The accompanying notes are an integral part
of these unaudited financial statements.
The accompanying notes are an integral part
of these unaudited financial statements.
The accompanying notes are an integral part
of these unaudited financial statements.
Notes to Financial Statements
June 30, 2017
(Unaudited)
Note A - Organization and Description of Business
HPC Acquisitions, Inc. (the “Company”)
was initially formed under the laws of the State of Minnesota as Herky Packing Co. on July 17, 1968. The Company initially produced
and marketed meat snack foods, principally beef jerky, smoked dried beef and snack sausages, through food brokers, distributors
and wagon jobbers. Despite a 1970 restructuring, including the relocation to an approximate 12,500 square foot production facility,
the Company’s efforts were unsuccessful and all operations were terminated by the end of 1970. On April 10, 1972, the Company
changed its corporate name to H. P. C. Incorporated. In connection with this name change, the Company acquired Ed Stein’s
Tire Center, Inc, a Minneapolis, Minnesota-based distributor of Gates tires. This acquisition was unsuccessful and reversed in
1973.
On August 7, 2006, the Company changed its
state of incorporation from Minnesota to Nevada by means of a merger with and into HPC Acquisitions, Inc., a Nevada corporation
formed on June 12, 2006 solely for the purpose of effecting the reincorporation. The Articles of Incorporation and Bylaws of the
Nevada corporation are the Articles of Incorporation and Bylaws of the surviving corporation. Such Articles of Incorporation modified
the Company’s capital structure to allow for the issuance of up to 50,000,000 shares of $0.001 par value common stock and
up to 10,000,000 shares of $0.001 par value preferred stock.
On March 8, 2016, the Company sold 12,011,000
shares of its common stock to David Selakovic for a total cash purchase price of $303,100. This transaction effected a change in
management and control of the Company. Mr. Selakovic assigned to the Company certain assets consisting of the exclusive right to
distribute in the Western Hemisphere natural agrochemicals developed by ECOWIN Co., Ltd., a Korean company, certain state permits
for the sale of ECOWIN agrochemicals, and the trademark “Vegalab” (the “DS Assets”). Our new plan of operation
is to commence the business of selling ECOWIN products under the brand name “Vegalab”.
The Company is currently in the business of
selling the ECOWIN products under the “Vegalab” name in the United States of America. The Company’s current sole
source of supply of ECOWIN products is through Vegalab S. A., a Swiss company solely owned by David Selakovic, the Company’s
controlling shareholder and sole officer and director.
Note B - Preparation of Financial Statements
The Company follows the accrual basis of accounting
in accordance with generally accepted accounting principles and has a fiscal year-end of December 31.
The preparation of 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 revenues and expenses during the reporting period. Actual results
could differ from those estimates.
During interim periods, the Company follows
the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission
on its Annual Report on Form 10-K for the year ended December 31, 2016.
In the opinion of management, the accompanying
interim financial statements, prepared in accordance with the U.S. Securities and Exchange Commission’s instructions for
Form 10-Q, should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s
annual report filed with the SEC on Form10-K for the year ended December 31, 2016, and are unaudited and contain all material adjustments,
consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and
cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2017.
Note C - Going Concern Uncertainty
The Company’s business plan is to distribute,
in the Western Hemisphere, certain natural agrochemicals developed by ECOWIN Co., Ltd., a Korean company, under the brand name
“Vegalab”. However, there is no assurance that the Company will be able to successfully penetrate its targeted market
or implement its business plan.
The Company's continued existence is dependent
upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient
resources to retire existing liabilities and obligations on a timely basis. The Company faces considerable risk in its business
plan. If insufficient operating capital is available during the next twelve months, the Company will be forced to rely on existing
cash in the bank and additional funds loaned by management and/or significant stockholders.
The Company’s former majority stockholder
previously provided the necessary working capital to maintain the corporate status of the Company. It is the current intent of
management and significant stockholders to provide sufficient working capital, if necessary, to support and preserve the integrity
of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such
advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future
funding.
The Company anticipates offering future sales
of equity securities. However, there is no assurance that the Company will be able to obtain additional funding through the sales
of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the
Company.
The Company’s certificate of incorporation
authorizes the issuance of up to 10,000,000 shares of preferred stock and 50,000,000 shares of common stock. The Company’s
ability to issue preferred stock may limit the Company’s ability to obtain debt or equity financing as well as impede potential
takeover of the Company, which takeover may be in the best interest of stockholders. The Company’s ability to issue these
authorized but unissued securities may also negatively impact our ability to raise additional capital through the sale of our debt
or equity securities.
In such a restricted cash flow scenario, the
Company would be unable to complete its business plan steps, and would, instead, delay all cash intensive activities. Without necessary
cash flow, the Company may become dormant during the next twelve months, or until such time as necessary funds could be raised
in the equity securities market.
While the Company is of the opinion that good
faith estimates of the Company’s ability to secure additional capital in the future to reach its goals have been made, there
is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.
These factors raise substantial doubt about the Company’s ability to continue to operate as a going concern for the twelve
months following the issuance date of these financial statements.
Note D - Summary of Significant Accounting Policies
|
1.
|
Cash and Cash Equivalents
|
The Company considers all cash on
hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased,
to be cash and cash equivalents.
|
2.
|
Concentrations of Credit
Risk
|
Sales to two customers comprised
60% and 28% of the Company’s total revenues. Two customers accounted for 92% and 94% of accounts receivable as
of June 30, 2017 and December 31, 2016, respectively. The Company believes that, in the event that its primary customers are unable
or unwilling to continue to purchase the Company’s good, there are a number of alternative customers at comparable prices.
In the normal course of business,
the Company extends unsecured credit to virtually all of its customers which are located throughout the United States. Because
of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its opinion of amounts which
will eventually become uncollectible. In the event of complete non-performance, the maximum exposure to the Company is the recorded
amount of trade accounts receivable shown on the balance sheet at the date of non-performance.
Inventory consists of finished goods
related to the sale of certain natural agrochemicals developed by ECOWIN Co., Ltd., a Korean company, under the brand name “Vegalab”.
Inventory is valued at the lower of cost or market using the first-in, first-out method. A change in income is taken when factors
that would result in a need for a reduction in the valuation, such as excess or obsolete inventory, are noted. At June 30, 2017 and December 31, 2016, there was no reserve for excess or obsolete inventory.
|
5.
|
Property, plant and equipment
|
Property plant and equipment are recorded at cost, net
of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the
assets, which is five years for all categories.
Automobile, computer equipment,
and leasehold improvements consisted of the following:
|
|
June 30, 2017
|
|
|
|
|
|
Automobile
|
|
$
|
14,261
|
|
Equipment
|
|
|
4,895
|
|
Total
|
|
|
19,156
|
|
Accumulated depreciation
|
|
|
(866
|
)
|
Balance
|
|
$
|
18,290
|
|
Depreciation expense for three and six months
ended June 30, 2017 was $866.
Revenue is recognized when the earnings
process is completed, the risks and rewards of ownership have transferred to the customer, which is generally the same day as delivery
or shipment of the product, the price to the buyer is fixed or determinable, and collection is reasonably assured. All sales are
recorded when the goods are shipped.
The Company ships all product on
an FOB-Plant, “as-is” basis. Accordingly, revenue is recognized by the Company at the point at which an order is shipped
at a fixed price, collection is reasonably assured and the Company has no remaining performance obligations related to the sale.
The Company sells all products with “no right of return” by the purchaser for any factor other than defects in the
products’ development.
|
7.
|
Income (Loss) per Share
|
Basic earnings (loss) per share
is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares
outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per
share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common
stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent
the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at
either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
As of June 30, 2017 and 2016, the
Company had no outstanding stock warrants, options or convertible securities which could be considered as dilutive for purposes
of the loss per share calculation.
|
8.
|
Recent Accounting Pronouncements
|
In August 2014, the FASB issued
ASU 2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
. The new standard
requires management to assess the company’s ability to continue as a going concern. Disclosures are required if there is
substantial doubt as to the company’s continuation as a going concern within one year after the issue date of financial statements.
The standard provides guidance for making the assessment, including consideration of management’s plans which may alleviate
doubt regarding the company’s ability to continue as a going concern. ASU 2014-15 is effective for years ending after December
15, 2016. The Company adopted this standard for the year ending December 31, 2016.
In February 2016, the FASB issued
ASU 2016-02,
Leases
, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which
is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) 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 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were
made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewing
the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In March 2016, the FASB issued
ASU 2016-09,
Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting
, which
relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for
share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity
or liabilities; and (c) classification on the statement of cash flows. This standard is effective for fiscal years beginning
after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard as of
December 31, 2016. The adoption of this standard had no effect on our results of operation, cash flows, other than
presentation, or financial condition.
In April 2016, the FASB issued ASU
2016–10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments
in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the
following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining
the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer
goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides
a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right
to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render
more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606.
The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations,
cash flows or financial condition.
In April 2016, the FASB issued ASU
No. 2016-15,
“Classification of Certain Cash Receipts and Cash Payments”
ASU 2016 - provides guidance regarding
the classification of certain items within the statement of cash flows. ASU 2016-15 is effective for annual periods beginning
after December 15, 2017, with early adoption permitted. The Company does not believe this ASU will have an impact on our
results of operation, cash flows, other than presentation, or financial condition.
On November 17, 2016, the FASB issued
ASU No. 2016-18, “
Statement of Cash Flows (Topic 230): Restricted Cash”
, a consensus of the FASB’s Emerging
Issues Task Force (the “Task Force”). The new standard requires that the statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of
the restrictions. ASU No. 2016-18 is effective for public business entities for fiscal years beginning after December 15, 2017.
The Company does not believe this ASU will have an impact on our results of operation, cash flows, other than presentation, or
financial condition.
The Company does not expect
the adoption of other recently issued accounting pronouncements to have a significant impact on the Company’s results
of operations, financial position or cash flows.
Note E - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable,
accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the
current interest rates payable in relation to current market conditions.
Interest rate risk is the risk that the Company’s
earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility
of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company’s
earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of
these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.
Note F - Related Party Transactions
The Company’s current sole source of
supply of ECOWIN products is through Vegalab S. A., a Swiss company solely owned by David Selakovic, the Company’s controlling
shareholder. All products are sold to the Company at VSA's cost for the products from the manufacturer. During the six months ended
June 30, 2017, the Company incurred $301,200 for product purchases for resale from Vegalab S. A.
As of June 30, 2017 and December 31,
2016, the Company had outstanding accounts payable – related party of $1,912,614 and $1,727,857, respectively, for
purchases of inventory.
Note G - Note Payable to Investor
On August 24, 2016, the Company’s new
controlling stockholder, David Selakovic, agreed to loan the Company up to $300,000 at a rate of 4% per annum. As of December 31,
2016, Mr. Selakovic loaned the Company a total of $175,000, due on 60 days demand. During the six months ended June 30, 2017, the
Company repaid $172,056. The Company recorded accrued interest of $5,205 and $2,474 as of June 30, 2017 and December 31, 2016,
respectively, related to this note payable.
Note H - Common Stock Transactions
During the six months ended June 30, 2017,
the Company sold a total of 716,224 shares of common stock for total cash proceeds of $644,600.
Note I – Commitment and Contingencies
On July 20, 2016, the Company entered into
a lease agreement for warehouses located at 2542 Business Parkway Suite 1 and 2, Minden, Nevada. The facility is 24,276 square
feet with a lease term of 36 months at a current cost of $14,554 per month. The Company was also required to make a security deposit
of $14,500. During the six months ended June 30, 2017, the Company incurred rent expense of $109,345.
Future minimum obligations on the lease are:
2017
|
|
$
|
83,752
|
|
2018
|
|
|
167,504
|
|
2019
|
|
|
125,628
|
|
|
|
$
|
376,884
|
|