UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
|
þ |
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
OR
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission file number: 001-13621
UPD HOLDING CORP.
(Exact name of Registrant as specified in its charter)
|
Nevada |
13-3465289 |
| (State or other
jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
75 Pringle Way, 8th Floor, Suite
804 Reno, Nevada 89502
(Address of principal executive offices, including zip
code)
775-829-7999 x112
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes o No þ
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 o No þ
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 o |
Accelerated
filer o |
| Non-accelerated
filer o |
Smaller reporting
company þ |
| |
Emerging growth
company o |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13 (a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company
(as defined by Rule 12b-2 of the Exchange Act). Yes o No þ
As
of November 18, 2020, the issuer had 172,450,907 shares of Common
Stock outstanding, par value $.005 per share.
UPD HOLDING CORP.
TABLE
OF CONTENTS
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q that
are not historical fact are forward-looking statements (as such
term is defined in the Private Securities Litigation Reform Act of
1995), within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The forward-looking statements contained herein
are based on current expectations that involve a number of risks
and uncertainties. These statements can be identified by the use of
forward-looking terminology such as “believes,” “expects,” “may,”
“will,” “should,” or “anticipates,” or the negative thereof or
other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties.
Investors are cautioned that these forward-looking statements that
are not historical facts are only predictions. No assurances can be
given that the future results indicated, whether expressed or
implied, will be achieved. Because of the number and range of
assumptions underlying the Company’s projections and
forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond the
reasonable control of the Company, some of the assumptions
inevitably will not materialize, and unanticipated events and
circumstances may occur subsequent to the date of this report.
These forward-looking statements are based on current expectations
and the Company assumes no obligation to update this information.
Therefore, the actual experience of the Company and the results
achieved during the period covered by any particular projections or
forward-looking statements may differ substantially from those
projected. The inclusion of projections and other forward-looking
statements should not be regarded as a representation by the
Company or any other person that these estimates and projections
will be realized, and actual results may vary materially. There can
be no assurance that any of these expectations will be realized or
that any of the forward-looking statements contained herein will
prove to be accurate.
PART I.
FINANCIAL INFORMATION
|
Item 1. |
Financial Statements |
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| |
|
September 30, |
|
|
June 30, |
|
| |
|
2020 |
|
|
2020 |
|
|
ASSETS |
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
| Cash
and cash equivalents |
|
$ |
3,453 |
|
|
$ |
20,718 |
|
| Other
current assets |
|
|
755 |
|
|
|
755 |
|
| Total
assets |
|
$ |
4,208 |
|
|
$ |
21,473 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts
payable |
|
$ |
203,023 |
|
|
$ |
171,547 |
|
| Accrued
interest |
|
|
82,993 |
|
|
|
77,134 |
|
| Convertible notes
payable |
|
|
179,484 |
|
|
|
180,129 |
|
| Due to
shareholders |
|
|
72,225 |
|
|
|
72,225 |
|
| Notes
payable |
|
|
104,560 |
|
|
|
104,560 |
|
| Total
current liabilities |
|
|
642,285 |
|
|
|
605,595 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and Contingencies |
|
|
|
|
|
|
|
|
| Stockholders' deficit |
|
|
|
|
|
|
|
|
| Preferred stock,
$0.01 par value; 10,000,000 authorized and none issued and
outstanding |
|
|
— |
|
|
|
— |
|
| Common
stock, $0.005 par value; 200,000,000 shares authorized and
172,450,907 issued and outstanding |
|
|
862,255 |
|
|
|
862,255 |
|
| Additional
paid-in-capital |
|
|
1,872,632 |
|
|
|
1,872,632 |
|
|
Accumulated deficit |
|
|
(3,372,964 |
) |
|
|
(3,319,009 |
) |
| Total
stockholders' deficit |
|
|
(638,077 |
) |
|
|
(584,122 |
) |
| Total
liabilities and stockholders' deficit |
|
$ |
4,208 |
|
|
$ |
21,473 |
|
The accompanying notes are an integral part of the unaudited
consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
| |
|
For
the Three Months Ended September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Revenues: |
|
|
|
|
|
|
| Product sales |
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
Professional fees |
|
|
45,616 |
|
|
|
24,424 |
|
| General
and administrative |
|
|
2,480 |
|
|
|
2,096 |
|
| Total
operating costs and expenses |
|
|
48,096 |
|
|
|
26,520 |
|
| |
|
|
|
|
|
|
|
|
| Operating loss |
|
|
(48,096 |
) |
|
|
(26,520 |
) |
| |
|
|
|
|
|
|
|
|
| Interest expense, net |
|
|
(5,859 |
) |
|
|
(17,162 |
) |
| Other income,
net |
|
|
— |
|
|
|
23,439 |
|
| Loss from
continuing operations, before income taxes |
|
|
(53,955 |
) |
|
|
(20,243 |
) |
| Provision for
income taxes |
|
|
— |
|
|
|
— |
|
| Net loss |
|
|
(53,955 |
) |
|
|
(20,243 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Basic and
diluted loss per share from: |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Weighted average shares outstanding |
|
|
|
|
|
|
|
|
| Basic
and diluted |
|
|
172,450,907 |
|
|
|
169,284,024 |
|
The accompanying notes are an integral part of the unaudited
consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ DEFICIT
FOR THE PERIODS ENDED
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
| |
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity (Deficit) |
|
| BALANCE, June 30,
2020 |
|
|
— |
|
|
$ |
— |
|
|
|
172,450,907 |
|
|
$ |
862,255 |
|
|
$ |
1,872,632 |
|
|
$ |
(3,319,009 |
) |
|
$ |
(584,122 |
) |
| Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(53,955 |
) |
|
|
(53,955 |
) |
| BALANCE,
September 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
172,450,907 |
|
|
$ |
862,255 |
|
|
$ |
1,872,632 |
|
|
$ |
(3,372,964 |
) |
|
$ |
(638,077 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| BALANCE, June 30, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
171,008,684 |
|
|
$ |
855,044 |
|
|
$ |
1,709,731 |
|
|
$ |
(3,449,946 |
) |
|
$ |
(885,171 |
) |
| Issuance of
common stock for conversion of debt and interest |
|
|
— |
|
|
|
— |
|
|
|
113,833 |
|
|
|
569 |
|
|
|
10,814 |
|
|
|
— |
|
|
|
11,383 |
|
| Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(20,243 |
) |
|
|
(20,243 |
) |
| BALANCE,
September 30, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
171,122,517 |
|
|
$ |
855,613 |
|
|
$ |
1,720,545 |
|
|
$ |
(3,470,189 |
) |
|
$ |
(894,031 |
) |
The accompanying notes are an integral part of the unaudited
consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
| |
|
For
the Three Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Cash flows from operating
activities: |
|
|
|
|
|
|
| Net loss |
|
$ |
(53,955 |
) |
|
$ |
(20,243 |
) |
| Adjustments to reconcile net loss to
net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Gain on settlement of debt |
|
|
— |
|
|
|
(23,439 |
) |
| Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
| Other current
assets |
|
|
— |
|
|
|
(755 |
) |
| Accrued
interest |
|
|
5,859 |
|
|
|
19,163 |
|
|
Accounts payable |
|
|
30,831 |
|
|
|
(20,954 |
) |
| Net cash
used in operating activities |
|
|
(17,265 |
) |
|
|
(46,228 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
| Proceeds from
issuance of convertible notes payable |
|
|
— |
|
|
|
55,561 |
|
|
Principal payments on notes payable |
|
|
— |
|
|
|
(6,561 |
) |
| Net cash
provided by financing activities |
|
|
— |
|
|
|
49,000 |
|
| |
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and
cash equivalents |
|
|
(17,265 |
) |
|
|
2,772 |
|
| Cash and cash
equivalents at beginning of period |
|
|
20,718 |
|
|
|
7,215 |
|
| Cash and cash
equivalents at end of period |
|
$ |
3,453 |
|
|
$ |
9,987 |
|
| |
|
|
|
|
|
|
|
|
| Cash paid for
income taxes |
|
$ |
— |
|
|
$ |
— |
|
| Cash paid for
interest |
|
$ |
— |
|
|
$ |
4,000 |
|
| |
|
|
|
|
|
|
|
|
| Non-Cash Supplemental Disclosures |
|
|
|
|
|
|
|
|
|
Common stock issued for debt settlement |
|
$ |
— |
|
|
$ |
10,000 |
|
The accompanying notes are an integral part of the unaudited
consolidated financial statements.
UPD HOLDING
CORP. AND
SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – BUSINESS AND ORGANIZATION
UPD Holding Corp. (“UPD”, “Company”), incorporated in the State of
Nevada, is a holding Company seeking to acquire assets and
businesses to provide a competitive advantage through cost-sharing
and other synergies. The Company currently operates in the food and
beverage industry through Record Street Brewing (“RSB”) and weight
and health management with its distribution and marketing agreement
with iMetabolic (“IMET”). The Company is pursuing business
development opportunities in the food and beverage industry and
other product licensing agreements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited interim consolidated financial
statements of the Company and its subsidiaries have been prepared
in accordance with generally accepted accounting principles
(“GAAP”), pursuant to the rules and regulations of the Securities
and Exchange Commission and are unaudited. Accordingly, they do not
include all the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the results for the interim
periods presented have been made. The results for the three month
period ended September 30, 2020, may not be indicative of the
results for the entire year. These financial statements should be
read in conjunction with the Company’s Annual Report on Form 10-K
for the fiscal year ended June 30, 2020 filed with the Securities
and Exchange Commission on August 14, 2020.
The preparation of the Company’s unaudited interim consolidated
financial statements in conformity with accounting principles
generally accepted in the United States of America 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 expenses during the
reporting periods. Management makes these estimates using the best
information available at the time the estimates are made; however,
actual results could differ materially from these estimates.
Principles of Consolidation
The Company consolidates the assets, liabilities, and operating
results of its wholly owned and majority-owned subsidiaries; Net
Edge Devices, LLC, an Arizona Limited Liability Company, iMetabolic
Corp, (“IMET”) a Nevada corporation, and Record Street Brewing Co.
a Nevada corporation. All intercompany accounts and transactions
have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid
investments with original maturities of 90 days of less at the date
of purchase. The Company is exposed to credit risk in the event of
default by the financial institutions or the issuers of these
investments to the extent the amounts on deposit or invested are in
excess of amounts that are insured. As of September 30, 2020 and
June 30, 2020 the Company did not have any cash equivalents or cash
deposits in excess of the federally insured limits.
Use of Estimates
The preparation of the Company’s consolidated financial statements
in conformity with accounting principles generally accepted in the
United States of America 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
expenses during the reporting periods. Management makes these
estimates using the best information available at the time the
estimates are made; however, actual results could differ materially
from these estimates.
Revenue Recognition
The Company licenses its beer and beverage products to its
customers. The royalties earned from these licensing agreements
represent revenue earned under contracts in which the Company bills
and collects from its licensee in arrears. The Company determines
the measurement of revenue and the timing of revenue recognition
utilizing the following core principles:
|
1. |
Identifying the contract with a
customer; |
|
2. |
Identifying the performance
obligations in the contract; |
|
3. |
Determining the transaction
price; |
|
4. |
Allocate the transaction price to
the performance obligations in the contract; and |
|
5. |
Recognize revenue when (or as) the
Company satisfies its performance obligations. |
Revenues from licensing royalties are recognized when the Company’s
performance obligations are satisfied upon its licensee’s sales to
its customers. The Company primarily invoices its licensee on a
quarterly basis, net of returns. The Company did not realize
material revenues during the quarter ended September 30, 2020.
Going Concern
The Company’s financial statements are prepared using accounting
principles generally accepted in the United States of America
applicable to a going concern which contemplates the realization of
assets and liquidation of liabilities in the normal course of
business. The Company has not yet established an ongoing source of
revenue sufficient to cover its operating costs and allow it to
continue as a going concern, has reoccurring net losses and net
capital deficiency. The ability of the Company to continue as a
going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If
the Company is unable to obtain adequate capital, it could be
forced to cease operations. These factors raise substantial doubt
about the Company’s ability to continue as a going concern. The
accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
In order to continue as a going concern, the Company will need,
among other things, additional capital resources. Management’s
plans to obtain such resources for the Company include (i)
obtaining capital from management and significant stockholders
sufficient to meet its minimal operating expenses; (ii) obtaining
funding from outside sources through the sale of its debt and/or
equity securities; and (iii) completing a merger with or
acquisition of an existing operating company. However, management
cannot provide any assurances that the Company will be successful
in accomplishing any of its plans.
NOTE 3 – NOTES AND CONVERTIBLE NOTES PAYABLE
The Company’s notes payable consist of the following:
|
Note Description
|
|
Sepember30,
2020 |
|
|
June 30,
2020 |
|
| Notes
Payable: |
|
|
|
|
|
|
Notes Payable matured in
December 2018 a nominal interest rate
of 12% |
|
$ |
20,000 |
|
|
$ |
20,000 |
|
Related Party
Note Payable due October 2020 a nominal interest
rate of 6% |
|
|
84,560 |
|
|
|
84,560 |
|
| Total Notes
payable |
|
$ |
104,560 |
|
|
$ |
104,560 |
|
| Accrued
interest |
|
|
11,324 |
|
|
|
8,900 |
|
|
Total notes payable, net |
|
$ |
115,484 |
|
|
$ |
113,460 |
|
Throughout the three months ended September 30, 2020 the Company
did not have the financial resources to make current payments on
these notes payable. The Company is in negotiations with the note
holders and has not incurred significant penalties associated with
the current default.
The Company’s convertible notes payable consist of the
following:
|
Convertible Note Description |
|
September 30, 2020 |
|
|
June 30, 2020 |
|
| |
|
|
|
|
|
|
| Notes payable convertible into
common stock at $0.10 per share; |
|
|
|
|
|
|
| nominal interest rate of 12%; and
matured in April 2018 (related |
|
|
|
|
|
|
| party) |
|
$ |
65,000 |
|
|
$ |
65,000 |
|
| rate of 12%; and matures in the third
quarter of fiscal 2021 |
|
|
64,484 |
|
|
|
65,129 |
|
| Notes payable convertible into common
stock at $0.10 per share; nominal interest |
|
|
|
|
|
|
|
|
| rate of 12%; and
matures in the fourth quarter of fiscal 2021 |
|
|
50,000 |
|
|
|
50,000 |
|
| Total convertible
notes payable |
|
$ |
179,484 |
|
|
$ |
180,129 |
|
| Accrued
interest |
|
|
71,669 |
|
|
|
68,234 |
|
| Total
convertible notes payable, net |
|
$ |
251,153 |
|
|
$ |
248,363 |
|
The Company’s outstanding convertible notes, with the exception of
the related party notes as further discussed in Note 5,
automatically convert to shares of common stock and $0.10 per share
upon maturity if not paid in full prior to maturity. The Company
did not make any monthly and interest payments on its outstanding
convertible notes payable.
During the three months ended September 30, 2020 and 2019 the
Company recognized interest expense on all outstanding notes and
convertible notes payable totaling approximately $6,000 and
$17,000, respectively.
NOTE 5 – RELATED PARTY TRANSACTIONS
From time to time the Company has received working capital advances
from shareholders. These advances are used to settle the Company’s
on-going operating expenses. The shareholders have agreed to not
accrue interest on the notes, and they are due on demand. Through
September 30, 2020 the shareholders have informally agreed to defer
payment until the Company’s operations are generating sufficient
cash flows, however, they are under no obligation to do so in the
future. The Company did not enter into any material related party
transactions during the three months ended September 30, 2020.
NOTE 6 – SUBSEQUENT EVENTS
In October 2020, the Company entered into a promissory note with an
investor in which the Company received total cash proceeds of
$100,000. The promissory note has a nominal interest rate of 6% per
annum and matures on June 30, 2021.
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following management discussion and analysis of our
financial condition and results of operations should be read in
conjunction with our unaudited interim consolidated financial
statements and related notes which are included in Item 1 of this
Quarterly Report on Form 10-Q, and with our audited financial
statements included in our Form 10-K for the fiscal year ended June
30,2020, filed with the Securities and Exchange Commission on
August 14, 2020.
This discussion and analysis provides information that
management believes is relevant to an assessment and understanding
of our results of operations and financial condition for the
periods presented. The following selected financial information is
derived from our historical consolidated financial statements and
should be read in conjunction with such consolidated financial
statements and notes thereto set forth elsewhere herein and the
“Forward- Looking Statements” explanation included herein.
Overview of Business
We are a health and wellness company with a focus on nutraceutical
and alternative and specialty beverages. Our past development
efforts have included weight loss and weight management products
marketed under our iMetabolic® brand and craft
beer offerings under our Record Street™ brand. Current
development efforts are focused on alternative and specialty
beverages that leverage and combine the Company’s regulated
nutraceutical and beverage manufacturing experience to create novel
and trending beverages that have health benefits, such as waters
infused with hemp-based nootropics, cannabinoids, and terpenes. We
also are pursuing the franchising and licensing of the Record
Street™ brand for live music venues and brewpubs throughout the
United States.
With fewer barriers to entry, such as reduced minimum order
quantities (MOQs), lower costs of goods sold (COGS), and reduced
regulatory licensing requirements, the Company has determined to
focus its brand extensions and product innovations in the health
and wellness beverage category.
On June 10, 2020, RSB entered into a license of the Record
Street™ and Stylus™ brands with a related-party private
entity, Alpine Group Inc. (the “Licensee”), that recently opened a
brewpub located in Reno, Nevada. Effective as of July 1, 2020, the
Licensee will have the exclusive right to brew and distribute
Record Street™ and Stylus™ brand beers in the State
of Nevada.
RSB manufactures and markets its line of Record Street™
branded beers, including its three flagship ales—Blonde Ale, Pale
Ale, and India Pale Ale—and its lager named
Stylus™.
In addition to brewing and off-premise distribution licensing
opportunities, RSB has also opened a taproom, restaurant, and
lounge that can be franchised under the Record Street™
brand. RSB taprooms will focus on the sale of Record Street™
branded beers and are envisioned as music and sports lounges that
sell RSB’s beers, affordable fast casual cuisine, and related
merchandise. With RSB’s beers displayed on a prominently featured
tap system, beer sales will be the primary revenue driver. The
economic strategy of the tap rooms will be value pricing, high
margins, and high volumes. The flagship location for the first RSB
taproom is currently open and operating in Reno, Nevada.
RSB intends to utilize the excess brewing capacity of the Licensee
to restart its beer distribution business and support taproom
franchise locations. As of the end of July 2020, RSB commenced keg
barrel products to a distributer based in Reno, Nevada, however, we
have not realized any material revenues to date under the licensing
agreement.
Going Concern
Our financial statements are prepared using generally accepted
accounting principles in the United States of America applicable to
a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. We
have not yet established an ongoing source of revenues sufficient
to cover our operating costs and to allow us to continue as a going
concern. Our ability to continue as a going concern is dependent on
our company obtaining adequate capital to fund operating losses
until we become profitable. If we are unable to obtain adequate
capital, we could be forced to significantly curtail or cease
operations.
In its report on our financial statements for the year ended June
30, 2020, our independent registered public accounting firm
included an explanatory paragraph regarding substantial doubt about
our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
We will need to raise additional funds to finance continuing
operations. However, there are no assurances that we will be
successful in raising additional funds. Without sufficient
additional financing, it would be unlikely for us to continue as a
going concern. Our ability to continue as a going concern is
dependent upon our ability to successfully accomplish the plans
described in this annual report and eventually secure other sources
of financing and attain profitable operations.
RESULTS OF OPERATIONS
The Company’s revenue is generated through the sale of its beer
products. Effective July 1, 2020 the Company entered into a
licensing agreement in which the Company will receive 25% of beer
sales distributed outside the gastropub operated my licensee. The
licensee began its gastropub operations in late April 2020. As of,
and through September 30, 2020 we did not realize any material
revenue under our licensing agreement.
Professional Fees
During the three months ended September 30, 2020 and 2019, the
Company recognized professional fees of approximately $46,000 and
$24,000, respectively, representing an increase of approximately 92
from the prior comparable period. This increase is the result of
the Company engaging accounting consultants and auditors to assist
in meeting the Company’s financial reporting obligations which were
delinquent during the comparable periods in fiscal 2019.
The Company expects its professional fees to decline throughout the
remainder of the first half of fiscal 2021 as it expects to meet
its compliance obligations on a timely basis.
General and Administrative Expenses
The Company
incurred general and administrative expenses totaling approximately
$2,500 and $2,100 for the three months ended September 30, 2020 and
2019, respectively. Similar to other operational items, our funding
challenges have resulted in overall declines in activity and
corresponding expenses incurred. We expect these items to increase
over the next several periods with the success of our business
plans and will primarily consist of facilities costs, management
and other salaries, travel, and other corporate overhead.
Interest Expense
Throughout fiscal 2020 we settled several of our previously
outstanding promissory notes and convertible promissory notes
payable. As a result, interest expense decreased approximately 65%
to approximately $6,000 from the prior three-month period ended
September 30. Our future interest expense obligations are dependent
on the types of financing arrangements we are successful in
arranging over the next twelve months, if any.
Liquidity and Capital Resources
As of September 30, 2020, the Company had a working capital deficit
of approximately $638,000. We estimate that, over the next twelve
months, in order to maintain reporting company status as defined
under the Securities Exchange Act of 1934, we will require cash for
general and administrative expenses and professional fees, which
include accounting, legal and other professional fees, as well as
filing fees. We believe we will be able to meet these costs through
the use of existing cash and cash equivalents or additional
amounts, as necessary, to be loaned by or invested in us by our
stockholders, management or other investors. However, no assurance
can be given that we will be able to raise additional capital, when
needed or at all, or that such capital, if available, will be on
acceptable terms. In the absence of obtaining additional financing,
we may be unable to fund our operations.
During the three months ended September 30, 2020, the Company’s
operational cash flows primarily consisted of incurring expenses in
the normal course of business at levels commensurate with its
funding levels and resulting inabilities to commence commercially
viable operations. The Company’s operational cash uses primarily
consisted of the incurrence of on-going professional and general
and administrative expenses for the three months ended September
30, 2020. The Company expects these operational cash uses to
continue until sufficient capital is raised, if any.
The Company does not have sufficient resources to engage in
significant investing activities.
During the three months ended September 2020, the Company generated
did not engage in any financing activities.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as set forth in
Item 303(a)(4) of the Regulation S-K.
Critical Accounting Policies
Our Unaudited Financial
Statements and Notes to Unaudited Financial Statements have
been prepared in accordance with U.S. GAAP. The preparation of
these financial statements requires management to make estimates,
judgments, and assumptions that affect reported amounts of assets,
liabilities, revenues, and expenses. We continually evaluate the
accounting policies and estimates used to prepare the accompanying
financial statements. The estimates are based on historical
experience and assumptions believed to be reasonable under current
facts and circumstances. Actual amounts and results could differ
from these estimates made by management. Certain accounting
policies that require significant management estimates and are
deemed critical to our results of operations or financial position
are discussed in our Annual Report on Form 10-K for the year
ended June 30, 2020.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As a "smaller reporting company" (as defined by Item 10 of
Regulation S-K), the Company is not required to provide the
information required by this item.
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. The
term “disclosure controls and procedures,” as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and
other procedures of a company that are designed to ensure that
information required to be disclosed by the company in the reports
it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the
Securities and Exchange Commission’s rules and forms. Disclosure
controls and procedures also include, without limitation, controls
and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the
company’s management, including its principal executive and
principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that, as of September
30, 2020 our disclosure controls and procedures were not effective
due to the size and nature of the existing business operation.
Given the size of our current operation and existing personnel, the
opportunity to implement internal control procedures that segregate
accounting duties and responsibilities is limited. Until the
organization can increase in size to warrant an increase in
personnel, formal internal control procedure will not be
implemented until they can be effectively executed and monitored.
As a result of the size of the current organization, there will not
be significant levels of supervision, review, independent directors
nor formal audit committee.
Changes in Internal Control Over Financial Reporting
During the three months ended September 30, 2020, there have been
no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
As of the date of this report, the Company is not currently
involved in any legal proceedings.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item. However, the risks associated with our
Company are set forth in the "Risk Factors" section of our Form
10-K filed with the SEC on August 14, 2020.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
There are no recent sales of unregistered equity securities that
were not previously disclosed.
Item 3. Defaults Upon Senior
Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The exhibits listed below are filed herewith.
_________________
* Filed herewith.
**In accordance with Rule 406T of Regulation S-T, this information
is deemed not “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
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UPD HOLDING CORP. |
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| Dated: November 19, 2020 |
By: |
/s/ Mark W.
Conte |
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Mark W. Conte |
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|
President and Chief Executive Officer |
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(Principal Executive Officer) |
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|
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| Dated: November 19, 2020 |
By: |
/s/ Kevin J.
Pikero |
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Kevin J. Pikero |
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|
Chief Financial Officer |
| |
|
(Principal Financial and Accounting Officer) |
13
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