note 6)

 

 

2,750,000

 

 

 

-

 

Second mortgage payable (Note 7)

 

 

1,760,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total Long-Term Liabilities

 

 

4,618,132

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total Current and Long-Term Liabilities

 

 

9,200,522

 

 

 

1,194,836

 

 

 

 

 

 

 

 

 

 

Nature of operations and continuance of business (Notes 1 and 2)

 

 

 

 

 

 

 

 

Commitments (Note 10)

Income taxes (Note 12)

 

 

 

 

 

 

 

 

Subsequent events (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholder’s Deficit

 

 

 

 

 

 

 

 

Common stock, 375,000,000 shares authorized, $0.001 par value

 

 

 

 

 

 

 

 

39,577,781 and 36,657,835 shares issued and outstanding respectively

 

 

39,578

 

 

 

36,658

 

Stock payable

 

 

192,000

 

 

 

-

 

Additional paid-in capital

 

 

45,830,289

 

 

 

42,089,489

 

Deficit

 

 

(50,494,387 )

 

 

(42,766,142 )

Total Stockholder’s Deficit

 

 

(4,432,520 )

 

 

(639,995 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholder’s Deficit

 

 

4,768,002

 

 

 

554,841

 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 
F-3

Table of Contents

  

GREEN HYGIENICS HOLDINGS INC.

Consolidated Statements of Operations

(Expressed in U.S. dollars)

  

 

 

Year Ended

July 31, 2020

 

 

Year Ended

July 31, 2019

 

 

 

 

 

 

 

 

Rental Revenue

 

 

161,374

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Consulting and business development

 

 

3,558,640

 

 

 

1,747,208

 

Supplies

 

 

1,150,674

 

 

 

-

 

Payroll and subcontractor expenses

 

 

970,809

 

 

 

-

 

General and administrative

 

 

1,005,274

 

 

 

71,303

 

 

 

 

 

 

 

 

 

 

Total Expenses

 

 

6,685,397

 

 

 

1,818,511

 

 

 

 

 

 

 

 

 

 

Loss Before Other Expenses

 

 

(6,524,023 )

 

 

(1,818,511 )

 

 

 

 

 

 

 

 

 

Other Expenses

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,204,222 )

 

 

(25,383 )

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(7,728,245 )

 

 

(1,843,894 )

 

 

 

 

 

 

 

 

 

Net Loss Per Share, Basic and Diluted

 

 

(0.20 )

 

 

(0.05 )

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding

 

 

37,773,491

 

 

 

35,203,862

 

  

(The accompanying notes are an integral part of these consolidated financial statements)

 

 
F-4

Table of Contents

  

GREEN HYGIENICS HOLDINGS INC.

Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

 

 

 

Year Ended

July 31, 2020

 

 

Year Ended

July 31, 2019

 

 

 

$

 

 

$

 

Operating Activities

 

 

 

 

 

 

Net loss

 

 

(7,728,245 )

 

 

(1,843,894 )

Imputed interest

 

 

154,074

 

 

 

22,009

 

Inventory impairment

 

 

306,450

 

 

 

-

 

Depreciation expense

 

 

78,076

 

 

 

-

 

Amortization of discounts

 

 

593,699

 

 

 

-

 

Share based compensation

 

 

3,024,160

 

 

 

1,522,500

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

-

 

 

 

460

 

Accrued interest payable

 

 

157,906

 

 

 

510

 

Accounts payable and accrued liabilities

 

 

771,426

 

 

 

306,450

 

Accounts payable – related parties

 

 

244,644

 

 

 

51,687

 

Deferred revenue

 

 

15,973

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net Cash Used In Operating Activities

 

 

(2,381,837 )

 

 

(556,178 )

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

 

Deposit on acquisition of property

 

 

-

 

 

 

(100,000 )

Cash paid for purchase of fixed assets

 

 

(218,586 )

 

 

(145,138 )

Net Cash Provided by (Used in) Investing Activities

 

 

(218,586 )

 

 

(245,138 )

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

Proceeds from Defaulted Note Payable

 

 

-

 

 

 

155,250

 

Principle payments on Defaulted Loan Payable

 

 

(130,261 )

 

 

-

 

Proceeds from Discounted Note Payable

 

 

585,000

 

 

 

 

 

Payments on Discounted Note Payable

 

 

(250,000 )

 

 

-

 

Proceeds from Note Payable

 

 

397,638

 

 

 

 

 

Proceeds from SBA Loan Payable

 

 

444,850

 

 

 

-

 

Principle payments on Agreement Payable

 

 

(34,427 )

 

 

-

 

Advances from related parties

 

 

1,624,908

 

 

 

646,187

 

Net Cash Provided by Financing Activities

 

 

2,637,708

 

 

 

801,437

 

 

 

 

 

 

 

 

 

 

Increase in Cash

 

 

37,285

 

 

 

3,121

 

 

 

 

 

 

 

 

 

 

Cash and trust funds, Beginning of Year

 

 

3,253

 

 

 

132

 

 

 

 

 

 

 

 

 

 

Cash and trust funds, End of Year

 

 

40,538

 

 

 

3,253

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures:

 

 

 

 

 

 

 

 

Interest paid

 

 

341,845

 

 

 

 

Non-Cash Transactions

 

 

 

 

 

 

 

 

Equipment financed through debt

 

 

183,031

 

 

 

-

 

Land acquired through debt

 

 

4,112,362

 

 

 

-

 

Deposit on acquisition of property

 

 

100,000

 

 

 

-

 

Shares issued for stock payable

 

 

1,100,000

 

 

 

 

 

Shares issued for conversion of debt

 

 

328,786

 

 

 

-

 

Equipment purchased on accounts payable

 

 

46,423

 

 

 

-

 

Discount on warrants

 

 

428,700

 

 

 

-

 

 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 
F-5

Table of Contents

  

GREEN HYGIENICS HOLDINGS INC.

Consolidated Statements of Stockholders’ Deficit

(Expressed in U.S. dollars) 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Stock

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Payable

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

$

 

 

$

 

 

 

 

 

$

 

 

$

 

Balance, July 31, 2018

 

 

34,707,835

 

 

 

34,708

 

 

 

40,544,980

 

 

 

-

 

 

 

(40,922,248 )

 

 

(342,560 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest

 

 

 

 

 

 

 

 

 

 

22,009

 

 

 

 

 

 

 

 

 

 

 

22,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

1,950,000

 

 

 

1,950

 

 

 

1,522,500

 

 

 

 

 

 

 

 

 

 

 

1,522,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,843,894 )

 

 

(1,843,894 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 31, 2019

 

 

36,657,835

 

 

 

36,658

 

 

 

42,089,489

 

 

 

-

 

 

 

(42,766,142 )

 

 

(639,995 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest

 

 

 

 

 

 

 

 

 

 

154,074

 

 

 

 

 

 

 

 

 

 

 

154,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount on warrants

 

 

 

 

 

 

 

 

 

 

428,700

 

 

 

 

 

 

 

 

 

 

 

428,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued and to be issued for services

 

 

1,685,000

 

 

 

1,685

 

 

 

2,830,475

 

 

 

192,000

 

 

 

 

 

 

 

3,024,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for debt conversion

 

 

1,234,946

 

 

 

1,235

 

 

 

327,551

 

 

 

 

 

 

 

 

 

 

 

328,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,728,245 )

 

 

(7,728,245 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 31, 2020

 

 

39,577,781

 

 

 

39,578

 

 

 

45,830,289

 

 

 

192,000

 

 

 

(50,494,387 )

 

 

(4,432,520 )

 

(The accompanying notes are an integral part of these consolidated financial statements)

  

 
F-6

Table of Contents

 

GREEN HYGIENICS HOLDINGS INC.

Notes to the Consolidated Financial Statements

Years Ended July 31, 2020 and 2019

(Expressed in U.S. dollars)

  

1. Nature of Operations and Continuance of Business

 

Green Hygienics Holdings Inc. (the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources, Inc. On June 30, 2010, the name was changed to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.

 

The Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”). The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC) making it an ordinary agricultural commodity.

 

The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products; creating trusted global consumer brands; developing valuable IP; and growing the Company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.

  

Going Concern

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated revenues of $161,374 since 2013. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As of July 31, 2020, the Company has a working capital deficiency of $4,541,852 and has an accumulated deficit of $50,494,387 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 
F-7

Table of Contents

  

2. Significant Accounting Policies

 

(a) Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.

 

(b) Principles of Consolidation

 

These financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are all entities (including structured entities) which the Company controls. For accounting purposes, control is established by an investor when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All inter-company balances and transactions are eliminated.

 

(c) Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

(d) Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.

 

(e) Inventory

 

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary. In July 2020, the Company planted its first large scale hemp crops for cultivation. The planting covers approximately 120 acres of land and three greenhouses. During the fourth quarter of 2020, the Company purchased additional seeds and nutrients to plant in its greenhouses to be later transferred into the fields. The company determined to recognize these costs as expenses and not record as inventory as of the year ended July 31, 2020 due to our unfavorable outcome from our initial planting. These costs included approximately $105,000 for seeds and nutrients and $195,000 on labor to prepare the field and plant seeds. The Company anticipates harvesting and selling these crops by the end of 2020. The Company had previously planted a smaller crop during the year ended July 31, 2019, During the year ended July 31, 2020, the 2019 crop with an inventory value of $306,450 was fully impaired due to unfavorable weather conditions. In the early growing stages, the plants were severely damaged by a sand storm and could not be salvaged.

 

(f) Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

 

(g) Related Party Transactions

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

 

(h) Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

 
F-8

Table of Contents

  

2. Significant Accounting Policies (continued)

 

(i) Foreign Currency Translation

 

The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

(j) Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

(k) Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

(l) Revenue and Deferred Revenue

 

Pursuant to ASC 606, Revenue from contracts with customers. As of the date of this report, the Company has not recognized any revenue related to the hemp production business. The only revenue recognized to date is the land use rental income from San Diego Gas and Electric Company in the amount of $161,374. The term of the rental agreement is in effect until December 2020 with a monthly payment of $17,600. As of July 31, 2020, the Company has recorded deferred revenue of $15,973, representing a portion of the payment received in July 2020, that pertains to August 2020 rental income.

 

(m) Leases

 

Pursuant to ASC 842, transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. As of the date of this report, the Company has no material transactions to report.

 

 
F-9

Table of Contents

  

2. Significant Accounting Policies (continued)

 

(n) Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of July 31, 2020, the Company does not have any potentially dilutive shares.

 

(o) Comprehensive Loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.

 

(p) Recent Accounting Pronouncements

 

In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. During the year ended July 31, 2020 the Company assessed the impact this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements.

 

3. Fixed Assets

 

Fixed assets are recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.

 

Fixed assets consist of the following:

 

 

 

Useful Life

 

Balance at

July 31,

2019

$

 

 

Additions

$

 

 

Accumulated Depreciation

$

 

 

Balance at

July 31,

2020

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production equipment

 

5 years

 

 

46,379

 

 

 

313,530

 

 

 

(63,728 )

 

 

296,181

 

Furniture and office equipment

 

5 years

 

 

8,102

 

 

 

-

 

 

 

(1,623 )

 

 

6,479

 

Buildings and improvements

 

15 years

 

 

90,657

 

 

 

134,510

 

 

 

(12,725 )

 

 

212,442

 

Land

 

 

 

 

-

 

 

 

4,212,362

 

 

 

-

 

 

 

4,212,362

 

 

 

 

 

 

145,138

 

 

 

4,660,402

 

 

 

(78,076 )

 

 

4,727,464

 

 

Fixed asset costs are being depreciated using the straight-line method based on the useful life of the asset. Depreciation expense for the year ended was July 31, 2020, was $78,076 and there was no depreciation expense for the year ended July 31, 2019, due to the immateriality as the assets were acquired near year end.

 

On August 26, 2019, the Company completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The property includes over 400,000 square feet of outside buildings which are currently being converted to greenhouses. The Company is utilizing the land and buildings for industrial hemp for CBD cultivation. On August 23, 2019, the Company entered into an agreement payable with the Vendor of the Property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024.

 

 
F-10

Table of Contents

 

On August 23, 2019, the Company entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024.

 

4. Loans Payable

 

 

(a)

As of July 31, 2020, the Company owes $24,989 (2019 - $155,250) plus accrued interest of $931 (2019 - $510) to a non-related party, which bears interest at the rate of 10% per annum, is unsecured and was due and payable on or before December 19, 2019. This loan payable is in default, and the Company is currently in negotiations to extend the maturity date.

 

 

 

 

(b)

As of July 31, 2020, the Company owes $444,850 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

 

 

 

 

(c)

As of July 31, 2020, the Company owes $171,213 in principal and $28,787 on accrued and unpaid interest (2019 - $-0-) to a non-related party. On December 19, 2019, the Company entered into an securities purchase agreement, which was amended on January 8, 2020 (collectively, the “SPA”) with Triton Funds, LP, an accredited investor (“Triton”), pursuant to which the Company issued and sold to Triton (i) a discounted convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000. If not exercised, the Warrant will expire at 5:00 pm EST on December 31, 2021. The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.

  

On December 31, 2019, Triton paid an initial purchase price of $100,000 at the initial closing. The Company received net proceeds of $85,000 after paying fees of $15,000. On February 20, 2020, Triton paid the purchase price balance of $500,000. The original issue discount on the Note is a total of $150,000. On March 31, 2020, the Company and Triton entered into a Modification Agreement, pursuant to which (i) the Company paid $250,000 of the principal amount of the Note, bringing the principal balance of the Note on that date to $500,000, (ii) the maturity date of the Note was extended to August 20, 2020, (iii) the conversion price of the Note was established as 75% of the lowest trading price of our common stock during the 30 trading days prior to conversion, and (iv) the minimum volume weighted price requirement of the Note was deleted. During the year ended July 31, 2020, in addition to the $250,000 paid on March 31, 2020, Triton converted $328,786 of the debt into 1,234,946 shares of common stock pursuant to the terms of the Modification Agreement. During the year ended July 31, 2020, the Company recorded amortization expense of note discounts of $164,999. On August 19, 2020, the Company paid the remaining principal and accrued and unpaid interest in the aggregate of $200,000 and as of that date the note balance is $-0-.

 

The Warrant was valued using a Black Scholes model which created a discount of the full value of cash received, bringing the full discount on the note to $428,700, which is to be amortized over the term of the Note. During the year ended July 31, 2020, $428,700 of the discount was amortized.

 

5. Agreement Payable

 

As of July 31, 2020, the Company owes $148,604 (2019 - $nil) to a non-related party and requires monthly payments of $4,290 including interest at the rate of 5.66% per annum for a period of 48 months commencing November 1, 2019. The loan is secured by a collateral charge on production equipment. Of the amount owed, $40,472 is included in current liabilities and $108,132 is included in long-term liabilities on the consolidated balance sheet resented herein.

 

6. Mortgage Payable

 

As of July 31, 2020, the Company owes $2,750,000 (2019 - $nil) plus accrued interest payable of $41,250 (2019 - $nil) to a non-related party, with monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024, and is included in long-term liabilities on the consolidated balance sheet resented herein.

  

 
F-11

Table of Contents

 

7. Second Mortgage Payable

 

As of July 31, 2020, the Company owes $1,760,000 (2019 - $nil) plus accrued interest payable of $66,000 (2019 - $nil) to a non-related party, with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024, and the debt is included in long-term liabilities on the consolidated balance sheet resented herein.

 

8. Related Party Transactions

 

Controlling Shareholder

 

As of July 31, 2020, Alita Capital, Inc., together with its affiliates (collectively, “Alita”), is the controlling shareholder of the Company’s common stock, as Alita owns approximately 52.5% of our issued and outstanding common stock, Accordingly, Alita has the ability to exercise significant control over our affairs, including the election of directors and most actions requiring the approval of shareholders, including the approval of any potential merger or sale of all or substantially all assets or segments of the Company, or the Company itself. Alita is controlled by Mr. Ron Loudoun, the Company’s CEO.

 

Alita is subject to certain restrictions under federal securities laws on sales of its shares as an affiliate. Should Alita sell or otherwise dispose of all or a portion of its position in the Company, a change in ownership and control of the Company could occur. A change in ownership, as defined by Internal Revenue Code Section 382, could reduce the availability of the Company’s net operating losses (“NOLs”) for federal and state income tax purposes. Furthermore, a change of control could trigger the change of control provisions in a number of our material agreements.

 

As of July 31, 2020, the Company owes $2,348,482 (July 31, 2019 - $696,074) to Alita. The debt includes funds advanced to the Company and amounts paid directly to vendors, is non-interest bearing, unsecured, and due on demand.

 

Other related party transactions include the following:

 

(a) As of July 31, 2020, the Company owes $56,824 (July 31, 2019 - $56,824) to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured, and is due on demand. As of July 31, 2020, accrued interest of $17,689 (July 31, 2019 - $14,825) has been included in amounts due to related parties.

  

(b) As of July 31, 2020, the Company incurred and owes $90,000 (July 31, 2019 - $nil) to the CEO of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in related party accounts payable.

 

(c) As of July 31, 2020, the Company incurred $30,000 (2019- $nil) in consulting fees to the CTO and as of July 31, 2020 owes $15,000 (July 31, 2019 - $nil) to the CTO of the Company for accrued and unpaid consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in related party accounts payable.

 

(d) During the year ended July 31, 2020, the Company incurred $4,250 (2019 - $nil) in consulting fees to the CFO of the Company. The amount was paid and there is no balance due the CFO.

 

(e) As of July 31, 2020, the Company owes $35,000 (July 31, 2019 - $27,500) to a former director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in related party accounts payable.

 

(f) As of July 31, 2020, the Company owes $67,500 (July 31, 2019 - $15,000) to the former CEO of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in related party accounts payable.

 

(g) As of July 31, 2020, the Company owes $67,500 (July 31, 2019 - $15,000) to the former President of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in related party accounts payable.

 

(h) As of July 31, 2020, the Company owes $27,144 (July 31, 2019 - $nil) to the former Chief Agricultural Operations Manager of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in related party accounts payable.

 

(i) Imputed interest of $154,074 for the year ended July 31, 2020 and $22,009 for the year ended July 31, 2019 has been recorded for the above related party debts.

 

9. Common Stock

 

Share Issuances

 

(a) On August 1, 2019, the Company issued 250,000 common shares to the CEO of the Company in exchange for services. The shares were valued at $370,000 based on OTC’s closing trade price on the date of the agreement.

 

(b) On August 1, 2019, the Company issued 50,000 common shares to the Chief Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued at $74,000 based on OTC’s closing trade price on the date of the agreement.

 

 
F-12

Table of Contents

 

(c) On August 1, 2019, the Company issued 200,000 common shares to the Chief Project Manager of the Company in exchange for consulting services. The shares were valued at $296,000 based on OTC’s closing trade price on the date of the agreement.

 

(d) On August 1, 2019, the Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued at $37,000 based on OTC’s closing trade price on the date of the agreement.

 

(e) On August 1, 2019, the Company issued 250,000 common shares to a non-related party in exchange for consulting services. The shares were valued at $370,000 based on OTC’s closing trade price on the date of the agreement.

 

(f) On August 1, 2019, the Company issued 50,000 common shares to Triton Funds LLC in exchange for consulting services. The shares were valued at $74,000 based on OTC’s closing trade price on the date of the agreement.

 

(g) On April 20, 2020, the Company issued 50,000 common shares to an Independent Director of the Company in exchange for consulting services. The shares were valued at $100,000 based on OTC’s closing trade price on the date of the agreement.

 

(h) On April 20, 2020, the Company issued 125,000 common shares to the Senior Vice President of Corporate Development of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

(i) On April 20, 2020, the Company issued 125,000 common shares to a Senior Vice President of Business Development – Agriculture Division of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

(j) On April 20, 2020, the Company issued 166,667 common shares to Triton Funds LP upon conversion of $50,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

(k) On May 8, 2020, the Company issued 214,286 common shares to Triton Funds LP upon conversion of $60,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

(l) On May 23, 2020, the Company issued 178,571 common shares to Triton Funds LP upon conversion of $50,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

(m) On June 8, 2020, the Company issued 153,846 common shares to Triton Funds LP upon conversion of $40,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

(n) On June 23, 2020, the Company issued 200,000 common shares to Triton Funds LP upon conversion of $50,000 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

(o) On July 14, 2020, the Company issued 200,000 common shares to the Chief Operating Officer of the Company in exchange for services. The shares were valued at $399,360 based on OTC’s closing trade price on the date of the agreement.

 

(p) On July 14, 2020, the Company issued 50,000 common shares to the Chief Financial Officer of the Company in exchange for services. The shares were valued at $63,500 based on OTC’s closing trade price on the date of the agreement.

 

(q) On July 14, 2020, the Company issued 125,000 common shares to the Senior Vice President of Corporate Development of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

(r) On July 14, 2020, the Company issued 125,000 common shares to a Senior Vice President of Business Development – Agriculture Division of the Company in exchange for consulting services. The shares were valued at $250,000 based on OTC’s closing trade price on the date of the agreement.

 

(s) On July 14, 2020, the Company issued in the aggregate 60,000 common shares to two independent consultants in exchange for services. The shares were valued at $48,300 in the aggregate, based on OTC’s closing trade price on the date of their respective agreements.

 

(t) On July 22, 2020, the Company issued 321,576 common shares to Triton Funds LP upon conversion of $78,786 of debt. The shares were valued pursuant to the conversion terms of the convertible promissory note (see note 4(c)).

 

Stock Payable

 

On November 15, 2019, the Company agreed to issue 100,000 common shares to an Independent Director of the Company, William Creekmur, in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement. The Company issued 50,000 of the shares on April 20, 2020. The remaining 50,000 shares valued at $100,000 have not been issued and are included in Stock payable as of July 31, 2020.

 

On July 1, 2020, the Company agreed to issue 200,000 common shares to an Advisor to the Company in exchange for consulting services. The shares were valued at $92,000 based on OTC’s closing trade price on the date of the agreement.

 

 
F-13

Table of Contents

 

10. Commitments/Contingencies

 

(a) On September 1, 2018, the Company entered into a consulting agreement with the CTO, Jeff Palumbo, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years commencing August 1, 2018. The agreement can be extended to four years upon mutual agreement. Upon completion of a minimum $1,000,000 financing, the Company will increase this payment to $5,000 per month. Upon completion of a minimum $5,000,000 financing or profitable operations, the Company will increase this payment to an amount mutually agreed upon that reflects the market rate for services provided by the CTO.

 

(b) On August 1, 2019, the Company entered into a consulting agreement with the CEO of the Company, Ron Loudoun, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of three years and pursuant to which, the Company issued the CEO 250,000 shares of common stock of the Company. Additionally, the Company agreed to issue an additional 250,000 shares of common stock per year for the remaining two years of the agreement.

  

(c) On August 1, 2019, the Company entered into a consulting agreement with the Chief Project Manager, Greg Stinson, whereby the Company agreed to pay a signing bonus of $15,000 and a consulting fee of $7,500 per month for a period of five years. Pursuant to the agreement, the Company also issued the Consultant 200,000 shares of common stock of the Company.

 

(d) On August 1, 2019, the Company entered into a consulting agreement with the Assistant Agricultural Operations Manager, Carol Snyder, whereby the Company agreed to pay a signing bonus of $4,000 and a consulting fee of $2,000 per month for a period of year. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement. Pursuant to the agreement, the Company also issued the Consultant 25,000 shares of common stock of the Company.

 

(e) On November 15, 2019, the Company agreed to issue 100,000 common shares to an Independent Director of the Company, William Creekmur, in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement. The Company issued 50,000 of the shares on April 20, 2020. The remaining 50,000 shares valued at $100,000 have not been issued and are included in Stock payable as of July 31, 2020.

 

(f) On February 13, 2020, the Company entered into a six-month (the “Initial Term”) consulting agreement with the CFO of the Company, Todd Mueller, whereby the Company agreed to pay a consulting fee of 100,000 shares, 50,000 shares would be delivered upon the execution of the agreement (certificated on July 14, 2020) and 50,000 delivered in six months based on the continuation of the agreement. Following the Initial Term, the Company and the Consultant may extend the Term for up to 5 years on similar terms and conditions by further agreement in writing to that effect. The Company may terminate this Agreement for any reason prior to the expiry of this Agreement with 30-day notice and full vesting of stock or stock options for the period of engagement. The Consultant may end this Agreement with 30 days written notice prior to the end of the term.

 

(g) On July 1, 2020, the Company agreed to issue 200,000 common shares to an Advisor to the Company in exchange for consulting services. The shares were valued at $92,000 based on OTC’s closing trade price on the date of the agreement.

 

There is currently no pending or threatened litigation.

 

11. Sales concentration

 

For the year ended July 31, 2020, 100% of our revenue is from the land use rental income from San Diego Gas and Electric Company in the amount of $161,374. The term of the rental agreement is in effect until December 2020 with a monthly payment of $17,600.

  

12. Income Taxes

 

The Company has net operating losses carried forward of $12,965,998 available to offset taxable income in future years which commence expiring in fiscal 2028.

 

The Company is subject to United States federal and state income taxes at an approximate rate of 26.42% (2019 – 26.42%). The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Income tax recovery at statutory rate

 

$ (1,622,931 )

 

$ (387,218 )

Change in enacted tax rates

 

 

-

 

 

 

-

 

Change in valuation allowance

 

 

1,622,931

 

 

 

387,218

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

$

 

 

$

 

 

 
F-14

Table of Contents

 

The significant components of deferred income tax assets and liabilities as at July 31, 2020 and 2019 are as follows:

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Net operating losses carried forward

 

$ 2,722,859

 

 

 

1,099,928

 

Valuation allowance

 

 

(2,722,859 )

 

 

(1,099,928 )

 

 

 

 

 

 

 

 

 

Net deferred income tax asset

 

 

 

 

 

 

 

The 2017 Act reduces the corporate tax rate from 34% to 21% for tax years beginning after December 31, 2017. For net operating losses arising after December 31, 2017, the 2017 Act limits a taxpayer’s ability to utilize net operating losses carryforwards to 80% of taxable income. In addition, net operating losses arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. Net operating losses generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation. The 2017 Act would generally eliminate the carryback of all net operating losses arising in a tax year ending after 2017 and instead would permit all such net operating losses to be carried forward indefinitely.

 

13. Subsequent Events

 

Effective August 1, 2020 (the “Effective Date”), the Company entered into an employment agreement (the “Agreement”) with Dr. Levan Darjania, PhD as the Company’s Chief Science Officer. Dr. Darjania is a seasoned and accomplished research and development (“R&D”) professional and program manager with over 26-years’ experience in biotechnology, pharmaceutical drug development (both industry and academia) and proven track record of success in developing and directing in-house and collaborative R&D programs, and forward-thinking strategic planning capabilities. Pursuant to the Agreement the Company has agreed to compensate Dr. Darjania an annual base salary of $250,000, and the issuance of 200,000 shares of common stock, of which 100,000 vested on the Effective Date and 100,000 vest six (6) months from the Effective Date.

 

On September 2, 2020, the Company issued 500,000 common shares to SRAX, Inc. (“SRAX”), in exchange for the right to use the SRAX Sequire platform.

 

The Company entered into an Equity Financing Agreement (the “Financing Agreement”) dated as of September 13, 2020 with GHS Investments, LLC (“GHS”) for an equity line. Although the Company is not required to sell shares under the Financing Agreement, the Financing Agreement gives the Company the option to sell to GHS up to $25,000,000 worth of our common stock, in increments, over the period ending on the earlier of (i) the date GHS has purchased an aggregate of $25,000,000 of the Company’s common stock pursuant to the Financing Agreement, or (ii) the date that the registration statement for the registration of the secondary offering and resale of the shares to be acquired by GHS pursuant to the Financing Agreement is no longer in effect (the “Open Period”). Concurrently with the execution of the Financing Agreement, the Company issued to GHS 150,857 restricted shares of its Common stock (“Commitment Shares”) to offset transaction costs. The Commitment Shares are deemed earned upon the execution of the Financing Agreement.

 

The Company will sell shares of its common stock to GHS at a price equal to 100% of the lowest closing price of the Company’s common stock during the ten (10) consecutive trading day period ending on the date on which it delivers a put notice to GHS (the “Market Price”), and the Company will be obligated to simultaneously deliver the number of shares equal to120% of the put notice amount based on the Market Price. In addition, the Financing Agreement (i) imposes an ownership limitation on GHS of 4.99% (i.e., GHS has no obligation to purchase shares if it beneficially owns more than 4.99% of our common stock), (ii) requires a minimum of ten (10) trading days between put notices, and (iii) prohibits any single Put Amount from exceeding $500,000.

 

 
F-15

Table of Contents

 

Concurrently therewith, the Company entered into a registration rights agreement with GHS, pursuant to which the Company agreed to file a registration statement with the SEC for the registration of the secondary offering and resale of the shares to be acquired by GHS pursuant to the Financing Agreement and the 150,857 Commitment Shares and to have the registration statement declared effective by the SEC at the earliest possible date. The registration statement was declared effective by the SEC on September 21, 2020.

 

On September 18, 2020 (the “Effective Date”), the Company entered into a Placement Agent and Advisory Services Agreement (the “Placement Agreement”) with Boustead Securities, LLC (“BSL”), an investment banking firm that advises clients on mergers and acquisitions, capital raises, and restructuring assignments in a wide array of industries and circumstances.

 

The initial term of this Agreement shall be exclusive for six (6) months from the Company’s delivery of an offering memorandum to BSL (the “Initial Term”). After the Initial Term, the term of the Placement Agreement will automatically be extended for additional successive one (1) year periods unless either party provides written notice to the other party of its intent not to so extend the term at least thirty (30) days before the expiration of the then current term. Under the terms of the Placement Agreement, the Company has agreed to issue to BSL an advisory fee of two hundred fifty thousand (250,000) common stock shares with an issuance date of the Effective Date.

 

On September 23, 2020, the Company issued 250,000 shares of common stock to the Company’s CEO, pursuant to his agreement dated August 1, 2019 (see Note 10(b)).

 

On September 23, 2020, the Company issued 200,000 shares of common stock pursuant to a consulting agreement dated July 1, 2020 (see Note 10(g)).

 

On September 23, 2020, the Company issued 50,000 shares to the Company’s CFO, pursuant to his consulting agreement dated February 13, 2020 (see Note 10(f)).

 

On September 23, 2020, the Company issued 140,000 shares of common stock to an independent third party in exchange for production equipment.

 

On September 23, 2020, the Company issued 50,000 shares of common stock in the aggregate to two independent third parties in exchange for production equipment.

 

On September 23, 2020, the Company issued in the aggregate 750,000 shares of common stock to eight (8) consultants for services.

  

 
F-16

Table of Contents

  

Item 9. Changes in and Disagreements with Accountants on Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of July 31, 2020 using the criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of July 31, 2020, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

 

 

1.

We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently, the Board of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities.

 

 

2.

We did not maintain appropriate cash controls – As of July 31, 2020, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company’s bank accounts.

 

 

3.

We did not implement appropriate information technology controls – As at July 31, 2019, the Company retains copies of all financial data and material agreements; however, there is no formal procedure or evidence of normal backup of the Company’s data or off-site storage of data in the event of theft, misplacement, or loss due to unmitigated factors.

 

 

4.

The Company has no formal control process related to the identification and approval of related party transactions.

 

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

 

As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of July 31, 2020 based on criteria established in Internal Control—Integrated Framework issued by COSO.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of July 31, 2020, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

 
21

Table of Contents

 

PART III

 

Item 10. Directors, Executive Officers and Control Persons

 

The names, ages and titles of our executive officers and director are as follows:

  

Name

 

Age

 

Position

Ronald Loudoun

 

57

 

Chief Executive Officer, President and director, June 1, 2017

Todd Mueller

 

59

 

Chief Financial Officer, February 15, 2020

Jeff Palumbo

 

39

 

Chief Technology Officer, August 30, 2019

Kyle MacKinnon

 

40

 

Chief Operating Officer, November 15, 2019

Jerry Halamuda

 

70

 

Senior Vice President, Agriculture Division, November 15, 2019

John Gildea

 

48

 

Senior Vice President, Corporate Development, November 15, 2019

  

Ronald Loudoun

President Chief Executive Officer and director

 

Mr. Loudoun has served as our President, Chief Executive Officer, Chief Financial Officer and director since June 1, 2017. Mr. Loudoun is a successful business strategist with more than 25 years of experience as a real estate agent and in business administration. For the seven years prior to this, Mr. Loudoun was a founder and director of Archer Cleantech Inc., a renewable energy project company based in Canada and pursuing projects abroad. The responsibilities included sourcing and identifying renewable project opportunities and negotiating related land leases and advancing the associated business development. Prior to this time, Mr. Loudoun was a licensed realtor historically and was involved in commercial property sales and development. In addition, from December 5, 2017 through January 30, 2018, for a period of fifty-five days, Mr. Loudoun served as an officer and director of Verde Science, Inc. Mr. Loudoun graduated with a Diploma of Administrative Management from BCIT in 1983 with an elective in Real Estate. He possesses an excellent background in new business development, multi-site operations, performance/quality improvement, administration and long-term planning. He has maintained a longstanding interest in both communicating the need for and sourcing new methods for conscious minded development and growth. Recognized as an astute and persuasive negotiator, Mr. Loudoun has a reputation for honesty and integrity and has the ability to successfully balance the risks of continual change and innovation through disciplined implementation. Capitalizing on his exceptional leadership qualities, out of the box thinking and real estate development expertise, Ron continues to develop innovative ideas that add significant value to any organization in which he is involved.

 

Todd Mueller

Chief Financial Officer

 

Mr. Mueller has served as our Chief Financial Officer since February 15, 2020. Prior to joining the Company, Mr. Mueller served as a fractional executive officer for his clientele for the past 16 years. During that time as a fractional executive officer, he accepted the Chief Financial Officer position with LifeMed Alaska, a medevac company held by two independent hospital systems from 2013 to 2015. LifeMed was previously a client of Mr. Mueller’s services. Prior to providing fractional services, Todd was Chief Financial Officer for USA Capital, LLC, a privately held equipment leasing company from 1998 to 2003. Mr. Mueller was the Corporate Controller for Asset Investors Corporation, a NYSE publicly held real estate investment trust from 1990 to 1997 and Director of Finance for Skyworld Airlines, a NASDAQ publicly held charter airline and travel club from 1987 to 1989. He worked for two nationally and internationally ranked CPA firms auditing both private and publicly held companies upon graduating from Wartburg College and earned a BA in Accounting and Business Management in 1983.

 

Jeff Palumbo

Chief Technology Officer

 

Mr. Palumbo has served as our Chief Technology Officer since August 30, 2018. Mr. Palumbo is an active entrepreneur with knowledge of technology and a passion for philanthropy which has led to his success in creating multiple platforms that empower publishers and merchants and engage consumers. For the past 20 years, he has extensive experience starting companies in the areas of entertainment, live streaming, augmented reality, virtual reality, development and Internet marketing. Mr. Palumbo is the founder of Y!RM/AMAZE, a celebrity fan engagement platform that leverages live streaming and augmented reality technologies to connect celebrities and fans together while also raising money for worthy causes. He has also developed platforms for several Fortune 1000 companies and continues to provide them with technology guidance. Mr. Palumbo is a mentor at a Top 10 U.S. technology incubator and another Virginia start-up community where he advises early-stage companies.

 

 
22

Table of Contents

 

Kyle MacKinnon

Chief Operating Officer

  

Mr. MacKinnon has served as our Chief Operating Officer since November 15, 2019. Bringing to the table a multi-faceted and in-depth understanding of the CBD Industry, including vast knowledge of cannabis processing, Kyle will assist the company in all facets of day to day business operations. Previously, as the Business Development Manager for Advanced Extraction, a leader in CO2 Supercritical Fluid extraction systems, Kyle built relationships with some of the largest Cannabis companies in the world and helped to guide the company through rapid growth and regulatory challenges in the technology and processing sectors of the Cannabis industry. Mr. MacKinnon has been a licensed realtor in Toronto and has managed a personal real estate portfolio with holdings in multiple Countries. He has also owned his own import business, Danbury Imports. Kyle is a graduate of St. Mary’s University in Halifax, Nova Scotia, Canada. He graduated with a Bachelor of Commerce Degree and was the recipient of the Entrepreneur of the Year Award.

 

Jerry Halamuda

Senior Vice President, Agriculture Division

 

Mr. Halamuda has served as our Senior Vice President, Agriculture Division, since November 15, 2019. Over his extensive career in the agri/horticulture space, Mr. Halamuda has founded, managed and operated multiple successful companies. The most prominent of these businesses was Color Spot Nurseries, which he founded and acted as CEO, COO and president over a span of 37 years. Color Spot operated over 6,000 acres in multiple states, including 20 million feet of greenhouses, and employed a staff of over 5,000, all of which led to a business with an annual turnover in excess of $300 million. Halamuda brings a wealth of industry and management experience; his knowledge and expertise at scaling businesses will be a key component as he leads the growth of GRYN’s Agriculture Division.

 

John Gildea

Senior Vice President, Corporate Development

 

Mr. Gildea has served as our Senior Vice President, Corporate Development, since November 15, 2019. Mr. Gildea has more than 20 years of experience in the public and private markets. His expertise includes structuring, negotiating and effecting private and public financings and mergers and acquisitions, as well as marketing, public and investor relations. Through the course of his career, Gildea established a trusted and extensive network of equity and capital partners, with whom he has maintained successful and proven relationships over the years, resulting in multiple uplistings to higher exchanges and capital raises.

 

Director Qualifications

 

We considered Mr. Loudoun’s prior experience as a successful business strategist and in real estate, including his prior experience with Archer Cleantech, Inc., other renewable project opportunities, as well as experience with other start-up businesses and real estate development as important factors in concluding that he was qualified to serve as one of our directors.

  

Term of Office

 

Our directors are appointed to hold office until the next annual meeting of our stockholders or until a successor is qualified and elected, or until he resigns or is removed in accordance with the provisions of the State of Nevada Statutes. Our officers are appointed by our Board of Directors and hold office until removed by the Board.

 

Family Relationships

 

None

 

Involvement in Certain Legal Proceedings

 

No director, executive officer, significant employee or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.

  

 
23

Table of Contents

 

Advisory Board

 

The Company has established an advisory board to advise and assist our management in pursuing the Company’s strategy to advance in the hemp industry. The advisory board consists of the following individuals:

 

Bipin Patel BSc MSc PhD MBA

 

Dr. Patel is a biotech pharma entrepreneur with over 20 years of experience and a track record for building value across early-stage drug discovery, development and commercialization. Based in Cambridge, U.K., and highly regarded for his work in international pharmaceutical business development, Dr. Patel has established an extensive global big-pharma network across the U.S., Europe, Japan and China. He specializes in surfacing and shaping opportunities, securing finance, and driving assets to conclusion. He has held senior roles including CEO, CSO, COO, strategic council and board of directors, and has driven various initiatives such as drug discovery, preclinical and clinical development in numerous fields within the biotech industry. Dr. Patel has a strong business and commercial acumen with an aptitude for deal making and partnering.

 

Edwin Stoughton

 

Mr. Stoughton has a 40-year history of proven success in sales, marketing, construction management, development and consulting to management groups. He is a skilled executive with extensive direct experience in team building, constructive conflict resolution, and consensus management, which helped him build highly successful construction and development companies. Stoughton is currently the vice president and a current principal of Demcon Concrete Contractors Inc.

 

David Racz

 

Mr. Racz has held global, senior-level positions with distinguished pharmaceutical companies including Pfizer, GlaxoSmithKline and Novartis. Mr. Racz began his pharmaceutical career at Pfizer Pharmaceuticals where he became Vice President of Sales and Human Resources. Mr. Racz managed the largest expansion in Pfizer’s sale force in history. Shortly thereafter, SmithKlineBeecham recruited Mr. Racz to manage over 4,000 employees in 20 countries throughout Asia, Latin America, Australia and South Africa in Sales, Marketing and Research and Development. Mr. Racz was also a key member of the team responsible for orchestrating the unparalleled transcontinental merger of SmithKline and Beecham. In 2002, Mr. Racz was recruited by Novartis Pharmaceuticals as Senior Vice President North America. In this capacity, he delivered strategy and resource allocation for an $8 billion health care company and oversaw 14,000 global employees in Pharmaceutical Operations, Global Oncology, Manufacturing and R&D. Mr. Racz was Senior Vice President for Mona Vie Inc. (“Mona Vie”), the fastest growing private company in the food and beverage industry incorporated in 2003 with annual sales in excess of $942 million and growth of over 100% per quarter for a three-year period. In addition, Mr. Racz has served on various boards of both private and public companies, in the pharmaceutical, consumer brands and CBD space. His primary areas of expertise reside in aligning business strategy with operational strategy, management systems, as well as merger and acquisition related activities. Mr. Racz also served as a Medical Service Corp Officer in United States Army, achieving the rank of Major and was awarded numerous times for service and merit. He earned his BS from Wayne State University and his MS from Troy University.

  

 
24

Table of Contents

  

Significant Employees

 

We have no significant employees other than our officers and/or directors. Our officers and directors have not been the subject of any order, judgment, or decree of any court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring, suspending or otherwise limiting them from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.

 

Our officers and directors have not been convicted in any criminal proceeding (excluding traffic violations) nor are they subject of any currently pending criminal proceeding.

 

We conduct our business through agreements with consultants and arms-length third parties. We pay our consultants usual and customary rates received by other third parties for performing similar consulting services.

 

Code of Ethics

 

Our board of directors adopted our code of ethical conduct that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe the adoption of our Code of Ethical Conduct is consistent with the requirements of the Sarbanes-Oxley Act of 2002.

 

Our Code of Ethical Conduct is designed to deter wrongdoing and to promote:

 

 

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

Full, fair, accurate, timely and understandable disclosure in reports and documents that we file or submit to the Securities & Exchange Commission and in other public communications made by us;

 

Compliance with applicable governmental laws, rules and regulations;

 

The prompt internal reporting to an appropriate person or persons identified in the code of violations of our Code of Ethical Conduct; and

 

Accountability for adherence to the Code.

 

Director Independence

 

None of the members of our Board of Directors qualifies as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our Board has not made a subjective determination as to each director that no relationships exist which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our Board of Directors made these determinations, our Board would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.

 

In performing the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the Company’s independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis; reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent auditors; reviews with the independent auditors and with the Company’s financial accounting personnel the adequacy and effectiveness of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company’s management and the independent auditors the results of the annual audit and the results of our quarterly financial statements.

 

Our board as a whole will consider executive officer compensation, and our entire board participates in the consideration of director compensation. Our board as a whole oversees our compensation policies, plans and programs, reviews and approves corporate performance goals and objectives relevant to the compensation of our executive officers, if any, and administers our equity incentive and stock option plans, if any.

 

Each of our directors participates in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated character and judgment.

 

 
25

Table of Contents

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, persons who beneficially own more than 10% of a registered class of the Company’s equity securities, and certain other persons to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC, and to furnish the Company with copies of the forms. Based solely on its review of the forms it received, or written representations from reporting persons, the Company believes that all of its directors, executive officers and greater than 10% beneficial owners complied with all such filing requirements during the fiscal year ended July 31, 2020.

 

Item 11. Executive Compensation

 

Management Compensation

 

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers for all services rendered in all capacities to us for the past two years ending July 31, 2020:

 

 

 

 

 

Annual Compensation

Long Term Compensation

 

Name

 

Title

 

Year

 

Salary ($)

 

 

Bonus

 

 

Other

Annual Compensation

 

 

Restricted

Stock

Awarded

 

 

Options/*

SARs (#)

 

 

LTIP

payouts ($)

 

 

All Other Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ron Loudoun

 

CEO

 

2020

 

$ 0

 

 

$ 0

 

 

$ 90,000

 

 

$ 0

 

 

$ 0

 

 

$ 0

 

 

$ 370,000

 

 

 

 

 

2019

 

$ 0

 

 

$ 0

 

 

$ 30,000

 

 

$ 0

 

 

$ 0

 

 

$ 0

 

 

$ 0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Todd Mueller

 

CFO

 

2020

 

$ 0

 

 

$ 0

 

 

$ 4,250

 

 

$ 0

 

 

$ 0

 

 

$ 0

 

 

$ 63,500

 

 

Employment Agreements

 

We have no employment agreement with Ronald Loudoun. However, on August 1, 2019, we entered into a consulting agreement with Mr. Loudoun to serve as President and Chief Executive Officer. The agreement is for an initial six month term, to be re-evaluated after six months, and provides for (i) an annual allocation of 250,000 options (priced at $0.50 per share with a term of three years) or common shares, and (ii) a monthly base fee of $7,500 per month during the term of the agreement, subject to adjustment on a quarterly basis by the Company and Mr. Loudoun. Mr. Loudoun is eligible to receive annual bonuses, in cash or in common shares, at the discretion of the board of directors. The agreement also provides for reimbursement for all reasonable travel and other out-of-pocket expenses incurred in connection with his services. The $7,500 per month is included in the Other Annual Compensation in the above table, The Company issued 250,000 shares which were valued at $1.48 per share ($370,000) based on the market price of the common stock on the date of the agreement and are included in the All Other Compensation in the above table.

 

We have no employment agreement with Todd Mueller. However, on February 13, 2020, the Company entered into a six-month (the “Initial Term”) consulting agreement with the CFO of the Company, Todd Mueller, whereby the Company agreed to pay a consulting fee of 100,000 shares, 50,000 shares would be delivered upon the execution of the agreement (certificated on July 14, 2020) and 50,000 delivered in six months based on the continuation of the agreement. Following the Initial Term, the Company and the Consultant may extend the Term for up to 5 years on similar terms and conditions by further agreement in writing to that effect. The Company may terminate this Agreement for any reason prior to the expiry of this Agreement with 30-day notice and full vesting of stock or stock options for the period of engagement. The Consultant may end this Agreement with 30 days written notice prior to the end of the term. Future allocations of shares will be determined by the compensation committee of the board of directors or, if none, the entire board of directors. In addition, Mr. Mueller is eligible to receive bonuses of at the discretion of the compensation committee of the board of directors or, if none, the entire board of directors. The agreement also provides for reimbursement for all reasonable travel and other out-of-pocket expenses incidental to his services, provided, however, that the Company has the right to pre-approve any expense that may reasonably be expected to exceed $1,000. The Company paid Mr. Mueller $4,250 during the year ended July 31, 2020 and is included in Other Annual Compensation in the above table. The Company valued the 50,000 shares of common stock at $63,500 based on OTC’s closing trade price on the date of the agreement and are included in the All Other Compensation in the above table.

  

There are no annuity, pension or retirement benefits proposed to be paid to the officer or director or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the company or any of its subsidiaries, if any.

 

 
26

Table of Contents

  

Item 12. Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth information as of October 29, 2020 as to each person or group who is known to us to be the beneficial owner of more than 5% of our outstanding voting securities and as to the security and percentage ownership of each of our executive officers and directors and of all of our officers and directors as a group. As of October 29, 2020, we had 41,918,638 shares of common stock outstanding.

 

Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.

 

Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of the date of this prospectus are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

  

 

 

 

Title of Class

 

Name and Address of Beneficial Owner (1)

 

Number Of
Shares
Beneficially
Owned

 

 

Percentage
Owned

 

 

 

Officers and Directors:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Ron Loudoun (2)

 

 

22,012,320

 

 

 

52.51 %

Common Stock

 

Todd Mueller

 

 

100,000

 

 

*

 

Common Stock

 

Jeff Palumbo

 

 

500,000

 

 

 

1.19 %

Common Stock

 

Kyle MacKinnon

 

 

200,000

 

 

*

 

Common Stock

 

Jerry Halamuda

 

 

250,000

 

 

*

 

Common Stock

 

John Gildea

 

 

250,000

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All directors and officers as a group (6 persons)

 

 

23,312,320

 

 

 

55.62 %

  

*

Less than 1%.

 

(1)

Unless otherwise noted, the address is c/o Green Hygienics Holdings Inc., 13795 Blaisdell Place, Suite 202, Poway, California 92064.

(2)

Includes 22,012,320 shares held by Alita Capital, Inc., of which Mr. Loudoun is the controlling shareholder.

  

Item 13. Certain Relationships and Related Transactions

 

With the exception of Ron Loudoun, none of our other directors, or officers, any proposed nominee for election as a director, any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, any promoter, or any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us other than the transactions described below.

 

Our management is involved in other business activities and may in the future be involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.

 

 
27

Table of Contents

  

Item 14. Principal Accounting Fees and Services

 

The aggregate fees billed for the most recently completed fiscal years ended July 31, 2020 and 2019, 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 quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

 

 

 

Year Ended

 

 

 

July 31, 2020

 

 

July 31, 2019

 

 

 

 

 

 

 

 

Audit Fees – M&K

 

$ 19.350

 

 

$ 6,759

 

Audit Related Fees

 

 

-

 

 

 

3,400

 

Tax Fees

 

 

-

 

 

 

-

 

All Other Fees

 

 

-

 

 

 

-

 

Total

 

$ 19,350

 

 

$ 10,159

 

  

Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

 

Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

 

Item 15. Exhibits

 

Exhibit No.

 

Description

 

 

 

2.1

 

Definitive Agreement dated April 29, 2019 by and among between Coastal Labs, LLC and Green Hygienics Holdings Inc., incorporated by reference to our Registration Statement on Form S-1 filed on January 31, 2020 (File No. 333-236212).

3.1

 

Articles of Incorporation of Silver Bay Resources, Inc. (now known as Green Hygienics Holdings Inc.), incorporated by reference to our Registration Statement on Form S-1 filed on September 17, 2008 (File No. 333-153510).

3.2

 

Certificate of Amendment of Silver Bay Resources, Inc. (now known as Green Hygienics Holdings Inc.), incorporated by reference to our Current Report on Form 8-K filed on July 1, 2010 (File No. 333-153510).

3.3

 

Articles of Merger dated June 1, 2012 between of Green Hygienics Holdings Inc. and Takedown Entertainment, Inc., incorporated by reference to our Current Report on Form 8-K filed on June 7, 2012.

3.4

 

Certificate of Change Pursuant to NRS 78.209, incorporated by reference to our Current Report on Form 8-K filed on June 7, 2012.

3.5

 

Certificate of Amendment of Green Hygienics Holdings Inc., incorporated by reference to our Current Report on Form 8-K filed on February 21, 2013.

3.6

 

Certificate of Amendment of Green Hygienics Holdings Inc., incorporated by reference to our Registration Statement on Form S-1 filed on September 14, 2020 (File No. 333-248790).

3.7

 

Bylaws, incorporated by reference to our Registration Statement on Form S-1 filed on September 17, 2008 (File No. 333-153510).

4.1

 

10% Convertible Promissory Note dated December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.

4.2

 

Common Stock Purchase Warrant dated December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.

10.1

 

Securities Purchase Agreement by and between Green Hygienics Holdings, Inc. and Triton Funds LP dated as of December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.

10.2

 

Registration Rights Agreement by and between Green Hygienics Holdings, Inc. and Triton Funds LP dated as of December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.

10.3

 

Amending Agreement by and between Green Hygienics Holdings, Inc. and Triton Funds LP dated as of January 8, 2020, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.

10.4

 

Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated March 11, 2019 by and between Alita Capital, Inc. or Assignee, and Kreutzkamp Trust, incorporated by reference to our Current Report on Form 8-K filed on August 29, 2019.

10.5

 

Promissory Note Secured by Deed of Trust dated August 23, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 31, 2020.

10.6

 

Secured Promissory Note dated August 15, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 31, 2020.

10.7

 

Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated October 18, 2019 by and between Green Hygienics Holdings, Inc. or Assignee, and Dos Molson LLC and Pat Reid, incorporated by reference to our Current Report on Form 8-K filed on October 25, 2019.

10.8

 

Consulting Agreement dated August 1, 2019 between Ronald Loudoun and Green Hygienics Holdings Inc., incorporated by reference to our Current Report on Form 8-K filed on January 31, 2020.

10.9

 

2011 Stock Plan, incorporated by reference to our Current Report on Form 8-K filed on September 8, 2011.

10.10

 

Consulting Agreement dated February 15, 2020 between Todd Mueller and Green Hygienics Holdings Inc., incorporated by reference to our Form 10-Q filed on June 15, 2020.

10.11

 

Equity Financing Agreement by and between Green Hygienics Holdings, Inc. and GHS Investments, LLC, dated September 13, 2020, incorporated by reference to our Registration Statement on Form S-1 filed on September 14, 2020 (File No. 333-248790).

10.12

 

Registration Rights Agreement by and between Green Hygienics Holdings, Inc. and GHS Investments, LLC, dated September 13, 2020, incorporated by reference to our Registration Statement on Form S-1 filed on September 14, 2020 (File No. 333-248790).

14

 

Code of Ethics of Takedown Entertainment, Inc. (now known as Green Hygienics Holdings Inc.), incorporated by reference to our Annual Report on Form 10-K filed on October 27, 2011.

31.1

 

Sec. 302 Certification of Chief Executive Officer

31.2

 

Sec. 302 Certification of Chief Financial Officer

32.1

 

Sec. 906 Certification of Chief Executive Officer

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

  

 
28

Table of Contents

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

GREEN HYGIENICS HOLDINGS INC.

 

(Registrant)

 

 

Dated: October 29, 2020

/s/ Ron Loudoun

 

 

Ron Loudoun

 

President, Chief Executive Officer,

Secretary, Treasurer and Director

 

 

(Principal 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: October 29, 2020

/s/ Ron Loudoun

 

 

Ron Loudoun

 

President, Chief Executive Officer,

Secretary, Treasurer and Director

 

(Principal Executive Officer)

 

Dated: October 29, 2020

/s/ Todd Mueller

 

 

Todd Mueller

 

Chief Financial Officer

 

(Principal Financial Officer and Principal Accounting Officer)

  

 
29

 

 

Green Hygienics (QB) (USOTC:GRYN)
Historical Stock Chart
From Dec 2020 to Jan 2021 Click Here for more Green Hygienics (QB) Charts.
Green Hygienics (QB) (USOTC:GRYN)
Historical Stock Chart
From Jan 2020 to Jan 2021 Click Here for more Green Hygienics (QB) Charts.