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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-54509
GOOD HEMP,
INC.
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(Name of Small Business Issuer in its charter)
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Nevada
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45-2578051
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(State of incorporation)
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(IRS Employer Identification No.)
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20311 Chartwell Center Drive, Suite 1469
Cornelius, NC
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28031
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(Address of principal executive office)
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(Zip Code)
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Registrant's telephone number, including area
code: 800-947-9197
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
Trading Symbol(s)
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Name of each exchange on which registered
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Not applicable
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Not applicable
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Not applicable
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Securities registered pursuant to Section 12(g) of the Act: Common
Stock, par value $0.001
Indicate by check mark if 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 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 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 if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K ☐
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
|
☐
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Accelerated filer
|
☐
|
Non-accelerated Filer
|
☒
|
Smaller reporting company
|
☒
|
|
Emerging growth company
|
☒
|
If an emerging growth company, indicate by checkmark 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.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act): Yes ☐ No ☒
On June 30, 2021, the last business day of the registrant’s most
recently completed second fiscal quarter, the aggregate market
value of the registrant’s common stock held by non-affiliates of
the registrant was approximately $1,451,996, based upon the closing
price on that date of the common stock of the registrant on the OTC
Link alternative quotation system of $1.50. For purposes of this
response, the registrant has assumed that its directors, executive
officers and beneficial owners of 5% or more of its common stock
are deemed to be affiliates of the registrant.
As of April 14, 2022, the Company had 27,712,260 outstanding shares
of common stock.
Documents incorporated by reference: None.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
or the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, which include but are
not limited to, statements concerning our business strategy, plans
and objectives, projected revenues, expenses, gross profit, income,
and mix of revenue. These forward-looking statements are based on
our current expectations, estimates and projections about our
industry, management’s beliefs and certain assumptions made by us.
Words such as “anticipates,” “expects,” “intends,” “plans,”
“predicts,” “potential,” “believes,” “seeks,” “hopes,” “estimates,”
“should,” “may,” “will,” “with a view to” and variations of these
words or similar expressions are intended to identify
forward-looking statements. These statements do not guarantee
future performance and are subject to risks, uncertainties and
assumptions that are difficult to predict. Therefore, our actual
results could differ materially and adversely from those expressed
in any forward-looking statements.
Item 1. Business
Throughout this Annual Report on Form 10-K, Good Hemp, Inc. is
referred to as “we,” “our,” “us,” the “Company,” or “Good
Hemp.”
The Company was formed as a Nevada corporation on November 26,
2007. The Company was involved in exploration and development of
mining properties until September 30, 2013, when it discontinued
operations. In June 2017, the Company’s creditors filed a petition
in the District Court of Harris County, Texas for the appointment
of a receiver. In August of 2017, the court appointed a receiver
(who was subsequently appointed as an officer and director of the
Company), and in February 2018, the receiver appointed William
Alessi as a director of the Company and then resigned as a director
and officer of the Company.
On February 6, 2019, the Company acquired trademarks and
intellectual property, which includes all rights and trade secrets
to the hemp-derived CBD-infused line of consumer beverages sold
under the “Good Hemp” brand. Since then, the Company has been
conducting operations under the “Good Hemp” trade name and through
the http://www.goodhemplivin.com/ website. Information on this
website is not a part of this report on Form 10-Q.
On April 30, 2019, the Company acquired from Mr. Spoone the “CANNA
HEMP” and “CANNA” trademarks including all rights and trade secrets
and related inventory. At June 30, 2021, the Company had not
attributed any value to these acquired trademarks.
On August 24, 2020, with an effective date of July 1, 2020, the
Company entered into a joint venture agreement with Paul Hervey
(“Hervey”), an individual, for the purpose of cultivating hemp on
approximately 9 acres of farmland and in approximately 3,700 square
feet of greenhouse space in North Carolina (referred to as “Olin
Farms”). In October 2021, Olin Farms ceased operations, and the
limited liability company joint venture entity was dissolved in
North Carolina.
On February 9, 2021, the Company formed Good Hemp Wellness, LLC, a
limited liability company formed under the laws of the State of
North Carolina, to sell CBD products to customers through
chiropractic offices. In October 2021, this company was dissolved
in North Carolina, and it is being treated as discontinued
operations in the consolidated financial statements. The Company
plans to sell Good Hemp Wellness CBD inventory directly.
On April 1, 2021, the Company entered into an agreement to purchase
Diamond Creek Group, LLC, a North Carolina limited liability
company which sells the Diamond Creek brand of high alkaline water
products, for a total purchase price of $643,000. On April 2, 2021,
the Company closed the acquisition and paid the initial $500,000
portion of the purchase price, and on April 23, 2021, paid the
$143,000 purchase price balance.
The Company is a North Carolina based company that is made up of
industry veterans focused on exploiting niche markets in the
beverage industry. The Company’s current products include high
alkaline water products, hemp-based beverage products under the
Good Hemp® brand, and CBD softgels under the Good Hemp Wellness
brand. Good Hemp® products include two lines of hemp-based
beverages described below. Good Hemp® products have been sold
throughout the United States since 2016 via Amazon.com, as well as
local retailers.
Products
Good Hemp® 2oh!, CANNA HEMP and CANNA are a line-up of refreshing,
all-natural, “good-for-you”, ready-to-drink waters in six flavors:
blueberry-blast, island coco-lime, kiwi-strawberry, lemon-twist,
mango-fandango and Q-cumbermint. Each Good Hemp® 2oh! beverage is
16.9 fluid ounces infused with 10 mg of hemp oil (CBD rich), 6g of
prebiotic fiber, has 0 g of sugar, contains no artificial
sweeteners or artificial flavors, is gluten free, vegan, and
contains 0 net carbs.
Good Hemp® fizz is a line-up of carbonated refreshing, all-natural,
“good-for-you”, “ready-to-drink carbonated beverages in three
flavors: blueberry-bam, mango-tango and citrus-twist. Each Good
Hemp® fizz beverage is 12 fluid ounces infused with 10 mg of hemp
oil (CBD rich), 6 g of prebiotic fiber, contains no artificial
sweeteners or artificial flavors, is gluten free and vegan.
Good Hemp Wellness is a line of CBD soft gels that uses a
proprietary super absorption formula which minimizes the nutrients
lost during the digestive process and allows consumers to absorb
more CBD in smaller doses.
Diamond Creek High Alkaline Water is a 9.5pH high alkaline natural
spring water, sourced from the highest quality, award winning
springs. Diamond Creek is available in one gallon, one liter and
half liter bottles and aids in balancing the body’s pH while
providing superior hydration resulting from a proprietary
ionization process.
Our Growth Strategy & Recent Merger
Agreements
We are focused on expanding our US distribution reach to service
more national chain stores; increase awareness of our brands in the
United States; securing additional chain, convenience and key
account distributors and store listings for our brands nationwide
and internationally; increasing our warehouse direct-to-retail
channel.
We are looking for strategic acquisitions and partnerships in the
beverage sector, such as Diamond Creek Group, LLC (“Diamond
Creek”), which we acquired in 2021.
On March 8, 2022, we entered into a Plan and Agreement of Merger
(the “PXS Merger Agreement”) with Petro X Solutions, Inc. (“PXS”),
a Wyoming corporation, pursuant to which a wholly-owned subsidiary
of the Company will merge (the “PXS Merger”) with and into PXS,
with PXS becoming our wholly-owned subsidiary as a result of the
PXS Merger. Pursuant to the PXS Merger Agreement, an aggregate of
100,000,000 shares of Company common stock will be issued to the
shareholders of PXS in the PXS Merger. The PXS Merger closing is to
occur upon the satisfaction of several conditions, including (i)
customary closing conditions, including the receipt of necessary
approval from each of the Company and PXS, the accuracy of the
representations and warranties of the other party, performance by
the other party of its obligations under the PXS Merger Agreement,
and the absence of any material adverse changes in the condition of
the other party, and (ii) the reformation of promissory notes
payable to our current management. Our management sees no
impediment to the consummation of the PXS Merger.
PXS markets competitively-priced, environmentally-friendly products
that are designed to work as well as or better than their toxic
competitors. Its primary product, EnviroXstreamTM, is a
plant-based, non-toxic, safe, yet powerful, cleaner/degreaser
technology that expedites the natural bio-degradation process of
hydrocarbons and other compounds. EnviroXstreamTM is currently a
California South Coast AQMD-Certified Clean Air Solvent, and in the
past has been, an EPA-designated Safer Choice product.
EnviroXstreamTM distinguishes itself by its efficacy, which is
buttressed by its “green” credentials.
On March 14, 2022, we entered into another Plan and Agreement of
Merger dated March 9, 2022 (the "Restoration Merger Agreement"),
with Restoration Artechs, Inc. ("Restoration"), a California
corporation, pursuant to which a wholly-owned subsidiary of the
Company will merge (the "Restoration Merger") with and into
Restoration, with Restoration becoming our wholly-owned subsidiary
as a result of the Restoration Merger. Pursuant to the Restoration
Merger Agreement, 25,000,000 shares of Company common stock will be
issued to the shareholder of Restoration in the Restoration Merger.
The Restoration Merger closing is to occur upon the satisfaction of
several conditions, including (i) customary closing conditions,
including the receipt of necessary approval from each of the
Company and Restoration, the accuracy of the representations and
warranties of the other party, performance by the other party of
its obligations under the Restoration Merger Agreement, and the
absence of any material adverse changes in the condition of the
other party, and (ii) the reformation of promissory notes payable
to our current management. Our management sees no impediment to the
consummation of the Restoration Merger.
Restoration is a Carlsbad, California-based restoration service
company specializing in surface restoration, especially commercial
and residential stainless steel surfaces. Through its subsidiary,
Barry’s Restore It All Products, LLC, it markets and sells to
businesses and consumers Scratch-B-GoneTM, a stainless steel
surface restoration kit, among other products.
Prominent Industry Acquisitions
Monster Beverage Corporation – In 2014, Coca Cola purchased a 16.7%
stake in Monster for $2.15 billion. Monster’s sales over the last
12 months were more than $2.6 billion.
VOSS Water® - slightly more than a 50% interest was sold for $105
million to the Reignwood Group (the parent company of Red Bull
China). Voss’s sales increased by 25% in 2015 to $77.5 million.
Vita Coco® - a 25% interest was sold for $165 million resulting in
a valuation of $660 million. Vita Coco’s sales increased 31% in
2014 to $421 million.
Sweet Leaf Tea® and Tradewinds brands – Nestle purchased these
brands for $100 million when sales were $53 million in 2010.
SUJA Juice - In 2015, Coca Cola invested $90 million for a 30%
stake and the merchant banking arm of Goldman Sachs also agreed to
pay $60 million for a 20% interest which places a value of $300
million. Sales were $42 million in 2014 and sales are projected to
be more than $70 million for 2015.
Bai Brands - Dr Pepper Snapple has invested $15 million for a 3%
interest which places a value of $500 million on the brand. Bai
Brands was projecting sales of $125 million for 2015.
Vitamin Water® - Coca-Cola® purchased Vitamin Water® for a reported
$4.1 billion when they were selling approximately 10 million cases
per year and had approximately $200 million in sales.
SOBE® - Pepsi-Cola® purchased SOBE® for a reported $378 million
when they were selling approximately 3 million cases per year and
had approximately $60 million in sales.
FUZE® - Coca-Cola® purchased FUZE® for a reported $300 million when
FUZE®, at the time, was selling approximately 7 million cases per
year and had approximately $140m in sales.
Arizona Iced Tea® - turned down an offer from Coca-Cola® for $2.1
billion. At the time of the offer, Arizona Iced Tea® was selling
approximately 25 million cases per year and had $500m in sales.
Industry Background
Non-alcoholic beverages are among the most widely distributed food
products in the world and are being sold through more than 400,000
retailers in the United States, our core market. The United States
has more than 2,600 beverage companies and 500 bottlers of beverage
products. Collectively they account for more than $100 billion in
annual sales. It is estimated that globally more than $300 billion
worth of non-alcoholic beverages are sold annually. The beverage
market is controlled by two giants, The Coca-Cola Company (“Coke”)
and PepsiCo, combining for over 70% of the non-alcoholic beverage
market. Carbonated beverage sales are slipping, while
non-carbonated beverage sales are growing. The demand for
“better-for you” and functional drinks are two of the fastest
growing beverage categories. Experts predict that beverage
companies that only offer carbonated beverages will have to work
hard to off-set flagging demand. Industry watchers believe that
growth will be largely confined to non-carbonated beverages and
will chiefly affect functional drinks.
Bottled water maintains a steady growth pace, ranking at the top of
beverage sales by volume in the United States. Total bottled water
sales reached $18.1B from 2019-2020 seeing a 5.7% year over year
growth. The global bottled water market size
is expected to reach USD 505.19 billion by 2028, according to a new
report by Grand View Research, Inc. It is expected to expand at a
CAGR of 11.1% from 2021 to 2028. The growing awareness regarding
the adverse health effects of consuming sugary drinks, such as
weight gain, obesity, diabetes, and heart disease, is supporting
the consumption of alternative beverages, such as still and
sparkling water.
The growth of the market is primarily attributed to rising
awareness regarding the importance of hydration. According to a
study conducted by the International Bottled Water Association in
2018, it was revealed that 93% of American citizens want bottled
water to be sold in most stores selling beverages. A substantial
part of the population prefers to quench their thirst using bottled
water over other beverages.
Increasing preference for nutrient-fortified water is trending
owing to the rising importance of health and wellness among buyers.
Bottled water demand has been increasing among travelers, working
professionals, and for use in households.
Since the signing of the 2018 Farm Bill, there has been a
significant boost in CBD store fronts, both brick and mortar, and
online retailers across the country. In 2019, total sales of
hemp-derived CBD consumer products in the U.S. were approximately
$1.2 billion. In the last year, consumers likely have become more
dependent on hemp-CBD products due to the events of 2020. We
believe these and other factors are the reason some experts have
projected CBD-related sales in 2020 to be nearly $2 billion and
grow to $6.9 billion by 2025.
Distribution Systems
Our distribution strategy is comprised of traditional beverage
distribution through established channels.
Direct Store Delivery (“DSD”) – DSD players, and regional and local
distributors touch over 90% of retail chains in the US. DSDs
primarily distribute beverages, chips, snacks and milk and provide
pre-sales, delivery and merchandising services to their customers.
Service levels are daily and weekly, and they require 25% to 30%
gross profit from sales to their customers. We will grant these
independent distributors the exclusive right in defined territories
to distribute finished cases of one or more of our products through
written agreements. These agreements typically include compensation
to those distributors in the event we provide product directly to
one of our regional retailers located in the distributor’s region.
We will choose our distributors based on their perceived ability to
build our brand franchise in convenience stores and grocery
stores.
Direct to Retail Channel (“Warehouse Direct”) – We are targeting
listings with large retail convenience store and grocery store
chains where we ship direct to the chain stores warehousing system.
Retailers must have warehousing and delivery capabilities. Services
to retailers will be provided by an assigned broker, approved by
us, to oversee pre-sale and merchandising services. Our direct to
retail channel of distribution is an important part of our strategy
to target large national or regional restaurant chains, retail
accounts, including mass merchandisers and premier food-service
businesses. Through these programs, we will negotiate directly with
the retailer to carry our products, and the account is serviced
through the retailer’s appointed distribution system. These
arrangements are terminable at any time by these retailers or us
and will contain no minimum purchase commitments.
Direct to Consumer – Our brands are available for direct retail
purchase on Amazon and Goodhemplivin.com. Additionally, specialty
stores can set up wholesale account at goodhemplivin.com.
Production Facilities
Our strategy is to outsource the manufacturing and warehousing of
our products to independent contract manufacturers (“co-packers”).
We purchase our raw materials from North American suppliers which
deliver to our third-party co-packers. We use two or more
co-packers to manufacture and package our products. Once our
products are manufactured, we store finished product in a warehouse
adjacent to each co-packer or in third party warehouses. Our
co-packers have been chosen based on their proximity to markets
covered by our distributors. Most of the ingredients used in the
formulation of our products are off-the shelf and thus readily
available. Under normal circumstances, no ingredient has a lead
time greater than three-to-six weeks. Other than minimum case
volume requirements per production run for most co-packers, we do
not have annual minimum production commitments with our co-packers.
Our co-packers may terminate their arrangements with us at any
time, in which case we could experience disruptions in our ability
to deliver products to our customers. We regularly review our
contract packing needs considering regulatory compliance and
logistical requirements and may add or change co-packers based on
those needs.
Raw Materials
Substantially all the raw materials used in the preparation,
bottling and packaging of our products are purchased by us or by
our contract manufacturers in accordance with our specifications.
The raw materials used in the preparation and packaging of our
products consists primarily of juice concentrates, natural flavors,
stevia, pure cane sugar, bottles, labels, trays and enclosures.
These raw materials are purchased from suppliers selected by us or
by our contract manufacturers. We believe that we have adequate
sources of raw materials, which are available from multiple
suppliers.
We purchase our flavor concentrate from several flavor concentrate
suppliers. Generally, all natural flavor suppliers own the
proprietary rights to the flavors. The development of new products
and flavors, independent suppliers bear a large portion of the
expense for product development, thereby enabling us to develop new
products and flavors at relatively low cost. We anticipate that for
future flavors and additional products, we may purchase flavor
concentrate from other flavor houses with the intention of
developing other sources of flavor concentrate for each of our
products. If we must replace a flavor supplier, we could experience
disruptions in our ability to deliver products to our customers,
which could have a material adverse effect on our results of
operations.
New Product Development
Our product philosophy will continue to be based on developing
products in those segments of the market that offer the greatest
chance of success such as health, wellness and natural refreshment
and rehydration, and we will continue to seek out underserved
market niches. We believe we can quickly respond, given our
technical and marketing expertise, to changing market conditions
with new and innovative products. We are committed to developing
products that are distinct, meet a quantifiable need, are
proprietary, lend themselves to a markup on production costs of
least a 60%, project a quality and healthy image, and can be
distributed through existing distribution channels. We are
identifying brands of other companies with a view to acquiring them
or taking on the exclusive distribution of their products.
Intellectual Property
We own the following intellectual property: Good Hemp® trademark,
Good Hemp 2oh!, Good Hemp fizz!, Canna Hemp and Canna beverage
formulations.
Seasonality
Our sales are expected to be seasonal and experience fluctuations
in quarterly results because of many factors. Historically, the
industry experiences an increase in revenues during the warm
weather months of April through September. Timing of customer
purchases will vary each year and sales can be expected to shift
from one quarter to another. Thus, we believe that period-to-period
comparisons of results of operations are not necessarily meaningful
and should not be relied upon as any indication of future
performance or results expected for the entire fiscal year.
Other Information
As of December 31, 2021, the Company had two employees.
The Company’s office is located at 20311 Chartwell Center Drive,
Ste. 1469, Cornelius, North Carolina, 28031.
Item 1A. Risk Factors.
Risks Related to our Financial Condition and Capital
Requirements
We have experienced recurring losses from operations
and negative cash flows from
operating activities
and anticipate that we will continue
to incur operating losses in the future.
We have experienced recurring losses from operations and negative
cash flows from operating activities. We expect to continue to
incur significant expenses related to our ongoing operations and
generate operating losses for the foreseeable future. The size of
our losses will depend, in part, on the rate of future expenditures
and our ability to generate revenues. We incurred a net loss of
approximately $4.8 million for the year ended December 31, 2021,
and our accumulated deficit increased to approximately $13.2
million as of December 31, 2021.
We may encounter unforeseen expenses, difficulties, complications,
delays, and other unknown factors that may adversely affect our
financial condition. Our prior losses and expected future losses
have had, and will continue to have, an adverse effect on our
financial condition. If our products do not achieve sufficient
market acceptance and our revenues do not increase significantly,
we may never become profitable. Even if we achieve profitability in
the future, we may not be able to sustain profitability in
subsequent periods. Our failure to become and remain profitable
would decrease the value of our company and could impair our
ability to raise capital, expand our business, diversify our
product offerings or continue our operations. A decline in the
value of our company could cause you to lose all or part of your
investment.
If we are not able to successfully execute on our
future operating plans, our financial condition and results of
operation may be materially adversely affected, and we may not be
able to continue as a going concern.
It is critical that we meet our sales goals and increase sales
going forward as our operating plan already reflects prior
significant cost containment measures and may make it difficult to
achieve top-line growth if further significant reductions become
necessary. If we do not meet our sales goals, our available cash
and working capital will decrease and our financial condition will
be negatively impacted.
We may need additional financing in the future, which
may not be available when needed or may be costly and
dilutive.
We will require additional financing to support our working capital
needs in the future. The amount of additional capital we may
require, the timing of our capital needs and the availability of
financing to fund those needs will depend on a number of factors,
including our strategic initiatives and operating plans, the
performance of our business and the market conditions for debt or
equity financing. Additionally, the amount of capital required will
depend on our ability to meet our sales goals and otherwise
successfully execute our operating plan. We believe it is
imperative that we meet these sales objectives in order to lessen
our reliance on external financing in the future. We intend to
continually monitor and adjust our operating plan as necessary to
respond to developments in our business, our markets and the
broader economy. Although we believe various debt and equity
financing alternatives will be available to us to support our
working capital needs, financing arrangements on acceptable terms
may not be available to us when needed. Additionally, these
alternatives may require significant cash payments for interest and
other costs or could be highly dilutive to our existing
shareholders. Any such financing alternatives may not provide us
with sufficient funds to meet our long-term capital requirements.
If necessary, we may explore strategic transactions that we
consider to be in the best interest of the company and our
shareholders, which may include, without limitation, public or
private offerings of debt or equity securities, a rights offering,
and other strategic alternatives; however, these options may not
ultimately be available or feasible when needed.
If we are unable to continue as a going concern, our
securities will have little or no value.
Although our audited financial statements for the year ended
December 31, 2020, were prepared under the assumption that we would
continue our operations as a going concern, the report of our
independent registered public accounting firm that accompanies our
financial statements for the year ended December 31, 2020, contains
a going concern qualification in which such firm expressed
substantial doubt about our ability to continue as a going concern,
based on the financial statements at that time. Specifically, as
noted above, we have experienced recurring losses from operations
and negative cash flows from operating activities, and we expect to
continue to incur significant expenses and operating losses for the
foreseeable future. These prior losses and expected future losses
have had, and will continue to have, an adverse effect on our
financial condition. In addition, as noted above, continued
operations and our ability to continue as a going concern may be
dependent on our ability to obtain additional financing in the near
future and thereafter, and there are no assurances that such
financing will be available to us at all or will be available in
sufficient amounts or on reasonable terms. Our financial statements
do not include any adjustments that may result from the outcome of
this uncertainty. If we are unable to generate additional funds in
the future through sales of our products, financings or from other
sources or transactions, we will exhaust our resources and will be
unable to continue operations. If we cannot continue as a going
concern, our shareholders would likely lose most or all of their
investment in us.
We have a limited operating history.
The Company, while incorporated in 2007, began carrying on its
current beverage business in 2019 and did not generate revenue from
the sale of products until that year. We are therefore subject to
many of the risks common to early-stage enterprises, including
under-capitalization, cash shortages, limitations with respect to
personnel, financial, and other resources and lack of revenues.
There is no assurance that we will be successful in achieving a
return on shareholders’ investment, and the likelihood of success
must be considered in light of the early stage of our beverage
operations.
We may incur significant debt to finance our
operations.
There is no assurance that we will not incur debt in the future,
that we will have sufficient funds to repay our indebtedness, or
that we will not default on our debt, jeopardizing our business
viability. Furthermore, we may not be able to borrow or raise
additional capital in the future to meet the Company’s needs or to
otherwise provide the capital necessary to conduct our
business.
Risk Factors Relating to Our Business and
Industry
We compete in an industry that is brand-conscious, so
brand name recognition and acceptance of our products are critical
to our success.
Our business is substantially dependent upon awareness and market
acceptance of our products and brands by our target market: trendy,
young and/or health-conscious consumers looking for a distinctive
tonality and/or the perceived benefits of hemp in their beverage
choices. In addition, our business depends on acceptance by our
independent distributors and retailers of our brands as beverage
brands that have the potential to provide incremental sales growth.
If we are not successful in the growth of our brand and product
offerings, we may not achieve and maintain satisfactory levels of
acceptance by independent distributors and retail consumers. In
addition, we may not be able to effectively execute our marketing
strategies in light of the various closures and event cancellations
caused by the COVID-19 outbreak. Any failure of our brands to
maintain or increase acceptance or market penetration would likely
have a material adverse effect on our revenues and financial
results.
Our brand and image are keys to our business and any
inability to maintain a positive brand image could have a material
adverse effect on our results of operations.
Our success depends on our ability to maintain brand image for our
existing products and effectively build up brand image for new
products and brand extensions. We cannot predict whether our
advertising, marketing and promotional programs will have the
desired impact on our products’ branding and on consumer
preferences. In addition, negative public relations and product
quality issues, including negative perceptions regarding the hemp
industry, whether real or imagined, could tarnish our reputation
and image of the affected brands and could cause consumers to
choose other products. Our brand image can also be adversely
affected by unfavorable reports, studies and articles, litigation,
or regulatory or other governmental action, whether involving our
products or those of our competitors.
Competition from traditional and large, well-financed
non-alcoholic beverage manufacturers may adversely affect our
distribution relationships and may hinder development of our
existing markets, as well as prevent us from expanding our
markets.
The beverage industry is highly competitive. We compete with other
beverage companies not only for consumer acceptance but also for
shelf space in retail outlets and for marketing focus by our
distributors, all of whom also distribute other beverage brands.
Our products compete with all non-alcoholic beverages, most of
which are marketed by companies with substantially greater
financial resources than ours. Some of these competitors are
placing severe pressure on independent distributors not to carry
competitive hemp brands such as ours. We also compete with regional
beverage producers and “private label” soft drink suppliers.
Our direct competitors in the sparkling, flavored-water, and energy
drink beverage categories include traditional large beverage
companies and distributors, and regional premium soft and energy
drink companies. These national and international competitors have
advantages such as lower production costs, larger marketing
budgets, greater financial and other resources and more developed
and extensive distribution networks than ours. We may not be able
to grow our volumes or maintains our selling prices, whether in
existing markets or as we enter new markets.
Increased competitor consolidations, market-place competition,
particularly among branded beverage products, and competitive
product and pricing pressures could impact our earnings, market
share and volume growth. If, due to such pressure or other
competitive threats, we are unable to sufficiently maintain or
develop our distribution channels, we may be unable to achieve our
current revenue and financial targets. As a means of maintaining
and expanding our distribution network, we intend to introduce
product extensions and additional brands. We may not be successful
in doing this, or it may take us longer than anticipated to achieve
market acceptance of these new products and brands, if at all.
Other companies may be more successful in this regard over the long
term. Competition, particularly from companies with greater
financial and marketing resources than ours, could have a material
adverse effect on our existing markets, as well as on our ability
to expand the market for our products.
We compete in an industry characterized by rapid
changes in consumer preferences and public perception, so our
ability to continue developing new products to satisfy our
consumers’ changing preferences will determine our long-term
success.
Failure to introduce new brands, products or product extensions
into the marketplace as current ones mature and to meet our
consumers’ changing preferences could prevent us from gaining
market share and achieving long-term profitability. Product
lifecycles can vary, and consumers’ preferences and loyalties
change over time. Although we try to anticipate these shifts and
innovate new products to introduce to our consumers, we may not
succeed. Customer preferences also are affected by factors other
than taste, such as health and nutrition considerations and obesity
concerns, shifting consumer needs, changes in consumer lifestyles,
increased consumer information and competitive product and pricing
pressures. Sales of our products may be adversely affected by the
negative publicity associated with these issues. In addition, there
may be a decreased demand for our products as a result of the
COVID-19 outbreak. If we do not adequately anticipate or adjust to
respond to these and other changes in customer preferences, we may
not be able to maintain and grow our brand image and our sales may
be adversely affected.
We may experience a reduced demand for some of our
products due to health concerns (including obesity) and legislative
initiatives against sweetened beverages.
Consumers are concerned about health and wellness; public health
officials and government officials are increasingly vocal about
obesity and its consequences. There has been a trend among some
public health advocates and dietary guidelines to recommend a
reduction in sweetened beverages, as well as increased public
scrutiny, new taxes on sugar-sweetened beverages (as described
below), and additional governmental regulations concerning the
marketing and labeling/packing of the beverage industry. Additional
or revised regulatory requirements, whether labeling, tax or
otherwise, could have a material adverse effect on our financial
condition and results of operations. Further, increasing public
concern with respect to sweetened beverages could reduce demand for
our sweetened beverage products.
Legislative or regulatory changes that affect our
products, including new
taxes, could reduce demand for
products or increase our costs.
Taxes imposed on the sale of certain of our products by federal,
state, and local governments in the United States, or other
countries in which we operate could cause consumers to shift away
from purchasing our beverages. Several municipalities in the United
States have implemented or are considering implementing taxes on
the sale of certain “sugared” beverages, including non-diet soft
drinks, fruit drinks, energy drinks, teas, and flavored waters to
help fund various initiatives. These taxes could materially affect
our business and financial results as we current sell flavored
water beverages, sparkling beverages, and energy drink
beverages.
Our ability to develop and commercialize hemp beverages
and comply with laws and regulations
governing cannabis, hemp or related
products will affect our operational results.
As of December 31, 2021, approximately forty-eight states
authorized industrial hemp programs pursuant to the 2018 farm bill
(the Agricultural Improvement Act of 2018, the “2018 Farm Bill”),
which legalized the regulated production of hemp.
The 2018 Farm Bill was signed into law on December 20, 2018. The
2018 Farm Bill removed hemp from the U.S. Controlled Substances Act
(the “CSA”) and established a federal regulatory framework for hemp
production in the United States. Among other provisions, the 2018
Farm Bill: (a) explicitly amends the CSA to exclude all parts of
the cannabis plant (including its cannabinoids, derivatives, and
extracts) containing a delta-9 THC concentration of not more than
0.3% on a dry weight basis from the CSA’s definition of
“marihuana”; (b) permits the commercial production and sale of
hemp; (c) precludes states, territories, and Indian tribes from
prohibiting the interstate transport of lawfully-produced hemp
through their borders; and (d) establishes the USDA as the primary
federal agency regulating the cultivation of hemp in the United
States, while allowing states, territories, and Indian tribes to
obtain (or retain) primary regulatory authority over hemp
activities within their borders after receiving approval of their
proposed hemp production plan from the USDA. Any such plan
submitted by a state, territory, or Indian tribe to the USDA must
meet or exceed minimum federal standards and receive USDA approval.
Any state, territory, or Indian tribe that does not submit a plan
to the USDA, or whose plan is not approved by the USDA, will be
regulated by the USDA; provided that, states retain the ability to
prohibit hemp production within their borders.
Marijuana continues to be classified as a Schedule I substance
under the CSA. As a result, any cannabinoids (including CBD)
derived from marijuana, as opposed to hemp, or any products derived
from hemp containing in excess of 0.3% THC on a dry-weight basis,
remain Schedule I substances under U.S. federal law. Cannabinoids
derived from hemp are indistinguishable from those derived from
marijuana, and confusion surrounding the nature of our beverage
products containing CBD and any hemp we cultivate and sale in
connection with our joint venture with Hervey to cultivate hemp,
inconsistent interpretations of the definition of “hemp”,
inaccurate or incomplete testing, farming practices and law
enforcement vigilance or lack of education could result in our
products being intercepted by federal and state law enforcement as
marijuana and could interrupt and/or have a material adverse impact
on the Company’s business. The Company could be required to
undertake processes that could delay shipments, impede sales or
result in seizures, proper or improper, that would be costly to
rectify or remove and which could have a material adverse effect on
the business, prospects, results of operations or financial
condition of the Company. If the Company mistakes in processing or
labeling and THC in excess of 0.3% on a dry-weight basis was found
in our products, the Company could be subject to enforcement and
prosecution under local, state, and federal laws which would have a
negative impact on the Company’s business and operations.
Under the 2018 Farm Bill, states have authority to adopt their own
regulatory regimes, and as such, regulations will likely continue
to vary on a state-by-state basis. States take varying approaches
to regulating the production and sale of hemp and hemp-derived
products under state food and drug laws. The variance in state law
and that state laws governing hemp production are rapidly changing
may increase the chance of unfavorable law enforcement
interpretation of the legality of Company’s operations as they
relate to the cultivation of hemp. Further, such variance in state
laws that may frequently change increases the Company’s compliance
costs and risk of error.
While some states explicitly authorize and regulate the production
and sale of hemp products or otherwise provide legal protection for
authorized individuals to engage in commercial hemp activities,
other states maintain outdated drug laws that do not distinguish
between marijuana, hemp and/or hemp-derived CBD, resulting in hemp
being classified as a controlled substance under state law. In
these states, sale of CBD, notwithstanding origin, is either
restricted to state medical or adult-use marijuana program
licensees or remains otherwise unlawful under state criminal laws.
Variance in hemp regulation across jurisdictions is likely to
persist. This patchwork of state laws may, for the foreseeable
future, materially impact the Company’s business and financial
condition, limit the accessibility of certain state markets, cause
confusion amongst regulators, and increase legal and compliance
costs.
There are no express protections in the United States under
applicable federal or state law for possessing or processing hemp
biomass derived from lawful hemp not exceeding 0.3% THC on a dry
weight basis and intended for use in finished product, but that may
temporarily exceed 0.3% THC during the interim processing stages.
While it is a common occurrence for hemp biomass to have variance
in THC content during interim processing stages after cultivation
but prior to use in finished products, there is risk that state or
federal regulators or law enforcement could take the position that
such hemp biomass is a Schedule I controlled substance in violation
of the CSA and similar state laws. Further, there is a risk that
North Carolina state regulators (where hemp will be cultivated
pursuant to our joint venture with Paul Hervey) and/or law
enforcement may interpret provisions of North Carolina law
prohibiting unlawful marijuana activity to apply to in-process hemp
at any joint venture facility so that such activity is considered
unlawful under state law.
In the event that the Company’s operations are deemed to violate
any laws or if we are deemed to be assisting others to violate a
state or federal law, the Company could be subject to enforcement
actions and penalties, and any resulting liability could cause the
Company to modify or cease its operations.
Continued development of the industrial hemp and cannabis
industries will be dependent upon new legislative authorization of
industrial hemp and cannabis at the state level, and further
amendment or supplementation of legislation at the federal level.
Any number of events or occurrences could slow or halt progress all
together in this space. While progress within the industrial hemp
and cannabis industries is currently encouraging, growth is not
assured. While there appears to be ample public support for
favorable legislative action, numerous factors may impact or
negatively affect the legislative process(es) within the various
states where we have business interests. Any one of these factors
could slow or halt use of industrial hemp and cannabis, which could
negatively impact our business and financial results.
In addition, the general manufacture, labeling and distribution of
our beverage products is regulated by various federal, state, and
local agencies. These governmental authorities may commence
regulatory or legal proceedings, which could restrict the
permissible scope of our product claims or the ability to sell
products in the future. The FDA regulates our products to ensure
that the products are not adulterated or misbranded. In particular,
we would be subject to regulation by the federal government and
other state and local agencies as a result of the development and
commercialization of cannabidiol (CBD) products. The shifting
compliance environment and the need to build and maintain robust
systems to comply with different compliance in multiple
jurisdictions increases the possibility that we may violate one or
more of the requirements. If our operations are found to be in
violation of any of such laws or any other governmental regulations
that apply to our business, we may be subject to penalties,
including, without limitation, civil and criminal penalties,
damages, fines, the curtailment or restructuring of our operations,
any of which could adversely affect the ability to operate our
business and its financial results.
International expansion efforts would likely
significantly increase our operational expenses.
We may in the future expand into other geographic areas, which
could increase our operational, regulatory, compliance,
reputational and foreign exchange rate risks. The failure of our
operating infrastructure to support such expansion could result in
operational failures and regulatory fines or sanctions. Future
international expansion could require us to incur a number of
up-front expenses, including those associated with obtaining
regulatory approvals, as well as additional ongoing expenses,
including those associated with infrastructure, staff and
regulatory compliance. We may not be able to successfully identify
suitable acquisition and expansion opportunities or integrate such
operations successfully with our existing operations.
Our reliance on distributors, retailers and brokers
could affect our ability to efficiently and profitably distribute
and market our products, maintain our existing markets and expand
our business into other geographic markets.
Our ability to maintain and expand our existing markets for our
products, and to establish markets in new geographic distribution
areas, is dependent on our ability to establish and maintain
successful relationships with reliable distributors, retailers and
brokers strategically positioned to serve those areas. Most of our
distributors, retailers and brokers sell and distribute competing
products, including non-alcoholic and alcoholic beverages, and our
products may represent a small portion of their businesses. The
success of our distribution network will depend on the performance
of the distributors, retailers, and brokers in our network. There
is a risk they may not adequately perform their functions within
the network by, without limitation, failing to distribute to
sufficient retailers or positioning our products in localities that
may not be receptive to our product. Our ability to incentivize and
motivate distributors to manage and sell our products is affected
by competition from other beverage companies who have greater
resources than we do. To the extent that our distributors,
retailers and brokers are distracted from selling our products or
do not employ sufficient efforts in managing and selling our
products, including re-stocking the retail shelves with our
products, our sales and results of operations could be adversely
affected. Furthermore, such third parties’ financial position or
market share may deteriorate, which could adversely affect our
distribution, marketing and sales activities.
Our ability to maintain and expand our distribution network and
attract additional distributors, retailers and brokers will depend
on a number of factors, some of which are outside our control. Some
of these factors include:
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the level of demand for our brands and products in a particular
distribution area;
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our ability to price our products at levels competitive with those
of competing products; and
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our ability to deliver products in the quantity and at the time
ordered by distributors, retailers and brokers.
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We may not be able to successfully manage all or any of these
factors in any of our current or prospective geographic areas of
distribution. Our inability to achieve success with regards to any
of these factors in a geographic distribution area will have a
material adverse effect on our relationships in that particular
geographic area, thus limiting our ability to maintain or expand
our market, which will likely adversely affect our revenues and
financial results.
We incur significant time and expense in attracting and
maintaining key distributors, and loss of distributors or retails
accounts would harm our business.
Our marketing and sales strategy depends in large part on the
availability and performance of our independent distributors. We
currently do not have, nor do we anticipate in the future that we
will be able to establish, long-term contractual commitments from
some of our distributors. We may not be able to maintain our
current distribution relationships or establish and maintain
successful relationships with distributors in new geographic
distribution areas. Moreover, there is the additional possibility
that we may have to incur additional expenditures to attract and
maintain key distributors in one or more of our geographic
distribution areas in order to profitably exploit our geographic
markets.
If we lose distributors or national or regional retail accounts,
our financial condition and results of operations could be
adversely affected. While we continually seek to expand and upgrade
our distributor network and retail relationships, we may not be
able to maintain our distributor or retailer base. The loss of any
of our distributors or retail accounts could have adverse effects
on our revenues, liquidity and financial results, could negatively
impact our ability to retain our relationships with our other
distributors and our ability to expand our market, and would place
increased dependence on our other independent distributors and
national accounts.
We rely on suppliers, manufacturers and contractors,
and events adversely affecting them would adversely affect
us.
The Company intends to maintain a full supply chain for the
provision of its hemp-based beverage products. Due to the novel and
variable regulatory landscape for hemp and CBD production in the
United States, the Company’s third-party hemp and beverage
suppliers, manufacturers and contractors may elect, at any time, to
decline or withdraw services necessary for the Company’s
operations. Loss of these suppliers, manufacturers and contractors,
including for non-hemp-based ingredients in the Company’s beverage
products, may have a material adverse effect on the Company’s
business, financial condition, results of operations and
prospects.
In addition, any significant interruption, negative change in the
availability or economics of the supply chain or increase in the
prices for the ingredients in the Company’s products provided by
any such third-party suppliers, manufacturers and contractors could
materially impact the Company’s business, financial condition,
results of operations and prospects. Any inability to secure
required supplies or to do so on appropriate terms could have a
materially adverse impact on the Company’s business, financial
condition, results of operations and prospects.
Wholesale price volatility may adversely affect
operations.
The beverage industry is margin-based with gross profits typically
dependent on the excess of sales prices over costs. Consequently,
profitability is sensitive to fluctuations in wholesale and retail
prices caused by changes in supply (which itself depends on other
factors such as weather, fuel, equipment and labor costs, shipping
costs, economic situation and demand), taxes, government programs
and policies for the beverage and hemp industries (including price
controls and wholesale price restrictions that may be imposed by
government agencies responsible for the regulation of sweetened
beverages and hemp), and other market conditions, all of which are
factors beyond the control of the Company. The Company’s operating
income will be sensitive to changes in the price of hemp and other
beverage ingredients, and the overall condition of the beverage and
hemp industries, as the Company’s profitability is directly related
to the price of hemp and our other beverage ingredients. There is
currently not an established market price for hemp, and the price
of hemp is affected by numerous factors beyond the Company’s
control. Ingredient price volatility may have a material adverse
effect on the Company’s business, financial condition, and results
of operations.
Results of future clinical research could reduce the
demand for hemp beverage products.
To date, there is limited standardization in the research of the
effects of hemp and hemp-based CBD, and future clinical research
studies may lead to conclusions that dispute or conflict with the
Company’s understanding and belief regarding the medical benefits,
viability, safety, efficacy, dosing and social acceptance of hemp
and hemp-based CBD. Research in the United States and
internationally regarding the medical benefits, viability, safety,
efficacy and dosing of hemp and isolated cannabinoids (such as CBD)
remains in relatively early stages.
Future research and clinical trials may draw opposing conclusions
to statements in this prospectus or could reach different or
negative conclusions regarding the medical benefits, viability,
safety, efficacy, dosing or other facts and perceptions related to
hemp and CBD, which could adversely affect social acceptance of
hemp and CBD products and the demand for the Company’s beverage
products.
The Company may sustain losses that cannot be recovered
through insurance or other preventative measures.
There is no assurance that the Company will not incur uninsured
liabilities and losses as a result of the conduct of its business.
While the Company currently has some liability insurance coverage,
once capital is available to purchase additional liability
insurance, the Company plans to increase its comprehensive
liability insurance. The Company also intends to evaluate the
availability and cost of property casualty and business
interruption insurance, neither of which the Company currently has.
Should uninsured losses occur, shareholders could lose their
invested capital.
The Company may be subject to product liability claims
and other claims of our customers and partners.
The sale of beverage products to consumers involves a certain level
of risk of product liability claims and the associated adverse
publicity. Because consumption of the Company’s beverage products
could cause injury to consumers if packaging or ingredients are
defective, we are subject to a risk of claims for such injuries and
damages. We could also be named as co-parties in product liability
suits that are brought against manufacturing partners that produce
our beverage products, packaging for those products, or the
ingredients in those products.
In addition, our customers and partners may bring suits against us
alleging damages for the failure of our products to meet stated
specifications or other requirements. Any such suits, even if not
successful, could be costly, disrupt the attention of our
management and damage our negotiations with distributors and/or
customers. Any attempt by us to limit our product liability in our
contracts may not be enforceable or may be subject to exceptions.
While we do have product liability insurance, our amounts of
coverage may be inadequate to cover all potential liability claims.
Insurance coverage, particularly as it relates to products relating
to the hemp industry, is expensive, and additional coverage may be
difficult to obtain. Also, additional insurance coverage may not be
available in the future on acceptable terms and may not be
sufficient to cover potential claims. We cannot be sure that our
contract manufacturers or manufacturing partners who produce our
beverage products, packaging and ingredients will have adequate
insurance coverage themselves to cover against potential claims. If
we experience a large insured loss, it may exceed any insurance
coverage limits we have at that time, or our insurance carrier may
decline to cover us or may raise our insurance rates to
unacceptable levels, any of which could impair our financial
position and potentially cause us to go out of business.
If we encounter product recalls or other product
quality issues, our business may suffer.
Product quality issues, real or imagined, or allegations of product
contamination, even when false or unfounded, could tarnish our
image and could cause consumers to choose other products. In
addition, because of changing government regulations or
implementation thereof, or allegations of product contamination, we
may be required from time to time to recall products entirely or
from specific markets. Product recalls could affect our
profitability and could negatively affect brand image.
It is difficult to predict the timing and amount of our
sales because our distributors are not required to place minimum
orders with us.
Our independent distributors and national accounts are not
generally required to place minimum monthly orders for our
products. In order to reduce their inventory costs, independent
distributors typically order products from us on a “just in time”
basis in quantities and at such times based on the demand for the
products in a particular distribution area. Accordingly, we cannot
predict the timing or quantity of purchases by any of our
independent distributors or whether any of our distributors will
continue to purchase products from us in the same frequencies and
volumes as they may have done in the past. Additionally, our larger
distributors and regional partners may make orders that are larger
than we have historically been required to fill. Shortages in
inventory levels, supply of raw materials or other key supplies
could negatively affect us.
If we do not adequately manage our inventory levels,
our operating results could be adversely
affected.
We need to maintain adequate inventory levels to be able to deliver
products to distributors on a timely basis. Our inventory supply
depends on our ability to correctly estimate demand for our
products. Our ability to estimate demand for our products is
imprecise, particularly for new products, seasonal promotions and
new markets. If we materially underestimate demand for our products
or are unable to maintain sufficient inventory of raw materials, we
might not be able to satisfy demand on a short-term basis. If we
overestimate distributor or retailer demand for our products, we
may end up with too much inventory, resulting in higher storage
costs, increased trade spend and the risk of inventory spoilage. If
we fail to manage our inventory to meet demand, we could damage our
relationships with our distributors and retailers and could delay
or lose sales opportunities, which would unfavorably impact our
future sales and adversely affect our operating results. In
addition, if the inventory of our products held by our distributors
and retailers is too high, they will not place orders for
additional products, which would also unfavorably impact our sales
and adversely affect our operating results.
If we fail to maintain relationships with our
independent contract manufacturers, our business could be
harmed.
We do not manufacture our products but instead outsource the
manufacturing process to third-party bottlers and independent
contract manufacturers (co-packers). We do not own the
manufacturing facilities, or the equipment required to manufacture
and package our beverage products, and we do not anticipate
bringing the manufacturing process in-house in the future. Our
ability to maintain effective relationships with contract
manufacturers and other third parties for the production and
delivery of our beverage products in a particular geographic
distribution area is important to the success of our operations
within each distribution area. Competition for contract
manufacturers’ business is intense, especially in the United
States, and this could make it more difficult for us to obtain new
or replacement manufacturers, or to locate back-up manufacturers,
in our various distribution areas, and could also affect the
economic terms of our agreements with our existing manufacturers.
We may not be able to maintain our relationships with current
contract manufacturers or establish satisfactory relationships with
new or replacement contract manufacturers, whether in existing or
new geographic distribution areas. The failure to establish and
maintain effective relationships with contract manufacturers for a
distribution area could increase our manufacturing costs and
thereby materially reduce gross profits from the sale of our
products in that area. Poor relations with any of our contract
manufacturers could adversely affect the amount and timing of
product delivered to our distributors for resale, which would in
turn adversely affect our revenues and financial condition. In
addition, our agreements with our contract manufacturers are
terminable at any time, and any such termination could disrupt our
ability to deliver products to our customers.
Our dependence on independent contract manufacturers
could make management of our manufacturing and distribution efforts
inefficient or unprofitable.
We are expected to arrange for our contract manufacturing needs
sufficiently in advance of anticipated requirements, which is
customary in the contract manufacturing industry for comparably
sized companies. Based on the cost structure and forecasted demand
for the particular geographic area where our contract manufacturers
are located, we must evaluate which of contract manufacturers to
use. To the extent demand for our products exceeds available
inventory or the production capacity of our contract manufacturing
arrangements, or orders are not submitted on a timely basis, we
will be unable to fulfill distributor orders on demand. Conversely,
we may produce more product inventory than warranted by the actual
demand for it, resulting in higher storage costs and the potential
risk of inventory spoilage. Our failure to accurately predict and
manage our contract manufacturing requirements and our inventory
levels may impair relationships with our independent distributors
and key accounts, which, in turn, would likely have a material
adverse effect on our ability to maintain effective relationships
with those distributors and key accounts.
Increases in costs or shortages of raw materials could
harm our business and financial results.
The principal raw materials we use or supply to our contract
manufacturers include plastic bottles and lids, aluminum cans,
labels and cardboard cartons, aluminum closures, hemp, and other
beverage ingredients. In addition, certain of our contract
manufacturing arrangements allow such contract manufacturers to
increase their charges to us based on their own cost increases.
These manufacturing and ingredient costs are subject to
fluctuation. Substantial increases in the prices of ingredients,
raw materials and packaging materials, used to produce our
products, to the extent that they cannot be recouped through
increases in the prices of finished beverage products, would
increase our operating costs and could reduce our profitability. If
the supply of these raw materials is impaired or if prices increase
significantly, it could affect the affordability of our products
and reduce sales.
If we or our contract manufacturers are unable to secure sufficient
ingredients or raw materials including glass, sugar, and other key
supplies, we might not be able to satisfy demand for our beverage
products on a short-term basis. Moreover, in the past there have
been industry-wide shortages of concentrates, supplements and
sweeteners, and these shortages could occur again from time to time
in the future, which could interfere with and delay production of
our products and could have a material adverse effect on our
business and financial results.
In addition, suppliers could fail to provide ingredients or raw
materials on a timely basis, or fail to meet our performance
expectations, for a number of reasons, including, for example,
disruption to the global supply chain as a result of the COVID-19
outbreak, which could cause a serious disruption to our business,
increase our costs, decrease our operating efficiencies and have a
material adverse effect on our business, results of operations and
financial condition.
Increases in costs of
energy and increased regulations may have an adverse impact on our
gross margin.
Over the past few years, volatility in the global oil markets has
resulted in high fuel prices, which many shipping companies have
passed on to their customers by way of higher base pricing and
increased fuel surcharges. If fuel prices increase, we expect to
experience higher shipping rates and fuel surcharges, as well as
energy surcharges on our raw materials. It is hard to predict what
will happen in the fuel markets in 2021 and beyond. Due to the
price sensitivity of our products, we may not be able to pass such
increases on to our customers.
Disruption within our supply chain, contract
manufacturing or distribution channels could have an adverse effect
on our business, financial condition and results of
operations.
Our ability, through our suppliers, business partners, contract
manufacturers, independent distributors, and retailers, to make,
move and sell products is critical to our success. Damage or
disruption to our suppliers or to manufacturing or distribution
capabilities due to weather, natural disaster, fire or explosion,
terrorism, pandemics such as influenza and the novel coronavirus
(COVID-19), labor strikes or other reasons, could impair the
manufacture, distribution and sale of our products. Many of these
events are outside of our control. Failure to take adequate steps
to protect against or mitigate the likelihood or potential impact
of such events, or to effectively manage such events if they occur,
could adversely affect our business, financial condition and
results of operations.
If we are unable to attract and retain key personnel,
our efficiency and operations would be adversely affected; in
addition, staff turnover causes uncertainties and could harm our
business.
Our success depends on our ability to attract and retain highly
qualified employees in such areas as finance, sales, marketing and
product development and distribution. We compete to hire new
employees, and, in some cases, must train them and develop their
skills and competencies. We may not be able to provide our
employees with competitive salaries, and our operating results
could be adversely affected by increased costs due to increased
competition for employees, higher employee turnover or increased
employee benefit costs.
Recently, we have experienced significant changes in our sales
personnel, and more could occur in the future. Changes to
operations, policies and procedures, which can often occur with the
appointment of new personnel, can create uncertainty, may
negatively impact our ability to execute quickly and effectively,
and may ultimately be unsuccessful. In addition, transition periods
are often difficult as the new Company personnel gain detailed
knowledge of our operations, and friction can result from changes
in strategy and management style. Employee turnover inherently
causes some loss of institutional knowledge, which can negatively
affect strategy and execution. Until we integrate new personnel,
and unless they are able to succeed in their positions, we may be
unable to successfully manage and grow our business, and our
financial condition and profitability may suffer.
Further, to the extent we experience additional personnel turnover,
our operations, financial condition, and employee morale could be
negatively impacted. If we are unable to attract and retain
qualified management and sales personnel, our business could
suffer. Moreover, our operations could be negatively affected if
employees are quarantined as the result of exposure to a contagious
illness such as COVID-19.
If we lose the services
of our Chief Executive Officer, our
operations could be disrupted, and our business could be
harmed.
Our business plan relies significantly on the continued services of
William Alessi, who we hired as our Chief Executive Officer in
February 2018. If we were to lose the services of Mr. Alessi, our
ability to execute our business plan could be materially
impaired.
Management cannot guarantee that its relationship with
the Company does not create conflicts of
interest.
The relationship of management to the Company could create
conflicts of interest. While management has a fiduciary duty to the
Company, it also determines its compensation from the Company.
Management’s compensation from the Company has not been determined
pursuant to arm’s-length negotiation.
We are required to indemnify our directors and
officers.
The Articles of Incorporation and Bylaws provide that we will
indemnify its officers and directors to the maximum extent
permitted by Nevada law, provided that the officer or director
acted in bad faith or breached his or her duty to us or our
stockholders, that the officer or director acted in bad faith, or
that it is more likely than not that it will ultimately be
determined that the officer or director has not met the standards
of conduct which make it permissible for under Nevada law for the
Company to indemnify the officer or director. If we were called
upon to indemnify an officer or director, then the portion of its
assets expended for such purpose would reduce the amount otherwise
available for the Company’s business.
If we fail to protect our trademarks and trade secrets,
we may be unable to successfully market our products and compete
effectively.
We rely on a combination of trademark and trade secrecy laws,
confidentiality procedures and contractual provisions to protect
our intellectual property rights. Failure to protect our
intellectual property could harm our brand and our reputation, and
adversely affect our ability to compete effectively. Further,
enforcing or defending our intellectual property rights, including
our trademarks and trade secrets, could result in the expenditure
of significant financial and managerial resources. We regard our
intellectual property, particularly our trademarks and trade
secrets, as crucial to our business and our success. However, the
steps taken by us to protect these proprietary rights may not be
adequate and may not prevent third parties from infringing or
misappropriating our trademarks, trade secrets or similar
proprietary rights. In addition, other parties may seek to assert
infringement claims against us, and we may have to pursue
litigation against other parties to assert our rights. Any such
claim or litigation could be costly. In addition, any event that
would jeopardize our proprietary rights or any claims of
infringement by third parties could have a material adverse effect
on our ability to market or sell our brands, profitably exploit our
products, or recoup our associated research and development
costs.
Our business is subject to many regulations and
noncompliance is costly.
The production, marketing and sale of our beverages, including
contents, labels, caps and containers, are subject to the rules and
regulations of various federal, provincial, state and local health
agencies. If a regulatory authority finds that a current or future
product or production batch or “run” is not in compliance with any
of these regulations, we may be fined, or production may be
stopped, which would adversely affect our financial condition and
results of operations. Similarly, any adverse publicity associated
with any noncompliance may damage our reputation and our ability to
successfully market our products. Furthermore, the rules and
regulations are subject to change from time to time and while we
closely monitor developments in this area, we cannot anticipate
whether changes in these rules and regulations will impact our
business adversely. Additional or revised regulatory requirements,
whether labeling, environmental, tax or otherwise, could have a
material adverse effect on our financial condition and results of
operations.
Significant additional labeling or warning requirements
may inhibit sales of affected products.
Various jurisdictions may seek to adopt significant additional
product labeling or warning requirements relating to the chemical
content or perceived adverse health consequences of our beverage
products. These types of requirements, if they become applicable to
one or more of our products under current or future environmental
or health laws or regulations, may inhibit sales of such products.
In California, a law requires that a specific warning appear on any
product that contains a component listed by the state as having
been found to cause cancer or birth defects. This law recognizes no
generally applicable quantitative thresholds below which a warning
is not required. If a component found in one of our products is
added to the list, or if the increasing sensitivity of detection
methodology that may become available under this law and related
regulations as they currently exist, or as they may be amended,
results in the detection of an infinitesimal quantity of a listed
substance in one of our beverages produced for sale in California,
the resulting warning requirements or adverse publicity could
affect our sales.
Litigation or legal proceedings could expose us to
significant liabilities and damage our
reputation.
We may become party to litigation claims and legal proceedings.
Litigation involves significant risks, uncertainties, and costs,
including distraction of management attention away from our
business operations. We evaluate litigation claims and legal
proceedings to assess the likelihood of unfavorable outcomes and to
estimate, if possible, the amount of potential losses. Based on
these assessments and estimates, we establish reserves and disclose
the relevant litigation claims or legal proceedings, as
appropriate. These assessments and estimates are based on the
information available to management at the time and involve a
significant amount of management judgment. Actual outcomes or
losses may differ materially from those envisioned by our current
assessments and estimates. Our policies and procedures require
strict compliance by our employees and agents with all U.S. and
local laws and regulations applicable to our business operations,
including those prohibiting improper payments to government
officials. Nonetheless, our policies and procedures may not ensure
full compliance by our employees and agents with all applicable
legal requirements. Improper conduct by our employees or agents
could damage our reputation or lead to litigation or legal
proceedings that could result in civil or criminal penalties,
including substantial monetary fines, as well as disgorgement of
profits.
Climate change may negatively affect our
business.
There is growing concern that a gradual increase in global average
temperatures may cause an adverse change in weather patterns around
the globe resulting in an increase in the frequency and severity of
natural disasters. While warmer weather has historically been
associated with increased sales of our products, changing weather
patterns could have a negative impact on agricultural productivity,
which may limit availability or increase the cost of certain key
ingredients such as sugar cane, natural flavors and supplements
used in our products. Also, increased frequency or duration of
extreme weather conditions may disrupt the productivity of our
facilities, the operation of our supply chain or impact demand for
our products. In addition, the increasing concern over climate
change may result in more regional, federal, and global legal and
regulatory requirements and could result in increased production,
transportation, and raw material costs. As a result, the effects of
climate change could have a long-term adverse impact on our
business and results of operations.
Our business and operations would be adversely impacted
in the event of a failure or interruption of our information
technology infrastructure or as a result of a cybersecurity
attack.
The proper functioning of our own information technology (IT)
infrastructure is critical to the efficient operation and
management of our business. We may not have the necessary financial
resources to update and maintain our IT infrastructure, and any
failure or interruption of our IT system could adversely impact our
operations. In addition, our IT is vulnerable to cyberattacks,
computer viruses, worms and other malicious software programs,
physical and electronic break-ins, sabotage, and similar
disruptions from unauthorized tampering with our computer systems.
We believe that we have adopted appropriate measures to mitigate
potential risks to our technology infrastructure and our operations
from these IT-related and other potential disruptions. However,
given the unpredictability of the timing, nature and scope of any
such IT failures or disruptions, we could potentially be subject to
downtimes, transactional errors, processing inefficiencies,
operational delays, other detrimental impacts on our operations or
ability to provide products to our customers, the compromising of
confidential or personal information, destruction or corruption of
data, security breaches, other manipulation or improper use of our
systems and networks, financial losses from remedial actions, loss
of business or potential liability, and/or damage to our
reputation, any of which could have a material adverse effect on
our cash flows, competitive position, financial condition or
results of operations.
Our results of operations may fluctuate from quarter to
quarter for many reasons, including seasonality.
Our sales are seasonal, and we experience fluctuations in quarterly
results as a result of many factors. We historically have generated
a greater percentage of our revenues during the warm weather months
of April through September. Timing of customer purchases will vary
each year, and sales can be expected to shift from one quarter to
another. As a result, management believes that period-to-period
comparisons of results of operations are not necessarily meaningful
and should not be relied upon as any indication of future
performance or results expected for the fiscal year.
In addition, our operating results may fluctuate due to a number of
other factors including, but not limited to:
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Our ability to maintain, develop and expand distribution channels
for current and new products, develop favorable arrangements with
third party distributors of our products and minimize or reduce
issues associated with engaging new distributors and retailers,
including, but not limited to, transition costs and expenses and
down time resulting from the initial deployment of our products in
each new distributor’s network;
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Unilateral decisions by distributors, grocery store chains,
specialty chain stores, club stores, mass merchandisers and other
customers to discontinue carrying all or any of our products that
they are carrying at any time;
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Our ability to manage our resources to sufficiently support general
operating activities, promotion allowances and slotting fees,
promotion and selling activities, and capital expansion, and our
ability to sustain profitability;
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Our ability to meet the competitive response by much larger,
well-funded and established companies currently operating in the
beverage industry, as we introduce new competitive products, and
our fountain products; and
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Competitive products and pricing pressures and our ability to gain
or maintain share of sales in the marketplace as a result of
actions by competitors.
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Due to these and other factors, our results of operations have
fluctuated from period to period and may continue to do so in the
future, which could cause our operating results in a particular
quarter to fail to meet market expectations.
Changes in our effective tax rate may impact our
results of operations.
We are subject to taxes in the U.S. and other jurisdictions. Tax
rates in these jurisdictions may be subject to significant change
due to economic and/or political conditions. A number of other
factors may also impact our future effective tax rate
including:
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the jurisdictions in which profits are determined to be earned and
taxed;
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the resolution of issues arising from tax audits with various tax
authorities;
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changes in valuation of our deferred tax assets and
liabilities;
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increases in expenses not deductible for tax purposes, including
write-offs of acquired intangibles and impairment of goodwill in
connection with acquisitions;
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changes in availability of tax credits, tax holidays, and tax
deductions;
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changes in share-based compensation; and
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changes in tax laws or the interpretation of such tax laws and
changes in generally accepted accounting principles.
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In December 2017, enacted legislation in the United States
significantly revised the Internal Revenue Code. The enacted
federal income tax law, among other things, contained significant
changes to corporate taxation, including reduction of the corporate
tax rate from a top marginal rate of 35% to a flat rate of 21%
beginning in 2018, limitation of the tax deduction for interest
expense to 30% of adjusted earnings, limitation of the deduction
for net operating losses to 80% of current year taxable income and
elimination of net operating loss carrybacks, one time taxation of
offshore earnings at reduced rates regardless of whether they are
repatriated, immediate deductions for certain new investments
instead of deductions for depreciation expense over time, and
modifying or repealing many business deductions and credits
(including reducing the business tax credit for certain clinical
testing expenses incurred in the testing of certain drugs for rare
diseases or conditions).
Notwithstanding the reduction in the corporate income tax rate, the
overall impact of the new federal tax law remains uncertain and our
business and financial condition could be adversely affected. In
addition, it is uncertain if and to what extent various states will
conform to the newly enacted federal tax law. The impact of this
tax reform on holders of our common stock is also uncertain and
could be adverse. We urge shareholders to consult with their legal
and tax advisors with respect to this legislation and the potential
tax consequences of investing in or holding our common stock.
Global economic, political, social and other
conditions, including the COVID-19 pandemic, may continue to
adversely impact our business and results of
operations.
The beverage industry, and particularly those companies selling
premium beverages like us, can be affected by macro-economic
factors, including changes in national, regional, and local
economic conditions, unemployment levels and consumer spending
patterns, which together may impact the willingness of consumers to
purchase our products as they adjust their discretionary spending.
Adverse economic conditions may adversely affect the ability of our
distributors to obtain the credit necessary to fund their working
capital needs, which could negatively impact their ability or
desire to continue to purchase products from us in the same
frequencies and volumes as they have done in the past. If we
experience similar adverse economic conditions in the future, sales
of our products could be adversely affected, collectability of
accounts receivable may be compromised and we may face obsolescence
issues with our inventory, any of which could have a material
adverse impact on our operating results and financial
condition.
Additionally, while the extent of the impact on our business and
financial condition is unknown at this time, we may be negatively
affected by COVID-19 and actions taken to address and limit the
spread of COVID-19, such as travel restrictions, event
cancellations, and limitations affecting the supply of labor and
the movement of raw materials and finished products. If available
manufacturing capacity is reduced as a result of the COVID-19, it
could negatively affect the timely supply, pricing and availability
of finished products. Moreover, we will also be negatively impacted
by current and future closures of restaurants, independent
accounts, convenience chains, and retail store chains resulting
from the COVID-19 outbreak. The current closures of restaurants and
independent accounts will negatively affect our revenues and cash
flows, especially with respect to our fountain business, which
comprised approximately 9% of the Company’s revenues in 2019.
Although the current status of retail and convenience chains
remains unknown at this time, the future closure of these types of
establishments will also adversely impact our business and
financial condition.
Overall, the Company does not yet know the full extent of potential
delays or impacts on its business, financing activities, or the
global economy as a whole. However, these effects could have a
material impact on the Company’s liquidity, capital resources,
operations and business and those of third parties on which we
rely.
Changes in accounting standards and subjective
assumptions, estimates and judgments by management related to
complex accounting matters could significantly affect our financial
results.
The United States generally accepted accounting principles and
related pronouncements, implementation guidelines and
interpretations with regard to a wide variety of matters that are
relevant to our business, such as, but not limited to, stock-based
compensation, trade spend and promotions, and income taxes are
highly complex and involve many subjective assumptions, estimates
and judgments by our management. Changes to these rules or their
interpretation or changes in underlying assumptions, estimates or
judgments by our management could significantly change our reported
results.
If we are unable to maintain effective disclosure
controls and procedures and internal control over financial
reporting, our stock price and investor confidence could be
materially and adversely affected.
We are required to maintain both disclosure controls and procedures
and internal control over financial reporting that are effective.
Because of their inherent limitations, internal control over
financial reporting, however well designed and operated, can only
provide reasonable, and not absolute, assurance that the controls
will prevent or detect misstatements. Because of these and other
inherent limitations of control systems, there is only the
reasonable assurance that our controls will succeed in achieving
their goals under all potential future conditions. The failure of
controls by design deficiencies or absence of adequate controls
could result in a material adverse effect on our business and
financial results, which could also negatively impact our stock
price and investor confidence.
Risk Factors Related to Our Common Stock
The price of our common stock may be volatile, and a
shareholder’s investment in our common stock could suffer a decline
in value.
There has been significant volatility in the volume and market
price of our common stock, and this volatility may continue in the
future. In addition, factors such as quarterly variations in our
operating results, litigation involving us, general trends relating
to the beverage industry, actions by governmental agencies,
national economic and stock market considerations as well as other
events and circumstances beyond our control, including the effects
of the COVID-19 outbreak, could have a significant impact on the
future market price of our common stock and the relative volatility
of such market price.
A prolonged decline in the price of our common stock could result
in a reduction in the liquidity of our common stock and a reduction
in our ability to raise capital. If we are unable to raise the
funds required for all of our planned operations and key
initiatives, we may be forced to allocate funds from other planned
uses, which may negatively impact our business and operations,
including our ability to develop new products and continue our
current operations.
Any future equity or debt issuances by us may have
dilutive or adverse effects on our existing
shareholders.
From time to time, we may issue additional shares of common stock
or convertible securities. The issuance of these securities could
dilute our shareholders’ ownership in our company and may include
terms that give new investors rights that are superior to those of
our current shareholders. Moreover, any issuances by us of equity
securities may be at or below the prevailing market price of our
common stock and in any event may have a dilutive impact on our
shareholders’ ownership interest, which could cause the market
price of our common stock to decline.
Our common stock is traded on the OTC Link ATS, which
may have an unfavorable impact on our stock price and
liquidity.
Our stock is traded on the OTC Link Alternative Trading System
(ATS) operated by OTC Markets Group, Inc. The OTC Link ATS is a
significantly more limited market than the national securities
exchanges such as the New York Stock Exchange, or Nasdaq stock
exchange, and there are lower financial or
qualitative standards that a company must meet to have its stock
quoted on the OTC Link ATS. The OTC Link ATS is an inter-dealer
quotation system much less regulated than the major exchanges, and
trading in our common stock may be subject to abuses, volatility
and shorting, which may have little to do with our operations or
business prospects. This volatility could depress the market price
of our common stock for reasons unrelated to operating performance.
The Financial Industry Regulatory Authority (“FINRA”) has adopted
rules that require a broker-dealer to have reasonable grounds for
believing an investment is suitable for that customer when
recommending an investment to a customer. FINRA believes that there
is a high probability that speculative low-priced securities will
not be suitable for some customers and may make it more difficult
for broker-dealers to recommend that their customers buy our common
stock, which may result in a limited ability to buy and sell our
stock. We currently do not meet applicable listing standards of a
market senior to the OTC Link ATS, and we may never apply or
qualify for future listing on Nasdaq or a senior market or national
securities exchange.
Our common shares are subject to the “Penny Stock”
rules of the SEC, and the trading market in our securities will
likely be limited, which makes transactions in our stock cumbersome
and may reduce the value of an investment in our
stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a “penny stock,” for the purposes
relevant to us, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require:
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That a broker or dealer approve a person’s account for transactions
in penny stocks; and
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The broker or dealer receive from the investor a written agreement
to the transaction, setting forth the identity and quality of the
penny stock to be purchased.
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In order to approve a person’s account for transactions in penny
stocks, the broker or dealer must:
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Obtain financial information and investment experience objectives
of the person; and
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Make a reasonable determination that the transactions in penny
stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
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The broker or dealer must also deliver, prior to any transaction in
a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight form:
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Sets forth the basis on which the broker or dealer made the
suitability determination; and
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That the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
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Generally, brokers may be less willing to execute transactions in
securities subject to the “penny stock” rules. This may make it
more difficult for investors to dispose of our common stock and
cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading and
about the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities
and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have
to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny
stocks.
We do not intend to pay any cash dividends on our
shares of common stock in the near future, so our shareholders will
not be able to receive a return on their shares unless they sell
their shares.
We intend to retain any future earnings to finance the development
and expansion of our business. We do not anticipate paying any cash
dividends on our common stock in the foreseeable future. There is
no assurance that future dividends will be paid, and if dividends
are paid, there is no assurance with respect to the amount of any
such dividend. Unless we pay dividends, our shareholders will not
be able to receive a return on their shares unless they sell such
shares.
A small group of Company officers and directors hold a
majority of the control of the Company.
As of December 31, 2020, the Company’s executive officers and
directors owned approximately 64.8% of the Company’s outstanding
common stock. By virtue of such stock ownership, the principal
shareholders are able to control the election of the members of the
Company’s Board of Directors and to generally exercise control over
the affairs of the Company. Such concentration of ownership could
also have the effect of delaying, deterring, or preventing a change
in control of the Company that might otherwise be beneficial to
stockholders. There can be no assurance that conflicts of interest
will not arise with respect to such directors or that such
conflicts will be resolved in a manner favorable to the
Company.
Even if a market develops for our shares, our shares
may be thinly traded with wide share price fluctuations, low share
prices and minimal liquidity.
If an established market for our shares develops, our share price
may be volatile with wide fluctuations in response to several
factors, including: potential investors’ anticipated feeling
regarding our results of operations; increased competition; and our
ability or inability to generate future revenues. In addition, our
share price may be affected by factors that are unrelated or
disproportionate to our operating performance. Our share price
might be affected by general economic, political, and market
conditions, such as recessions, interest rates, commodity prices,
or international currency fluctuations. Additionally, stocks traded
on the OTC Link ATS are usually thinly traded, highly volatile and
not followed by analysts. These factors, which are not under our
control, may have a material effect on our share price.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
None. The Company’s office space is provided free of charge by its
officer and director, William Alessi.
Item 3. Legal Proceedings.
From time to time, we may be involved in litigation relating to
claims arising out of our operations in the normal course of
business. As of December 31, 2021, there were no pending or
threatened lawsuits that could reasonably be expected to have a
material effect on the Company’s results of operations.
Item 4. Mine Safety Disclosures
None.
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities.
The Company’s common stock is not traded on any national securities
exchange but is quoted on the alternative trading system operated
by OTC Markets Group, Inc. (the OTC Link ATS) under the “GHMP”
trading symbol at the OTC Pink level. The following table
summarizes the high and low historical trading prices of the
Company’s common stock for the periods indicated as reported by
OTCMarkets.com (as historic high and low bid prices are not
reported by OTCMarkets.com).
Fiscal Year Ended December 31, 2020
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High
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Low
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First Quarter
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0.81 |
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0.321 |
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Second Quarter
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1.09 |
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0.39 |
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Third Quarter
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2.33 |
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0.5501 |
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Fourth Quarter
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1.17 |
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0.6851 |
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Fiscal Year Ended December 31, 2021
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High
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Low
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First Quarter
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1.24 |
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0.7101 |
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Second Quarter
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4.2 |
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0.85 |
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Third Quarter
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1.9499 |
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0.6185 |
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Fourth Quarter
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0.8999 |
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0.0761 |
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Holders of our common stock are entitled to receive dividends as
may be declared by the Board of Directors. The Company’s Board of
Directors is not restricted from paying any dividends but is not
obligated to declare a dividend. No cash dividends have ever been
declared and it is not anticipated that cash dividends will ever be
paid.
We are currently authorized to issue 30,000,000 shares of preferred
stock, par value $0.001, of which 250,000 shares of Series B-1
Convertible Preferred Stock are issued and outstanding as of
October 16, 2020. On July 21, 2020, we filed with the State of
Nevada a Certificate of Designation designating 250,000 shares of
the Company’s authorized preferred stock as Series B-1 Convertible
Preferred Stock (the “Series B-1 Preferred Stock”). Each share of
Series B-1 Preferred Stock is convertible into 1.667 shares of
Company common stock (subject to a 4.99% beneficial ownership
limitation). The Series B-1 Preferred Stock entitles the holder to
piggy-back registration rights and one vote per share and has no
liquidation or dividend preferences. Also, on July 21, 2020, we
filed with the State of Nevada a Certificate of Designation
designating 750,000 shares of the Company’s authorized preferred
stock as Series B-2 Convertible Preferred Stock (the “Series B-2
Preferred Stock”). Each share of Series B-2 Preferred Stock is
convertible into a number of shares of Company common stock equal
to $1.00 divided by (i) the lesser of $0.60 or 60% of the 14-day
average closing price of the Company’s common stock at the time of
conversion (the “Market Price”) if the conversion occurs within 6
months of July 21, 2020, or (ii) 60% of the Market Price if the
conversion occurs at least six months after July 21, 2020 (subject
to a 4.99% beneficial ownership limitation). The Series B-2
Preferred Stock entitles the holder to one vote per share and has
no liquidation or dividend preferences or other rights. No shares
of Series B-2 Preferred Stock are outstanding although we have
granted Todd Braun, one of the Selling Security Holders, warrants
to purchase all 750,000 designated but unissued shares of Series
B-2 Preferred Stock. We have not designated any other series of
preferred stock, but our Board of Directors has the authority to
designate the rights and preferences of each series of preferred
stock without action by our stockholders, and then to issue shares
of preferred stock. As a result, preferred shares could be issued
quickly and easily, negatively affecting the rights of holders of
common shares and could be issued with terms calculated to delay or
prevent a change in control or make removal of management more
difficult. Because we may issue preferred stock in order to raise
capital for our operations, your ownership interest may be diluted
which would result in your percentage of ownership in us
decreasing.
As of December 31, 2021, the Company had 23,805,630 outstanding
shares of common stock which were owned by approximately 37
shareholders of record.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operation.
The statements contained in the following MD&A and elsewhere
throughout this Annual Report on Form 10-K, including any documents
incorporated by reference, that are not historical facts, including
statements about our beliefs and expectations, are “forward-looking
statements” within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements include
statements preceded by, followed by or that include the words
“may,” “could,” “would,” “should,” “believe,” “expect,”
“anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and
similar words or expressions. In addition, any statements that
refer to expectations, projections, or other characterizations of
future events or circumstances are forward-looking statements.
These forward-looking statements, which reflect our management’s
beliefs, objectives, and expectations as of the date hereof, are
based on the best judgement of our management. All forward-looking
statements speak only as of the date on which they are made. Such
forward-looking statements are subject to certain risks,
uncertainties and assumptions relating to factors that could cause
actual results to differ materially from those anticipated in such
statements, including, without limitation, the following: economic,
social and political conditions, global economic downturns
resulting from extraordinary events such as the COVID-19 pandemic
and other securities industry risks; interest rate risks; liquidity
risks; credit risk with clients and counterparties; risk of
liability for errors in clearing functions; systemic risk; systems
failures, delays and capacity constraints; network security risks;
competition; reliance on external service providers; new laws and
regulations affecting our business; net capital requirements;
extensive regulation, regulatory uncertainties and legal matters;
failure to maintain relationships with employees, customers,
business partners or governmental entities; the inability to
achieve synergies or to implement integration plans and other
consequences associated with risks and uncertainties detailed in
our filings with the SEC, including our most recent filings on
Forms 10-K and 10-Q.
We caution that the foregoing list of factors is not exclusive, and
new factors may emerge, or changes to the foregoing factors may
occur, that could impact our business. We undertake no obligation
to publicly update or revise these statements, whether as a result
of new information, future events or otherwise, except to the
extent required by the federal securities laws.
Certain information contained in this discussion and elsewhere in
this report may include “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995 and
is subject to the safe harbor created by that act. The safe harbor
created by the Private Securities Litigation Reform Act will not
apply to certain “forward looking statements” because we issued
“penny stock” (as defined in Section 3(a)(51) of the Securities
Exchange Act of 1934 and Rule 3(a)(51-1) under the Exchange Act)
during the three year period preceding the date(s) on which those
forward looking statements were first made, except to the extent
otherwise specifically provided by rule, regulation or order of the
Securities and Exchange Commission. We caution readers that certain
important factors may affect our actual results and could cause
such results to differ materially from any forward-looking
statements which may be deemed to have been made in this Report or
which are otherwise made by or on our behalf. For this purpose, any
statements contained in this report that are not statements of
historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as
“may,” “will,” “expect,” “believe,” “explore,” “consider,”
“anticipate,” “intend,” “could,” “estimate,” “plan,” or “propose”
or the negative variations of those words or comparable terminology
are intended to identify forward-looking statements. Factors that
may affect our results include, but are not limited to, the risks
and uncertainties associated with:
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Our ability to raise capital necessary to sustain our anticipated
operations and implement our business plan,
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Our ability to implement our business plan,
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Our ability to generate sufficient cash to survive,
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The degree and nature of our competition,
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The lack of diversification of our business plan,
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The general volatility of the capital markets and the establishment
of a market for our shares, and
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Disruption in the economic and financial conditions primarily from
the impact of past terrorist attacks in the United States, threats
of future attacks, police and military activities overseas and
other disruptive worldwide political and economic events and
environmental weather conditions.
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We are also subject to other risks detailed from time to time in
our other filings with Securities and Exchange Commission and
elsewhere in this report. Any one or more of these uncertainties,
risks and other influences could materially affect our results of
operations and whether forward-looking statements made by us
ultimately prove to be accurate. Our actual results, performance
and achievements could differ materially from those expressed or
implied in these forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking
statements, whether from new information, future events or
otherwise.
We qualify as an “emerging growth company” under the JOBS Act. As a
result, we are permitted to, and intend to, rely on exemptions from
certain disclosure requirements. For so long as we are an emerging
growth company, we will not be required to:
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have an auditor report on our internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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comply with any requirement that may be adopted by the Public
Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements
(i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder
advisory votes, such as “say-on-pay” and “say-on-frequency;”
and
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disclose certain executive compensation related items such as the
correlation between executive compensation and performance and
comparisons of the CEO’s compensation to median employee
compensation.
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In addition, Section 107 of the JOBS Act also provides that an
emerging growth company can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. In
other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of
the benefits of this extended transition period. Our financial
statements may therefore not be comparable to those of companies
that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years,
or until the earliest of (i) the last day of the first fiscal year
in which our total annual gross revenues exceed $1 billion, (ii)
the date that we become a “large accelerated filer” as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, which would
occur if the market value of our ordinary shares that is held by
non-affiliates exceeds $700 million as of the last business day of
our most recently completed second fiscal quarter or (iii) the date
on which we have issued more than $1 billion in non-convertible
debt during the preceding three year period.
Plan of Operation
The Company was formed as a Nevada corporation on November 26,
2007. The Company was involved in exploration and development of
mining properties until September 30, 2013, when it discontinued
operations. In June 2017, the Company’s creditors filed a petition
in the District Court of Harris County, Texas for the appointment
of a receiver. In August of 2017, the court appointed a receiver
(who was subsequently appointed as an officer and director of the
Company), and in February 2018, the receiver appointed William
Alessi as a director of the Company and then resigned as a director
and officer of the Company.
On February 6, 2019, the Company acquired trademarks and
intellectual property, which includes all rights and trade secrets
to the hemp-derived CBD-infused line of consumer beverages sold
under the “Good Hemp” brand. Since then, the Company has been
conducting operations under the “Good Hemp” trade name and through
the http://www.goodhemplivin.com/ website. Information on this
website is not a part of this report on Form 10-Q.
On April 30, 2019, the Company acquired from Mr. Spoone the “CANNA
HEMP” and “CANNA” trademarks including all rights and trade secrets
and related inventory. At June 30, 2021, the Company had not
attributed any value to these acquired trademarks.
On August 24, 2020, with an effective date of July 1, 2020, the
Company entered into a joint venture agreement with Paul Hervey
(“Hervey”), an individual, for the purpose of cultivating hemp on
approximately 9 acres of farmland and in approximately 3,700 square
feet of greenhouse space in North Carolina (referred to as “Olin
Farms”). In October 2021, Olin Farms ceased operations, and the
limited liability company joint venture entity was dissolved in
North Carolina.
On February 9, 2021, the Company formed Good Hemp Wellness, LLC, a
limited liability company formed under the laws of the State of
North Carolina, to sell CBD products to customers through
chiropractic offices. In October 2021, this company was dissolved
in North Carolina, and it is being treated as discontinued
operations in the consolidated financial statements. The Company
plans to sell Good Hemp Wellness CBD inventory directly.
On April 1, 2021, the Company entered into an agreement to purchase
Diamond Creek Group, LLC, a North Carolina limited liability
company which sells the Diamond Creek brand of high alkaline water
products, for a total purchase price of $643,000. On April 2, 2021,
the Company closed the acquisition and paid the initial $500,000
portion of the purchase price, and on April 23, 2021, paid the
$143,000 purchase price balance.
The Company is a North Carolina based company that is made up of
industry veterans focused on exploiting niche markets in the hemp
and beverage industries. The Company’s products include high
alkaline water products, hemp-based beverage products under Good
Hemp® brand, and CBD softgels under the Good Hemp Wellness brand.
Good Hemp® products include two lines of hemp-based beverages
described below. Good Hemp® products have been sold throughout the
United States since 2016 via Amazon.com, as well as local
retailers.
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 are material to investors.
Results of Operations
For the year ended December 31, 2021 compared to the
year ended December 31, 2020
Revenues
We had $1,222,067 and $415,796 of revenue for the years ended
December 31, 2021 and 2020, respectively. Revenue increased in 2021
as compared to 2020 as a result of increasing sales volumes
resulting from increased online advertising efforts and engaging
several additional beverage distributors in 2020.
Cost of Sales
We had $1,122,181 and $342,824 of cost of sales for the years ended
December 31, 2021 and 2020, respectively. For the years ended
December 31, 2021 and 2020, as a percentage of revenue, it was
91.8% and 82.5%, respectively.
Operating Expenses
Operating expenses for the years ended December 31, 2021 and 2020
were $2,357,823 and $1,388,074, respectively. The increase in
expenses for 2021 compared to 2020 were comprised primarily of
amortization of the branding agreement of $1,753,714.
Other Income (Expenses)
Other expenses for the years ended December 31, 2021 and 2020 were
$2,484,407 and $146,853, respectively. The gain (loss) on
derivatives for the years ended December 31, 2021 and 2020 was
($1,694,431) and $39,811, respectively.
Net Loss
Net loss for the years ended December 31, 2021 and 2020 was
$4,816,176 and $1,461,955, respectively.
Liquidity and Capital Resources
We had a cash balance of $15,121 and negative working capital of
$5,053,486 at December 31, 2021 and a cash balance of $21,233 and
negative working capital of $2,2,16,462 at December 31, 2020.
The Company’s anticipated capital requirements for the next 12
months will consist of expenses of being a public company and
general and administrative expenses all of which we currently
estimate will cost $1,500,000, excluding revenue related expenses
and salaries. In the event there are unanticipated expenses and we
need additional funds, we may seek to raise additional funding that
we require in the form of equity financing from the sale of our
common stock. However, we cannot provide investors with any
assurance that we will be able to raise sufficient funding from the
sale of our common stock to fund such additional expenses. We
currently do not have any agreements, arrangements or
understandings with any person or entity to obtain funds through
bank loans, lines of credit or any other sources.
Sources and Uses of Cash
Operating activities during the year ended December 31, 2021 used
$727,660 of net cash. Net cash used in investing activities was
$690,600 for the year ended December 31, 2021. Net cash provided by
financing activities of $1,373,513 was received from the issuance
of preferred and common stock and convertible notes payable during
the year ended December 31, 2021.Operating activities during the
year ended December 31, 2020 used $121,522 of net cash. Net cash
used in investing activities was $63,433 for the year ended
December 31, 2020. Net cash provided by financing activities of
$158,100 was received from the issuance of common stock and
shareholder advances during the year ended December 31, 2020.
The Company has been impacted by the COVID-19 pandemic, and some of
its earlier plans to further diversify its operations and expand
its operating subsidiaries have been paused due to the economic
uncertainty.
Off Balance Sheet Arrangements
We have no 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.
Critical Accounting Policies
Use of Estimates. 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.
Significant estimates in the accompanying financial statements
include the amortization period for intangible assets, valuation
and impairment valuation of intangible assets, depreciable lives of
the web site and property and equipment, valuation of warrant and
beneficial conversion feature debt discounts, valuation of
share-based payments and the valuation allowance on deferred tax
assets.
Changes in Accounting Principles. No significant
changes in accounting principles were adopted during fiscal 2021
and 2020.
Impairment of Long-Lived Assets. The Company accounts
for long-lived assets in accordance with the provisions of
Statement of Financial Accounting Standards ASC 360-10, “Accounting
for the Impairment or Disposal of Long-Lived Assets.” This
statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount
or fair value less costs to sell.
Fair Value of Financial Instruments and Fair Value
Measurements. The Company measures their financial assets
and liabilities in accordance with generally accepted accounting
principles. For certain of our financial instruments, including
cash, accounts payable, accrued expenses escrow liability and
short-term loans the carrying amounts approximate fair value due to
their short maturities.
We have adopted accounting guidance for financial and non-financial
assets and liabilities. The adoption did not have a material impact
on our results of operations, financial position or liquidity. This
standard defines fair value, provides guidance for measuring fair
value and requires certain disclosures. This standard does not
require any new fair value measurements, but rather applies to all
other accounting pronouncements that require or permit fair value
measurements. This guidance does not apply to measurements related
to share-based payments. This guidance discusses valuation
techniques, such as the market approach (comparable market prices),
the income approach (present value of future income or cash flow),
and the cost approach (cost to replace the service capacity of an
asset or replacement cost). The guidance utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels. The following is a
brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in
active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable,
either directly or indirectly. These include quoted prices for
similar assets or liabilities in active markets and quoted prices
for identical or similar assets or liabilities in markets that are
not active.
Level 3: Unobservable inputs in which little or no market data
exists, therefore developed using estimates and assumptions
developed by us, which reflect those that a market participant
would use.
Revenue Recognition. In May 2014, the FASB issued ASU
No. 2014-09, Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”), which amends the existing accounting standards for
revenue recognition. ASU 2014-09 is based on principles that govern
the recognition of revenue at an amount an entity expects to be
entitled when products are transferred to customers. ASU 2014-09
was effective for the Company in its first quarter of 2019.
Subsequently, the FASB has issued the following standards related
to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations (“ASU
2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers
(Topic 606): Identifying Performance Obligations and Licensing
(“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with
Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU
2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new
revenue standards”).
The new revenue standards may be applied retrospectively to each
prior period presented or retrospectively with the cumulative
effect recognized as of the date of adoption. The Company adopted
the new revenue standards in its first quarter of 2018 utilizing
the full retrospective transition method.
Stock-Based Compensation. The Company accounts for
stock-based instruments issued to employees in accordance with ASC
Topic 718. ASC Topic 718 requires companies to recognize in the
statement of operations the grant-date fair value of stock options
and other equity-based compensation issued to employees. The
Company accounts for non-employee share-based awards in accordance
with ASC Topic 505-50. The value of the portion of an award that is
ultimately expected to vest is recognized as an expense over the
requisite service periods using the straight-line attribution
method. The Company estimates the fair value of each stock option
at the grant date by using the Black-Scholes option-pricing model.
The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model.
Inflation
In the opinion of management, inflation has not had a material
effect on the Company’s financial condition or results of its
operations.
Item 7A. Quantitative and Qualitative Disclosure about
Market Risk
Not applicable.
Item 8. Financial Statements
GOOD HEMP, INC.
Contents
Boyle CPA,
LLC
Certified Public Accountants &
Consultants
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To
the Shareholders and
Board of Directors of Good Hemp, Inc.
Opinion on the Financial
Statements
We have audited the accompanying balance sheets of Good Hemp, Inc.
(the “Company”) as of December 31, 2021 and 2020, the related
statements of operations, stockholders’ deficit, and cash flows for
each of the two years in the period ended December 31, 2021, and
the related notes (collectively referred to as the “financial
statements”). These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits. In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and
its cash flows for each of the two years in the period ended
December 31, 2021, in conformity with accounting principles
generally accepted in the United States of America.
Substantial Doubt About the
Company’s Ability to Continue as a Going Concern
As discussed in Note 3 to the financial statements, the Company’s
continuing operating losses, working capital deficiency and
accumulated deficit raise substantial doubt about its ability to
continue as a going concern for a period of one year from the
issuance of the financial statements. Management’s plans are also
described in Note 3. The financial statements do not include
adjustments that might result from the outcome of this
uncertainty.
Basis of 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 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 standards of the Public
Company Accounting Oversight Board (United States). 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 fraud or error. 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.
/s/ Boyle CPA, LLC
We
have served as the Company’s auditor since 2019.
Red Bank, NJ
April 22, 2022
331 Newman Springs Road
|
|
Building 1, 4th Floor, Suite
143
|
P (732) 784-1582
|
Red Bank, NJ 07701
|
F (732) 510-0665
|
GOOD HEMP, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2021 and 2020
|
|
December 31, 2021
|
|
|
December 31, 2020
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$ |
15,121 |
|
|
$ |
21,233 |
|
Accounts receivable
|
|
|
46,318 |
|
|
|
4,689 |
|
Inventory
|
|
|
- |
|
|
|
163,567 |
|
Prepaid expenses
|
|
|
- |
|
|
|
9,541 |
|
Total current assets
|
|
|
61,439 |
|
|
|
199,030 |
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
122,991 |
|
|
|
- |
|
Branding agreement
|
|
|
- |
|
|
|
1,735,714 |
|
Investment
|
|
|
- |
|
|
|
63,433 |
|
Goodwill
|
|
|
302,215 |
|
|
|
- |
|
Intellectual property
|
|
|
112,000 |
|
|
|
12,000 |
|
Total assets
|
|
$ |
598,645 |
|
|
$ |
2,010,177 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
78,719 |
|
|
$ |
19,203 |
|
Accounts payable to related parties
|
|
|
- |
|
|
|
82,832 |
|
Accrued liabilities
|
|
|
9,206 |
|
|
|
- |
|
Interest payable
|
|
|
65,814 |
|
|
|
35,320 |
|
Interest payable to related parties
|
|
|
108,403 |
|
|
|
45,057 |
|
Notes payable
|
|
|
19,100 |
|
|
|
19,100 |
|
Convertible notes, net of discounts
|
|
|
1,202,756 |
|
|
|
286,910 |
|
Convertible notes to related parties, net of discounts
|
|
|
410,000 |
|
|
|
400,575 |
|
Derivative liabilities
|
|
|
3,220,927 |
|
|
|
1,526,495 |
|
Total current liabilities
|
|
|
5,114,925 |
|
|
|
2,415,492 |
|
Total liabilities
|
|
|
5,114,925 |
|
|
|
2,415,492 |
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Preferred stock - Class A - 30,000,000 shares authorized, $0.001
par value, 0 and 250,000 shares issued and outstanding as of
December 31, 2021 and 2020, respectively
|
|
|
- |
|
|
|
250 |
|
Common stock - 150,000,000 shares authorized, $0.001 par value,
23,805,630 and 22,263,829 shares issued and outstanding as of
December 31, 2021 and 2020, respectively
|
|
|
23,806 |
|
|
|
22,264 |
|
Additional paid in capital
|
|
|
8,665,981 |
|
|
|
7,962,062 |
|
Accumulated deficit
|
|
|
(13,181,451 |
) |
|
|
(8,389,891 |
) |
Total controlling interest
|
|
|
(4,491,664 |
) |
|
|
(405,315 |
) |
Non-controlling interest
|
|
|
(24,616 |
) |
|
|
- |
|
Total stockholders' deficit
|
|
|
(4,516,280 |
) |
|
|
(405,315 |
) |
Total liabilities and stockholders' deficit
|
|
$ |
598,645 |
|
|
$ |
2,010,177 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
GOOD HEMP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2021 and 2020
|
|
For the Years Ended
|
|
|
|
December 31, 2021
|
|
|
December 31, 2020
|
|
Net sales
|
|
$ |
1,222,067 |
|
|
$ |
415,796 |
|
Cost of sales
|
|
|
1,122,181 |
|
|
|
342,824 |
|
Gross profit
|
|
|
99,886 |
|
|
|
72,972 |
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
600,872
|
|
|
|
423,788
|
|
Depreciation and amortization
|
|
|
1,756,951
|
|
|
|
964,286
|
|
Total operating expenses
|
|
|
2,357,823
|
|
|
|
1,388,074
|
|
Operating loss
|
|
|
(2,257,937 |
) |
|
|
(1,315,102 |
) |
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
8 |
|
|
|
5 |
|
Other
income
|
|
|
149 |
|
|
|
- |
|
Gain on write off of debt
|
|
|
10,087 |
|
|
|
- |
|
Interest expense
|
|
|
(271,797 |
) |
|
|
(67,710 |
) |
Loan fees
|
|
|
(300,459
|
)
|
|
|
(118,959
|
)
|
Change in derivative liabilities
|
|
|
(1,694,431 |
) |
|
|
39,811 |
|
Impairment of intangible assets
|
|
|
(161,309 |
) |
|
|
- |
|
Loss on investment
|
|
|
(66,655 |
) |
|
|
- |
|
Total other income (expense)
|
|
|
(2,484,407 |
) |
|
|
(146,853 |
) |
Net loss from continuing operations
|
|
|
(4,742,344 |
) |
|
|
(1,461,955 |
) |
Loss from discontinued operations
|
|
|
(73,832 |
) |
|
|
- |
|
Net loss
|
|
|
(4,816,176 |
) |
|
|
(1,461,955 |
) |
Net loss - non-controlling interest
|
|
|
24,616 |
|
|
|
- |
|
Net loss - controlling interest
|
|
$ |
(4,791,560 |
) |
|
$ |
(1,461,955 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations - basic and
diluted
|
|
$ |
(0.21 |
) |
|
$ |
(0.08 |
) |
Net loss per share from discontinued operations - basic and
diluted
|
|
$ |
(0.00 |
) |
|
$ |
- |
|
Net loss per share - basic and diluted
|
|
$ |
(0.21 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic and diluted
|
|
|
22,852,457 |
|
|
|
17,776,646 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
GOOD HEMP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’
DEFICIT
For the Years Ended December 31, 2021 and 2020
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Non-Controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Interest
|
|
|
Total
|
|
Balance, December 31, 2019
|
|
|
- |
|
|
$ |
- |
|
|
|
1,952,470 |
|
|
$ |
1,953 |
|
|
$ |
4,868,548 |
|
|
$ |
(6,927,936 |
) |
|
$ |
- |
|
|
$ |
(2,057,435 |
) |
Issuance of common shares for branding agreement
|
|
|
- |
|
|
|
- |
|
|
|
6,000,000 |
|
|
|
6,000 |
|
|
|
2,694,000 |
|
|
|
- |
|
|
|
- |
|
|
|
2,700,000 |
|
Shares issued to William Alessi
|
|
|
- |
|
|
|
- |
|
|
|
7,000,000 |
|
|
|
7,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,000 |
|
Shares issued to Chris Chumas
|
|
|
- |
|
|
|
- |
|
|
|
7,000,000 |
|
|
|
7,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,000 |
|
Issuance of Series B-1 preferred stock
|
|
|
250,000 |
|
|
|
250 |
|
|
|
- |
|
|
|
- |
|
|
|
249,750 |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
Issuance of common stock for conversion of convertible note
|
|
|
- |
|
|
|
- |
|
|
|
111,359 |
|
|
|
111 |
|
|
|
59,889 |
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
Issuance of common stock for services
|
|
|
- |
|
|
|
- |
|
|
|
160,000 |
|
|
|
160 |
|
|
|
119,840 |
|
|
|
- |
|
|
|
- |
|
|
|
120,000 |
|
Issuance of common stock for joint venture
|
|
|
- |
|
|
|
- |
|
|
|
40,000 |
|
|
|
40 |
|
|
|
19,960 |
|
|
|
- |
|
|
|
- |
|
|
|
20,000 |
|
Amortization of derivative liabilities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(49,925 |
) |
|
|
- |
|
|
|
- |
|
|
|
(49,925 |
) |
Net loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,461,955 |
) |
|
|
- |
|
|
|
(1,461,955 |
) |
Balance, December 31, 2020
|
|
|
250,000 |
|
|
|
250 |
|
|
|
22,263,829 |
|
|
|
22,264 |
|
|
|
7,962,062 |
|
|
|
(8,389,891 |
) |
|
|
- |
|
|
|
(405,315 |
) |
Issuance of common stock for services
|
|
|
- |
|
|
|
- |
|
|
|
30,000 |
|
|
|
30 |
|
|
|
10,426 |
|
|
|
- |
|
|
|
- |
|
|
|
10,456 |
|
Issuance of common stock for conversion of convertible note
|
|
|
- |
|
|
|
- |
|
|
|
378,260 |
|
|
|
379 |
|
|
|
134,941 |
|
|
|
- |
|
|
|
- |
|
|
|
135,320 |
|
Issuance of common stock for financing
|
|
|
- |
|
|
|
- |
|
|
|
65,000 |
|
|
|
65 |
|
|
|
26,370 |
|
|
|
- |
|
|
|
- |
|
|
|
26,435 |
|
Issuance of S-1 common stock at $1.25 for cash
|
|
|
- |
|
|
|
- |
|
|
|
226,400 |
|
|
|
226 |
|
|
|
282,774 |
|
|
|
- |
|
|
|
- |
|
|
|
283,000 |
|
Exercise of warrants for preferred shares at $1.00
|
|
|
250,000 |
|
|
|
250 |
|
|
|
- |
|
|
|
- |
|
|
|
249,750 |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
Conversion of preferred shares to common shares
|
|
|
(500,000 |
) |
|
|
(500 |
) |
|
|
833,333 |
|
|
|
833 |
|
|
|
(333 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cashless warrant exercise
|
|
|
- |
|
|
|
- |
|
|
|
8,808 |
|
|
|
9 |
|
|
|
(9 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss for the year
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,791,560 |
) |
|
|
(24,616 |
) |
|
|
(4,816,176 |
) |
Balance, December 31, 2021
|
|
|
- |
|
|
$ |
- |
|
|
|
23,805,630 |
|
|
$ |
23,806 |
|
|
$ |
8,665,981 |
|
|
$ |
(13,181,451 |
) |
|
$ |
(24,616 |
) |
|
$ |
(4,516,280 |
) |
The accompanying notes are an integral part of these
consolidated financial statements.
GOOD HEMP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2021 and 2020
|
|
For the Years Ended
|
|
|
|
December 31, 2021
|
|
|
December 31, 2020
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss for continuing operations
|
|
$ |
(4,742,344 |
) |
|
$ |
(1,461,955 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
21,237 |
|
|
|
- |
|
Amortization of branding agreement
|
|
|
1,735,714 |
|
|
|
1,058,786 |
|
Stock-based compensation
|
|
|
26,400 |
|
|
|
- |
|
Gain on write off of debt
|
|
|
(10,087 |
) |
|
|
- |
|
Loss on investment
|
|
|
66,655 |
|
|
|
- |
|
Impairment of intangible assets
|
|
|
161,309 |
|
|
|
- |
|
Change in derivative liabilities
|
|
|
1,694,432 |
|
|
|
(39,811 |
) |
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(18 |
) |
|
|
88,416 |
|
Prepaid expenses
|
|
|
168,339 |
|
|
|
(9,541 |
) |
Inventory
|
|
|
163,567 |
|
|
|
107,895 |
|
Other receivable
|
|
|
228 |
|
|
|
- |
|
Accounts payable
|
|
|
(2,859 |
) |
|
|
168 |
|
Accounts payable to related parties
|
|
|
- |
|
|
|
82,832 |
|
Accrued liabilities
|
|
|
(31,479 |
) |
|
|
- |
|
Interest payable
|
|
|
(13,325 |
) |
|
|
6,631 |
|
Interest payable
|
|
|
108,403 |
|
|
|
45,057 |
|
Operating cash flows from discontinued operations
|
|
|
(73,832 |
) |
|
|
- |
|
Net cash used in operating activities
|
|
|
(727,660 |
) |
|
|
(121,522 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of investments
|
|
|
(643,600 |
) |
|
|
(63,433 |
) |
Purchase of fixed assets
|
|
|
(47,000 |
) |
|
|
- |
|
Net cash flows from investing activities
|
|
|
(690,600 |
) |
|
|
(63,433 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes payable to related parties, net of
discounts
|
|
|
- |
|
|
|
14,000 |
|
Proceeds from convertible notes payable, net of discounts
|
|
|
1,432,000 |
|
|
|
248,000 |
|
Repayment of convertible notes payable, net of discounts
|
|
|
(488,291 |
) |
|
|
(373,000 |
) |
Issuance of notes payable
|
|
|
- |
|
|
|
19,100 |
|
Proceeds from issuance of common stock
|
|
|
283,000 |
|
|
|
- |
|
Repayment of convertible notes payable to related parties, net of
discounts
|
|
|
(100,575 |
) |
|
|
- |
|
Issuance of preferred stock
|
|
|
247,379 |
|
|
|
250,000 |
|
Net cash provided by financing activities
|
|
|
1,373,513 |
|
|
|
158,100 |
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(44,747 |
) |
|
|
(26,855 |
) |
Cash and cash equivalents - beginning of
period
|
|
|
59,868 |
|
|
|
48,088 |
|
Cash and cash equivalents - end of period
|
|
$ |
15,121 |
|
|
$ |
21,233 |
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash information
|
|
|
|
|
|
|
|
|
Common stock issued for financing fees
|
|
$ |
78,000 |
|
|
$ |
- |
|
Spire Branding Agreement for common stock
|
|
$ |
- |
|
|
$ |
2,700,000 |
|
Conversion of notes payable into common stock
|
|
$ |
38,988 |
|
|
$ |
14,000 |
|
Exercise of cashless warrants
|
|
$ |
8,808 |
|
|
$ |
- |
|
The accompanying notes are an integral part of these
consolidated financial statements.
GOOD HEMP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
NOTE 1 – NATURE OF OPERATIONS
Good Hemp, Inc. (the “Company” or “Good Hemp”), formerly known as
Keyser Resources, Inc., and Lone Star Gold, Inc., was incorporated
in the State of Nevada on November 26, 2007.
The Company was involved in the exploration and development of
mining properties until September 30, 2013, when it discontinued
operations. In 2017, the Company was put into receivership and in
2018, it emerged from receivership. On September 11, 2019, the
Company’s Board of Directors, pursuant to Nevada Revised Statute
92A.280, amended the Company’s Articles of Incorporation to change
the name of the Company from Lone Star Gold, Inc. to Good Hemp,
Inc. The amendment was filed with the Nevada Secretary of State on
September 12, 2019.
The Company is now a North Carolina based company that is made up
of industry veterans focused on exploiting niche markets in the
hemp industry. Good Hemp® includes two lines of hemp-based
beverages. Good Hemp® 2oh! is a hemp-derived, CBD-infused line of
flavored waters, and Good Hemp® fizz! is a line of carbonated hemp
oil infused sodas. Good Hemp® products have been sold throughout
the United States since 2016 via Amazon.com, as well as local
retailers.
By establishing a comprehensive distribution system, Good Hemp® has
secured listings for its products with regional and national
grocery and convenience chain stores.
On July 21, 2020, the Company filed with the State of Nevada a
Certificate of Designation designating 250,000 shares of the
Company’s authorized preferred stock as Series B-1 Convertible
Preferred Stock (the “Series B-1 Preferred Stock”). Each share of
Series B-1 Preferred Stock is convertible into 1.667 shares of
Company common stock (subject to a 4.99% beneficial ownership
limitation). The Series B-1 Preferred Stock entitles the holder to
piggy-back registration rights and one vote per share.
Also, on July 21, 2020, the Company filed with the State of Nevada
a Certificate of Designation designating 750,000 shares of the
Company’s authorized preferred stock as Series B-2 Convertible
Preferred Stock (the “Series B-2 Preferred Stock”). Each share of
Series B-2 Preferred Stock is convertible into a number of shares
of Company common stock equal to $1.00 divided by (i) the lesser of
$0.60 or 60% of the 14-day average closing price of the Company’s
common stock at the time of conversion (the “Market Price”) if the
conversion occurs within 6 months of July 21, 2020, or (ii) 60% of
the Market Price if the conversion occurs at least 6 months after
July 21, 2020 (subject to a 4.99% beneficial ownership limitation).
The Series B-2 Preferred Stock entitles the holder to one vote per
share.
On February 9, 2021, the Company formed Good Hemp Wellness, LLC, a
limited liability company formed under the laws of the State of
North Carolina to sell CBD products to customers through
chiropractic offices. Effective February 10, 2021, the Company
entered into an Operating Agreement with Simple Growth Solutions,
LLC governing the operation of the Joint Venture Subsidiary and
providing that (i) Good Hemp Wellness will be owned initially
66.66% by the Company and 33.34% by Simple Growth; (ii) the Joint
Venture Subsidiary will be managed by a Board of Managers
consisting of three managers, two of which shall be appointed by
the Company, and one of which shall be appointed by Simple Growth.
In October 2021, Good Hemp Wellness, LLC was dissolved. This
company is being treated as discontinued operations in the
consolidated financial statements.
On April 1, 2021, the Company entered into an agreement to purchase
Diamond Creek Group, LLC, a North Carolina limited liability
company which sells the Diamond Creek brand of high alkaline water
products, for a total purchase price of $643,000. On April 2, 2021,
the Company closed the acquisition and paid the initial $500,000
portion of the purchase price, and on April 23, 2021, paid the
$143,000 purchase price balance. See note 4 for the purchase price
allocation.
The outbreak of the coronavirus (COVID-19) resulted in increased
travel restrictions, and shutdown of businesses, which may cause
slower recovery of the economy. We may experience impact from
quarantines, market downturns and changes in customer behavior
related to pandemic fears and impact on our workforce if the virus
continues to spread. In addition, one or more of our customers,
partners, service providers or suppliers may experience financial
distress, delayed or defaults on payment, file for bankruptcy
protection, sharp diminishing of business, or suffer disruptions in
their business due to the outbreak. The extent to which the
coronavirus impacts our results will depend on future developments
and reactions throughout the world, which are highly uncertain and
will include emerging information concerning the severity of the
coronavirus and the actions taken by governments and private
businesses to attempt to contain the coronavirus. It is likely to
result in a potential material adverse impact on our business,
results of operations and financial condition. Wider-spread
COVID-19 globally could prolong the deterioration in economic
conditions and could cause decreases in or delays in advertising
spending and reduce and/or negatively impact our short-term ability
to grow our revenues. Any decreased collectability of accounts
receivable, bankruptcy of small and medium businesses, or early
termination of agreements due to deterioration in economic
conditions could negatively impact our results of operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The Company follows the accrual basis of accounting in accordance
with generally accepted accounting principles in the United States
of America and has a year-end of December 31st.
Management further acknowledges that it is solely responsible for
adopting sound accounting practices, establishing and maintaining a
system of internal accounting control and preventing and detecting
fraud. The Company’s system of internal accounting control is
designed to assure, among other items, that 1) recorded
transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner
to produce financial statements which present fairly the financial
condition, results of operations and cash flows of the Company for
the respective periods being presented.
Use of Estimates
The preparation of 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. The Company regularly evaluates estimates and assumptions
related to the recoverability of long-lived assets and 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.
Consolidation
The financial statements include the financial statements of the
Company and its’ wholly-owned subsidiaries Diamond Creek Group, LLC
and Good Hemp Wellness, LLC. Good Hemp Wellness, LLC was
discontinued during 2021. All intercompany transactions have
been eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to make the December 31,
2020 balances comparable to December 31, 2021.
Impairment of Long-Lived Assets
Long-lived assets and certain identifiable intangible assets to be
held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. Determination of recoverability is
based on an estimate of undiscounted future cash flows resulting
from the use of the asset and its eventual disposition. Measurement
of an impairment loss for long-lived assets and certain
identifiable intangible assets that management expects to hold and
use is based on the fair value of the asset. Long-lived assets and
certain identifiable intangible assets to be disposed of are
reported at the lower of carrying amount or fair value less costs
to sell.
Fair Value of Financial Instruments
The FASB issued ASC 820-10, Fair Value Measurements and
Disclosures, for financial assets and liabilities. ASC 820-10
provides a framework for measuring fair value and requires expanded
disclosures regarding fair value measurements. ASC 820-10 defines
fair value as the price that would be received for an asset or the
exit price that would be paid to transfer a liability in the
principal or most advantageous market in an orderly transaction
between market participants on the measurement date. ASC 820-10
also establishes a fair value hierarchy which requires an entity to
maximize the use of observable inputs, where available. The
following summarizes the three levels of inputs required by the
standard that the Company uses to measure fair value:
-
|
Level 1: Quoted prices in active markets for identical assets or
liabilities
|
-
|
Level 2: Observable inputs other than Level 1 prices, such as
quoted prices for similar assets or liabilities; quoted prices in
markets that are not active, or other inputs that are observable or
can be corroborated by observable market data for substantially the
full term of the related assets or liabilities.
|
-
|
Level 3: Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities.
|
Determining which category an asset or liability falls within the
hierarchy requires significant judgment. We evaluate our hierarchy
disclosures each quarter.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents
include demand deposits, money market funds, and all highly liquid
debt instructions with original maturities of three months or
less.
The Company places its cash and cash equivalents with financial
institutions of high credit worthiness. At times, its cash and cash
equivalents with a particular financial institution may exceed any
applicable government insurance limits. The Company’s management
plans to assess the financial strength and credit worthiness of any
parties to which it extends funds, and as such, it believes that
any associated credit risk exposures are limited.
Inventory
Inventory consisting of raw materials and finished product is
stated at the lower of cost (first in, first out method) or net
realizable value.
Concentration and Credit Risk
At
December 31, 2021, all the Company’s receivables were with 3
customers, comprising 47%, 31% and 22% of the balance. Sales to
these three customers comprised 63% of the Company's sales during
the year ended December 31, 2021.
Cash - The Company places its cash and cash equivalents with
financial institutions of high credit worthiness. At times, its
cash and cash equivalents with a particular financial institution
may exceed any applicable government insurance limits. The
Company’s management plans to assess the financial strength and
credit worthiness of any parties to which it extends funds, and as
such, it believes that any associated credit risk exposures are
limited.
Accounts Receivable and Allowance for Doubtful
Accounts
Trade accounts receivable consists of product sales to customers.
Trade accounts receivable are generally due 30 days after issuance
of the invoice. Receivables past due more than 120 days are
considered delinquent. Delinquent receivables are written off based
on specific circumstances of the customer. At December 31, 2021 and
2020, an allowance was not deemed necessary.
Derivative Financial Instruments
For derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its
fair value and is then re-valued at each reporting date, with
changes in the fair value reported in the statements of operations.
For stock-based derivative financial instruments, the Company used
a Black Scholes valuation model to value the derivative instruments
at inception and on subsequent valuation dates. The classification
of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the
end of each reporting period. Derivative liabilities are classified
in the balance sheet as current or non-current based on whether or
not net-cash settlement or conversion of the instrument could be
required within 12 months of the balance sheet date.
Commitment and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to report
accounting for contingencies. Liabilities for loss contingencies
arising from claims, assessments, litigation, fines and penalties
and other sources are recorded when it is probable that a liability
has been incurred and the amount of the assessment can be
reasonably estimated.
The Company follows ASC 440-10, Commitments, to report accounting
for certain commitments.
Net Loss Per Common Share
The Company computes net income or loss per share in accordance
with ASC 260 Earnings per Share. Under the provisions of the
Earnings per Share Topic ASC, basic net loss per share is computed
by dividing the net loss available to common stockholders for the
period by the weighted average number of shares of common stock
outstanding during the period. The calculation of diluted net loss
per share gives effect to common stock equivalents; however,
potential common shares are excluded if their effect is
anti-dilutive.
Income Taxes
The Company accounts for its income taxes in accordance with ASC
740 Income Taxes, which requires recognition of deferred tax assets
and liabilities for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
operations in the period that includes the enactment date. A
valuation allowance is provided for the amount of deferred tax
assets that would otherwise be recorded for income tax benefits
primarily relating to operating loss carryforwards as realization
cannot be determined to be more likely than not.
The statement establishes a more-likely-than-not threshold for
recognizing the benefits of tax return positions in the financial
statements. Also, the statement implements a process for measuring
those tax positions which meet the recognition threshold of being
ultimately sustained upon examination by the taxing authorities.
There are no uncertain tax positions taken by the Company on its
tax returns and the adoption of the statement had no material
impact to the Company’s financial statements. The Company files tax
returns in the US and states in which it has operations and is
subject to taxation. Tax years subsequent to 2017 remain open to
examination by U.S. federal and state tax jurisdictions.
Revenue Recognition
Revenue is recognized in accordance with ASC 606. The Company
performs the following five steps: (i) identify the contract(s)
with a customer, (ii) identify the performance obligations in the
contract, (iii) determine the transaction price, (iv) allocate the
transaction price to the performance obligations in the contract,
and (v) recognize revenue when (or as) the entity satisfies a
performance obligation. The Company applies the five-step model to
arrangements that meet the definition of a contract under Topic
606, including when it is probable that the entity will collect the
consideration it is entitled to in exchange for the goods or
services it transfers to the customer. At contract inception, once
the contract is determined to be within the scope of Topic 606, the
Company evaluates the goods or services promised within each
contract related performance obligation and assesses whether each
promised good or service is distinct. The Company recognizes as
revenue, the amount of the transaction price that is allocated to
the respective performance obligation when (or as) the performance
obligation is satisfied.
The Company recognizes revenue upon completion of our performance
obligations or expiration of the contractual time to use services
such as professional service hours purchased in bulk for a given
time period.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by FASB
that are adopted by the Company as of the specified effective date.
If not discussed, management believes that the impact of recently
issued standards, which are not yet effective, will not have a
material impact on the Company’s financial statements upon
adoption.
NOTE 3 – GOING CONCERN
The accompanying consolidated financial statements have been
prepared using generally accepted in the United States of American
applicable to a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has recurring losses, an
accumulated deficit and a working capital deficiency. As reflected
in the financial statements, the Company had a working capital
deficit of $5,053,486 at December 31, 2021 and had a loss of
$4,816,176 for the year ended December 31, 2021. Management’s plans
include raising capital in the debt and equity markets. The ability
of the Company to continue as a going concern is dependent on the
Company obtaining adequate capital to fund operating losses until
its operations become established enough to be considered reliably
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 for a period of one year from the issuance of these
financial statements. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The financial statements do not include any adjustments related to
the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be
necessary should the Company is unable to continue as a going
concern.
NOTE 4 – INTANGIBLE ASSETS
On February 6, 2019, the Company, entered into
an Intellectual Property Purchase Agreement (the
“Agreement”) with S.
Mark Spoone, a Colorado corporation (the “Seller”), to acquire all of Mr.
Spoone’s intellectual property associated with Mr. Spoone’s “Good
Hemp” hemp-derived CBD-infused line of consumer beverages, for a
purchase price consisting of 12,000,000 shares of the Company’s
Class A preferred shares for a total value of $12,000. The
transaction was completed on February 12, 2019.
On April 30, 2019, the Company acquired from S. Mark Spoone the
CANNA HEMP and CANNA trademarks including all rights and trade
secrets and related inventory for consideration totaling
$32,462.39. At December 31, 2021, the Company had not attributed
any value to the acquired trademarks.
Effective February 28, 2020, the Company entered into a Branding
Agreement (the “Branding Agreement”) with Spire Holdings, LLC
(“Spire”), pursuant to which the Company would immediately issue
Spire 6,000,000 shares of the Company’s common stock (the “Spire
Shares”), and Spire would provide the Company (i) 7 primary NASCAR
Cup Series No. 77 entry automobile, team and drivers (“Car”)
sponsorships, and (ii) 25 associate or secondary sponsorships in
connection with the Car, subject to NASCAR and network television
approval. Pursuant to the Branding Agreement, Spire has some
antidilution protection and piggyback registration rights with
respect to the Spire Shares.
On February 10, 2021, the Company and Spire entered into an
Amendment to Branding Agreement amending the sponsorship dates to
be during the 2021-2022 NASCAR Cup Series racing seasons instead of
the 2020-2021 racing season.
The Company recorded an intangible asset in the amount of
$2,700,000 based on the closing price of GHMP common shares of
$0.45 on February 28,2020. During the year ended December 31, 2020,
the Company determined that it had utilized approximately 36% of
the services provided under the branding agreement and has
recognized $964,286 as expenses. During the year ended December 31,
2021, the Company determined that it had utilized 100% of the
services provided under the branding agreement and has recognized
$1,735,714 as expenses. The following summarizes the branding
agreement:
Gross Value of Branding Agreement
|
|
$ |
2,700,000 |
|
Value Utilized
|
|
|
(2,700,000 |
) |
Remaining
|
|
$ |
- |
|
On April 1, 2021, the Company entered into an agreement to purchase
Diamond Creek Group, LLC, a North Carolina limited liability
company which sells the Diamond Creek brand of high alkaline water
products, for a total purchase price of $643,000. On April 2, 2021,
the Company closed the acquisition and paid the initial $500,000
portion of the purchase price, and on April 23, 2021, paid the
$143,000 purchase price balance. During 2021, a major customer
chose not to continue purchasing products from Diamond Creek. The
Company evaluated goodwill and determined that it was impaired by
$161,309. The determination was based upon the loss of a major
customer of Diamond Creek, with the resulting decline in revenues.
The purchase price was allocated as follows:
Purchase Price Allocation
|
|
Amount
|
|
Acquisition cost
|
|
$ |
643,000 |
|
Assets acquired
|
|
|
|
|
Cash and cash equivalents
|
|
|
38,635 |
|
Accounts receivable
|
|
|
41,611 |
|
Property and equipment
|
|
|
97,228 |
|
Trademark
|
|
|
100,000 |
|
Total assets acquired
|
|
|
277,474 |
|
|
|
|
|
|
Liabilities assumed
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
77,998 |
|
Note payable
|
|
|
20,000 |
|
Total liabilities assumed
|
|
|
97,998 |
|
|
|
|
463,524 |
|
Impairment of goodwill
|
|
|
161,309 |
|
Goodwill
|
|
$ |
302,215 |
|
Unaudited Pro Forma Financial
Information
The following table provides unaudited supplemental pro forma
results for the Company for the years ended December 31, 2021 and
2020 as if the Diamond Creek Group, LLC acquisition had occurred on
January 1, 2020:
|
|
December 31, 2021
|
|
|
December 31, 2020
|
|
Revenues
|
|
$ |
1,491,903 |
|
|
$ |
1,825,341 |
|
Net income (loss)
|
|
|
(4,675,842 |
) |
|
|
(1,435,442 |
) |
Net loss per share
|
|
|
(0.20 |
) |
|
|
(0.08 |
) |
The unaudited supplemental pro forma financial information was
prepared based on the historical information of the Company and
Diamond Creek Group LLC. The unaudited supplemental pro forma
financial information does not give effect to the potential impact
of current financial conditions, any anticipated synergies,
operating efficiencies or cost savings that may result from the
acquisitions or any integration costs. Unaudited pro forma balances
are not necessarily indicative of operating results had the Diamond
Creek Group LLC acquisition occurred on January 1, 2020 or of
future results.
NOTE 5 – NOTES PAYABLE
On March 30, 2020, the Company entered into a securities purchase
agreement (the “SPA”) with Power Up Lending Group Ltd., a Virginia
corporation (the “Investor”), pursuant to which the Company agreed
to issue to the Investor a 10% Convertible Promissory Note (the
“Note”), dated March 23, 2020, in the principal amount of $67,500.
The Note was funded by the Investor on March 30, 2020, and on such
date pursuant to the SPA, the Company reimbursed the Investor for
expenses for legal fees and due diligence of $2,500. The SPA
includes customary representations, warranties and covenants by the
Company and customary closing conditions.
The Note matures 12 months after the date of the Note on March 23,
2021. The Note is convertible into shares of the Company’s common
stock beginning on the date which is 180 days from the date of the
Note, at a conversion price equal to 65% multiplied by the lowest
closing bid price during the 20 trading day period ending on the
last complete trading day prior to the date of conversion;
provided, however, that the Investor may not convert the Note to
the extent that such conversion would result in the Investor’s
beneficial ownership of the Company’s common stock being in excess
of 4.99% of the Company’s issued and outstanding common stock. The
beneficial ownership limitation may not be waived by the
Investor.
The Note carries a prepayment penalty if the Note is paid off in
60, 90, 120,150, or 180 days following the Note date. The
prepayment penalty is based on the then-outstanding principal at
the time of payoff, plus accrued and unpaid interest, multiplied by
115%, 120%, 125%, 130%, and 135% respectively. After the expiration
of 180 days following the issue date, the Company shall have no
right of prepayment. As of December 31, 2021, this note has been
paid in full.
Effective April 8, 2020, the Company and its lender, GS Capital
Partners, LLC, entered into a forbearance agreement relating to the
Lender’s promissory note dated October 8, 2019, in the original
principal amount of $103,000, pursuant to which the Company would
pay the Lender $40,000 by April 10, 2020, and $80,000 by May 10,
2020. The Company made both payments, with the final payment made
on May 11, 2020, since May 10, 2020, was a Sunday, and the lender’s
note is now considered paid in full.
Effective May 8, 2020, the Company entered into a securities
purchase agreement with Power Up Lending Group Ltd., a Virginia
corporation (“Power Up”), pursuant to which the Company agreed to
issue to the Power Up an 8% Convertible Promissory Note, dated May
7, 2020, in the principal amount of $42,000. The note was funded by
the Power Up on May 8, 2020, and on such date pursuant to the
securities purchase agreement, the Company reimbursed the Power Up
for expenses for legal fees and due diligence of $2,000. The
securities purchase agreement includes customary representations,
warranties and covenants by the Company and customary closing
conditions. The note matures 12 months after the date of the note
on May 7, 2021. The note is convertible into shares of the
Company’s common stock beginning on the date which is 180 days from
the date of the note, at a conversion price equal to 65% multiplied
by the lowest closing bid price during the 20 trading day period
ending on the last complete trading day prior to the date of
conversion; provided, however, that Power Up may not convert the
note to the extent that such conversion would result in Power Up’s
beneficial ownership of the Company’s common stock being in excess
of 4.99% of the Company’s issued and outstanding common stock. The
beneficial ownership limitation may not be waived by Power Up. The
note carries a prepayment penalty if the note is paid off in 30,
60, 90, 120, 150, or 180 days following the note date. The
prepayment penalty is based on the then-outstanding principal at
the time of payoff, plus accrued and unpaid interest, multiplied by
112%, 115%, 118%, 125%, 130%, and 135% respectively. After the
expiration of 180 days following the issue date, the Company shall
have no right of prepayment. As of December 31, 2021, this note has
been paid in full.
On July 31, 2020, the Company issued a Convertible Promissory Note
(the “JRF Note”) to JRF AZ Investments II, LP (the “JRF Investor”),
in the principal amount of $60,000, which was funded on July 31,
2020. The JRF Note matured nine months after the date of the note
and was convertible into shares of the Company’s common stock at a
conversion price equal to 60% of the average closing price during
the 10 trading-day period ending on the trading day prior to
conversion. On August 1, 2020, the JRF Investor elected to convert
the entire JRF Note into Company common stock and was subsequently
issued 111,359 shares of Company common stock in conversion
thereof.
On August 4, 2020, the Company entered into a securities purchase
agreement with DGF Services, Inc. The note is for $10,000 bearing
interest at 7% per annum and has a conversion price of $0.60 per
share. The note matures on February 3, 2021. On March 15, 2021, the
Company issued 17,405 shares of common stock for the conversion of
principal and interest of $10,456. See Note 9.
On August 18, 2020, the Company entered into a securities purchase
agreement with Power Up Lending Group pursuant to which the Company
agreed to issue to the Investor an 8% Convertible Promissory Note,
dated August 18, 2020, in the principal amount of $128,000. The
note was funded by the Investor on August 18, 2020, and on such
date pursuant to the securities purchase agreement, the Company
reimbursed the Investor for expenses for legal fees and due
diligence of $2,000. The securities purchase agreement includes
customary representations, warranties and covenants by the Company
and customary closing conditions. The note matures 12 months after
the date of the note on August 17, 2021. The note is convertible
into shares of the Company’s common stock beginning on the date
which is 180 days from the date of the note, at a conversion price
equal to 65% multiplied by the lowest closing bid price during the
20 trading day period ending on the last complete trading day prior
to the date of conversion; provided, however, that the Investor may
not convert the note to the extent that such conversion would
result in the Investor’s beneficial ownership of the Company’s
common stock being in excess of 4.99% of the Company’s issued and
outstanding common stock. The beneficial ownership limitation may
not be waived by the Investor. The note carries a prepayment
penalty if the note is paid off in 30, 60, 90, 120, 150, or 180
days following the note date. The prepayment penalty is based on
the then-outstanding principal at the time of payoff, plus accrued
and unpaid interest, multiplied by 112%, 115%, 118%, 125%, 130%,
and 135% respectively. After the expiration of 180 days following
the issue date, the Company shall have no right of
prepayment. On February 16, 2021, the Company paid the note,
accrued interest and prepayment penalty in full.
On February 4, 2021, the Company entered into a securities purchase
agreement with Power Up Lending Group pursuant to which the Company
agreed to issue to the Investor an 8% Convertible Promissory Note,
dated February 4, 2021, in the principal amount of $127,000. The
note was funded by the Investor on February 4, 2021, and on such
date pursuant to the securities purchase agreement, the Company
reimbursed the Investor for expenses for legal fees and due
diligence of $2,000. The securities purchase agreement includes
customary representations, warranties and covenants by the Company
and customary closing conditions. The note matures 12 months after
the date of the note on February 4, 2022. The note is convertible
into shares of the Company’s common stock beginning on the date
which is 180 days from the date of the note, at a conversion price
equal to 65% multiplied by the lowest closing bid price during the
20 trading day period ending on the last complete trading day prior
to the date of conversion; provided, however, that the Investor may
not convert the note to the extent that such conversion would
result in the Investor’s beneficial ownership of the Company’s
common stock being in excess of 4.99% of the Company’s issued and
outstanding common stock. The beneficial ownership limitation may
not be waived by the Investor. The note carries a prepayment
penalty if the note is paid off in 30, 60, 90, 120, 150, or 180
days following the note date. The prepayment penalty is based on
the then-outstanding principal at the time of payoff, plus accrued
and unpaid interest, multiplied by 112%, 115%, 118%, 125%, 130%,
and 135% respectively. After the expiration of 180 days following
the issue date, the Company shall have no right of prepayment. On
August 2, 2021, the Company paid the note, accrued interest and
prepayment penalty in full.
On February 16, 2021, the Company entered into a securities
purchase agreement with Power Up Lending Group pursuant to which
the Company agreed to issue to the Investor an 8% Convertible
Promissory Note, dated February 16, 2021, in the principal amount
of $78,750. The note was funded by the Investor on February 16,
2021, and on such date pursuant to the securities purchase
agreement, the Company reimbursed the Investor for expenses for
legal fees and due diligence of $2,000. The securities purchase
agreement includes customary representations, warranties and
covenants by the Company and customary closing conditions. The note
matures 12 months after the date of the note on February 16, 2022.
The note is convertible into shares of the Company’s common stock
beginning on the date which is 180 days from the date of the note,
at a conversion price equal to 65% multiplied by the lowest closing
bid price during the 20 trading day period ending on the last
complete trading day prior to the date of conversion; provided,
however, that the Investor may not convert the note to the extent
that such conversion would result in the Investor’s beneficial
ownership of the Company’s common stock being in excess of 4.99% of
the Company’s issued and outstanding common stock. The beneficial
ownership limitation may not be waived by the Investor. The note
carries a prepayment penalty if the note is paid off in 30, 60, 90,
120, 150, or 180 days following the note date. The prepayment
penalty is based on the then-outstanding principal at the time of
payoff, plus accrued and unpaid interest, multiplied by 112%, 115%,
118%, 125%, 130%, and 135% respectively. After the expiration of
180 days following the issue date, the Company shall have no right
of prepayment. On August 11, 2021, the Company paid the note,
accrued interest and prepayment penalty in full.
Effective February 16, 2021, the Company entered into a securities
purchase agreement with AES Capital Management, LLC, pursuant to
which the Company agreed to issue to an 8% Convertible Redeemable
Promissory Note (“AES Note”) in the principal amount of $78,750.
The AES Note was funded by the investor on February 16, 2021, and
on such date pursuant to AES Note, the Company reimbursed the
investor for loan fees of $3,750, receiving net funding of $75,000.
On August 26, 2021, the Company paid the note, accrued interest and
prepayment penalty in full.
On March 26, 2021, the Company entered into a securities purchase
agreement with Leonite Capital LLC (“Leonite”) pursuant to which
the Company agreed to issue to the Investor an 8% Convertible
Promissory Note, dated March 26, 2021, in the principal amount of
$568,182. The note was funded by the Investor on March 26, 2021,
and on such date pursuant to the securities purchase agreement, the
Company reimbursed the Investor for expenses for legal fees and due
diligence of $2,000. The securities purchase agreement includes
customary representations, warranties and covenants by the Company
and customary closing conditions. The note matures 12 months after
the date of the note on March 26, 2022. The note is convertible
into shares of the Company’s common stock beginning on the date
which is 180 days from the date of the note, at a conversion price
equal to 65% multiplied by the lowest closing bid price during the
20 trading day period ending on the last complete trading day prior
to the date of conversion; provided, however, that the Investor may
not convert the note to the extent that such conversion would
result in the Investor’s beneficial ownership of the Company’s
common stock being in excess of 4.99% of the Company’s issued and
outstanding common stock. The beneficial ownership limitation may
not be waived by the Investor. The note carries a prepayment
penalty if the note is paid off in 30, 60, 90, 120, 150, or 180
days following the note date. The prepayment penalty is based on
the then-outstanding principal at the time of payoff, plus accrued
and unpaid interest, multiplied by 112%, 115%, 118%, 125%, 130%,
and 135% respectively. After the expiration of 180 days following
the issue date, the Company shall have no right of prepayment. The
financing required the Company to issue 65,000 shares of common
stock to Leonite (see Note 9).
On April 21, 2021, the Company entered into a securities purchase
agreement (the “GS Capital SPA”) with GS Capital Partners, LLC, a
New York limited liability company, pursuant to which the Company
agreed to issue to the investor a 5% Convertible Redeemable
Promissory Note (the “GS Capital Note”), dated April 21, 2021, in
the principal amount of $85,750. The GS Capital Note included a
$8,000 original issue discount, and was funded by the investor on
April 22, 2021, and on such date pursuant to the GS Capital SPA,
the Company reimbursed the investor for legal fees of $3,750,
receiving net funding of $74,000. The GS Capital SPA includes
customary representations, warranties and covenants by the Company
and customary closing conditions. The GS Capital Note matures 12
months after the date of the note on April 21, 2022. The note is
convertible into shares of the Company’s common stock at any time
at a conversion price equal to 65% multiplied by the lowest closing
bid price during the 20 trading day period prior to the date of
conversion (and including the conversion date); provided, however,
that the investor may not convert the note to the extent that such
conversion would result in the investor’s beneficial ownership of
the Company’s common stock being in excess of 4.99% of the
Company’s issued and outstanding common stock. The note carries a
prepayment penalty if it is paid off in 180 days following the note
date. The prepayment penalty is based on the then-outstanding
principal at the time of payoff, plus accrued and unpaid interest,
multiplied by 105% if prepaid within 60 days, 120% if prepaid from
61 days-120 days, and 125% if prepaid between 121 days-180 days of
issuance. After the expiration of 180 days, the Company shall have
no right of prepayment. On October 27, 2021, the Company issued
52,848 shares of common stock for the conversion of principal and
interest of $11,027. On November 17, 2021, the Company issued
83,043 shares of common stock for the conversion of principal and
interest of $8,745. On December 13, 2021, the Company issued
224,964 shares of common stock for the conversion of principal and
interest of $8,774. See Note 9. As of December 31, 2021, the
outstanding balance of this note was $58,000.
On April 20, 2021, the Company entered into a securities purchase
agreement (the “Power Up SPA”) with Power Up Lending Group Ltd., a
Virginia corporation, pursuant to which the Company agreed to issue
to the investor a 5% Convertible Promissory Note (the “Power Up
Note”), dated April 20, 2021, in the principal amount of $82,000.
The Power Up Note was funded by the investor on April 23, 2021, and
on such date pursuant to the Power Up SPA, the Company reimbursed
the investor for expenses for legal fees and due diligence of
$2,000, receiving net funding of $80,000. The Power Up SPA includes
customary representations, warranties and covenants by the Company
and customary closing conditions. The Power Up Note matures 12
months after the date of the Power Up Note on April 20, 2022. The
note is convertible into shares of the Company’s common stock
beginning on the date which is 180 days from the date of the note,
at a conversion price equal to 65% multiplied by the lowest closing
bid price during the 20 trading day period ending on the last
complete trading day prior to the date of conversion; provided,
however, that the investor may not convert the note to the extent
that such conversion would result in the investor’s beneficial
ownership of the Company’s common stock being in excess of 4.99% of
the Company’s issued and outstanding common stock. The beneficial
ownership limitation may not be waived by the investor. The note
carries a prepayment penalty if the note is paid off in 180 days
following the note date. The prepayment penalty is based on the
then-outstanding principal at the time of payoff, plus accrued and
unpaid interest, multiplied by 125%. After the expiration of 180
days following the issue date, the Company shall have no right of
prepayment. On October 20, 2021, the Company paid the note,
accrued interest and prepayment penalty in full.
On May 4, 2021, the Company entered into a securities purchase
agreement with Metrospaces, Inc., a Florida corporation, pursuant
to which the Company agreed to issue to the investor a 5%
Convertible Redeemable Note, dated April 4, 2021, in the principal
amount of $50,000. The note was funded by the investor on May 4,
2021, with the Company receiving funding of $50,000. The securities
purchase agreement includes customary representations, warranties
and covenants by the Company and customary closing conditions. The
note matures 12 months after the date of the note on May 4, 2022.
The note is convertible into shares of the Company’s common stock
at any time at a conversion price equal to 65% multiplied by the
lowest closing price during the 20 trading day period prior to the
date of conversion (and including the conversion date); provided,
however, that the investor may not convert the note to the extent
that such conversion would result in the investor’s beneficial
ownership of the Company’s common stock being in excess of 9.9% of
the Company’s issued and outstanding common stock. The note carries
a prepayment penalty if it is paid off in 180 days following the
note date. The prepayment penalty is based on the then-outstanding
principal at the time of payoff, plus accrued and unpaid interest,
multiplied by 115% if prepaid within 60 days, 120% if prepaid from
61 days-120 days, and 125% if prepaid between 121 days-180 days of
issuance. After the expiration of 180 days, the Company shall have
no right of prepayment.
On August 13, 2021, the Company entered into a securities purchase
agreement with Geneva Roth Remark Holdings, Inc., a New York
corporation, pursuant to which the Company agreed to issue to the
investor a Convertible Note, dated August 13, 2021, in the
principal amount of $250,375. The Note included a $25,375 original
issue discount and was funded by the investor on August 13, 2021,
with the Company receiving funding of $225,000. The note carries a
one-time interest charge of 10% of $25,037. The note has mandatory
monthly payments of $27,541 starting on September 30, 2021 until
the note is paid in full. The securities purchase agreement
includes customary representations, warranties and covenants by the
Company and customary closing conditions. The note matures 12
months after the date of the note on August 13, 2022. The note is
convertible into shares of the Company’s common stock at any time
at a conversion price equal to 75% multiplied by the lowest closing
price during the previous trading day period prior to the date of
conversion (and including the conversion date); provided, however,
that the investor may not convert the note to the extent that such
conversion would result in the investor’s beneficial ownership of
the Company’s common stock being in excess of 4.99% of the
Company’s issued and outstanding common stock. The Company made the
first note payment on $27,541 prior to September 30, 2021. However,
the Company has not made any of the required payments for October,
November and December 2021 as required by the note agreement.
On October 5, 2021, the Company entered into a securities purchase
agreement (the “Jefferson SPA”) with Jefferson Street Capital, LLC,
a New Jersey limited liability company, pursuant to which the
Company agreed to issue to the investor a 10% Convertible
Redeemable Promissory Note (the “Jefferson Note”), dated October 5,
2021, in the principal amount of $275,000. The Jefferson Note
included a $25,000 original issue discount, and was funded by the
investor on October 13, 2021, and on such date pursuant to the
Jefferson Note, the Company reimbursed the investor for loan fees
of $20,000, receiving net funding of $230,000. The Jefferson SPA
includes customary representations, warranties and covenants by the
Company and customary closing conditions. The Jefferson Note
matures on August 20, 2022. The note is convertible into shares of
the Company’s common stock at any time at a conversion price equal
to 75% multiplied by the lowest closing bid price during the 10
trading day period prior to the date of conversion (and including
the conversion date); provided, however, that the investor may not
convert the note to the extent that such conversion would result in
the investor’s beneficial ownership of the Company’s common stock
being in excess of 4.99% of the Company’s issued and outstanding
common stock. As of December 31, 2021, the outstanding balance of
this note was $275,000.
On October 19, 2021, the Company entered into a securities purchase
agreement (the “Sixth Street SPA”) with Sixth Street Lending, LLC,
a Virginia limited liability company, pursuant to which the Company
agreed to issue to the investor a 5% Convertible Redeemable
Promissory Note (the “Sixth St Note”), dated October 19, 2021, in
the principal amount of $87,500. The Sixth St Note was funded by
the investor on October 22, 2021, and on such date pursuant to the
Sixth St Note, the Company reimbursed the investor for loan fees of
$2,500, receiving net funding of $85,000. The Sixth Street SPA
includes customary representations, warranties and covenants by the
Company and customary closing conditions. The Sixth St Note matures
on October 19, 2022. The note is convertible into shares of the
Company’s common stock beginning on the date which is 180 days from
the date of the note, at a conversion price equal to 65% multiplied
by the lowest closing bid price during the 20 trading day period
ending on the last complete trading day prior to the date of
conversion; provided, however, that the investor may not convert
the note to the extent that such conversion would result in the
investor’s beneficial ownership of the Company’s common stock being
in excess of 4.99% of the Company’s issued and outstanding common
stock. The beneficial ownership limitation may not be waived by the
investor. The note carries a prepayment penalty if the note is paid
off in 180 days following the note date. The prepayment penalty is
based on the then-outstanding principal at the time of payoff, plus
accrued and unpaid interest, multiplied by 125%. After the
expiration of 180 days following the issue date, the Company shall
have no right of prepayment. As of December 31, 2021, the
outstanding balance of this note was $87,500.
NOTE 6 – RELATED PARTY TRANSACTIONS
All related party transactions are recorded at the exchange amount
which is the value established and agreed to by the related party.
Mr. William Alessi, CEO, is the Principal Executive Officer and
director of the Company. The JanBella Group is an entity controlled
by Mr. Alessi. Chris Chumas is a director and a minority
shareholder of the Company.
A payable to a related party of $17,574 to Maurice Bideaux, the
Company’s former chief executive officer and director, was forgiven
by Mr. Bideaux in 2010. An additional advance from Mr. Bideaux of
$38,910 was forgiven by Mr. Bideaux in 2021.
On July 18, 2019, the Company issued promissory notes to Mr.
Alessi, JanBella Group and Mr. Chumas to evidence the amounts they
advanced to the Company. The notes are due on demand, bear interest
at 10% per year, and are secured by all of the Company's assets. At
the option of the noteholders, the notes may be converted into
shares of the Company's common stock. The number of shares which
will be issued upon any conversion of the notes will be determined
by dividing the principal amount to be converted (plus, at the
option of the noteholder, accrued and unpaid interest) by the lower
of (i) $0.001 or, (ii) 50% of the lowest bid price during the
forty-five consecutive trading day period ending on the trading day
immediately prior to the conversion date.
On January 29, 2020, the Company issued 7,000,000 shares of its
common stock to each of William Alessi and Chris Chumas,
respectively, for partial conversion of their promissory notes in
the principal amount of $7,000 each, respectively.
On October 15, 2021, the Company paid $50,287 to both Mr. Alessi
and Mr. Chumas as payments against the promissory notes held by
these individuals.
The following table presents principal amounts due, and common and
preferred shares held by William Alessi and Chris Chumas as of
December 31, 2021:
|
|
|
|
|
Interest
|
|
|
Common
Shares
|
|
|
Preferred
Shares
|
|
Name
|
|
Principal
|
|
|
rate
|
|
|
#
|
|
|
#
|
|
Chris Chumas
|
|
$ |
100,000 |
|
|
|
8 |
% |
|
|
7,000,000 |
|
|
nil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Alessi
|
|
|
200,000 |
|
|
|
8 |
% |
|
|
6,971,050 |
(1)
|
|
nil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JanBella Group (2)
|
|
|
110,000 |
|
|
|
10 |
% |
|
nil
|
|
|
nil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
410,000 |
|
|
|
|
|
|
|
|
|
|
|
|
_________
(1) Includes 6,971,000 shares held in the name of
Mr. Alessi’s trust, and 50 shares held in the name of Mr. Alessi’s
IRA.
(2) Mr. Alessi’s entity.
See Part II – Unregistered Sales of Equity Securities and Use of
Proceeds regarding the sale of unregistered securities and use of
proceeds.
NOTE 7 – DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative
accounting consideration under ASC 815, Derivatives and Hedging,
and hedging, and determined that the instrument should be
classified as a liability since the conversion option becomes
effective at issuance resulting in there being no explicit limit to
the number of shares to be delivered upon settlement of the above
conversion options. The Company determined our derivative
liabilities to be a Level 3 fair value measurement and used the
Black-Scholes pricing model to calculate the fair value as of
September 30, 2020. The Black-Scholes model requires six basic data
inputs: the exercise or strike price, time to expiration, the
risk-free interest rate, the current stock price, the estimated
volatility of the stock price in the future, and the dividend rate.
Changes to these inputs could produce a significantly higher or
lower fair value measurement. The fair value of each convertible
note is estimated using the Black-Scholes valuation model.
For the year ended December 31, 2021, the assumptions utilized in
estimating fair values of the liabilities measured on a recurring
basis are as follows:
|
|
Year
Ended
|
|
|
|
December 31,
2021
|
|
Expected term
|
|
1.00 years
|
|
Expected average volatility
|
|
|
356.68 |
% |
Expected dividend yield
|
|
|
- |
|
Risk-free interest rate
|
|
|
7.00 |
% |
The fair value measurements of the derivative liabilities
at December 31, 2021 is summarized:
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
$ |
3,220,927 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,220,927 |
|
The fair value measurements of the derivative liabilities
at December 31, 2020 is summarized:
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
$ |
1,526,495 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,526,495 |
|
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is subject, from time to time, to claims by third
parties under various legal disputes. The defense of such claims,
or any adverse outcome relating to any such claims, could have a
material adverse effect on the Company’s liquidity, financial
condition and cash flows. As of December 31, 2021, the Company did
not have any legal actions pending against it.
Commitments
The Company entered into various Seed Resale Agreements to sell
Hemp seeds to growers. The Company is obligated to purchase from
the growers’ minimum future quantities of hemp biomass.
NOTE 9 – CAPITAL STOCK
On January 29, 2020, the Company issued 7,000,000 shares of its
common stock to each of William Alessi and Chris Chumas,
respectively, for partial conversion of promissory notes in the
principal amount of $7,000 each, respectively.
On February 28, 2020, the Company entered into a Branding Agreement
(the “Branding Agreement”) with Spire Holdings, LLC (“Spire”),
pursuant to which the Company would immediately issue Spire
6,000,000 shares of the Company’s common stock (the “Spire
Shares”), and Spire would provide the Company (i) 7 primary NASCAR
Cup Series No. 77 entry automobile, team and drivers (“Car”)
sponsorships, and (ii) 25 associate or secondary sponsorships in
connection with the Car, subject to NASCAR and network television
approval. Pursuant to the Branding Agreement, Spire has some
anti-dilution protection and piggyback registration rights with
respect to the Spire Shares.
On July 29, 2020, the Company sold a third party investor (the
“Investor”) the
following securities (the “Securities”) for an aggregate
purchase price of $250,000: (i) 250,000 shares of the Series B-1
Preferred Stock, (ii) non-cashless warrants to purchase 250,000
shares of the Series B-2 Preferred Stock for $1.00 per share
terminating on January 21, 2021, (iii) non-cashless warrants to
purchase 250,000 shares of the Series B-2 Preferred Stock for $1.00
per share terminating on July 21, 2021, and (iv) non-cashless
warrants to purchase 250,000 shares of the Series B-2 Preferred
Stock for $1.00 per share terminating on January 21, 2022.
Effective July 1, 2020, Scott Shellady was appointed to serve as
the Chief Strategic Officer of the Company. On June 24, 2020, the
Company entered into a consulting services agreement with Mr.
Shellady, pursuant to which Mr. Shellady would (i) render
marketing, sales, distribution, and branding services to the
Company; and (ii) would be paid $5,000 per month and 100,000 shares
of Company common stock for services rendered during the initial
term from July 1, 2020, through December 31, 2020.
Effective July 31, 2020, the Company issued a Convertible
Promissory Note to JRF AZ Investments II, LP in the principal
amount of $60,000, which was funded on July 31, 2020. The Note
matured six months after the date of the Note and was convertible
into shares of the Company’s common stock at a conversion price
equal to 60% of the average closing price during the 10-trading day
period ending on the trading day prior to conversion. On August 1,
2020, JRF AZ Investments II, LP elected to convert the entire Note
into Company common stock and was subsequently issued 111,359
shares of Company common stock in conversion thereof.
On August 24, 2020, with an effective date of July 1, 2020, the
Company entered into a joint venture agreement with Paul Hervey
(“Hervey”), an individual, for the purpose of cultivating hemp.
Hervey is a licensed hemp cultivator in good standing under the
laws of North Carolina with approximately 3,700 square feet of
greenhouse cultivation space and approximately 9 acres of farmable
land (the “Facility”). Under the joint venture agreement, Good Hemp
will contribute up to $160,000 for the preparation of the Facility,
as well as up to $174,000 as ongoing operational expenses for the
joint venture, and Hervey will contribute exclusive use of the
Facility, as well as purchase services and/or purchase or lease
necessary equipment for the planting, cultivation and irrigation
for growing hemp, and profits shall be split equally by the parties
after reimbursement of expenses paid by the parties. The joint
venture shall conduct business under the name “Olin Farms, LLC”. On
or about August 20, 2020, the Company compensated Hervey $53,433.33
for the initial expenses of the joint venture. The payment was made
as follows: (i) a check payable to Hervey in the amount of
$33,433.33, and (ii) the issuance of 40,000 shares of Company
common stock in lieu of a $20,000 cash payment.
On March 15, 2021, the Company issued 30,000 shares of common stock
to a consultant for services.
On March 23, 2021, the Company issued 17,405 shares of common stock
to DGF Services, Inc. for a conversion of $10,456 in convertible
debt. See Note 5.
On March 25, 2021, the Company issued 65,000 shares of common stock
to Leonite in conjunction with financing. See Note 5.
On June 16, 2021, the Company issued 166,400 shares of common stock
to two investors under the S-1 registration at $1.25 per share for
a total of $208,000 in cash.
On July 26, 2021, the Company issued 60,000 shares of common stock
to one investor under the S-1 registration at $1.25 per share for a
total of $75,000 in cash.
On July 30, 2021, an investor (the “Investor”) exercised a
non-cashless warrants to purchase 250,000 shares of the Series B-2
Preferred Stock for $1.00 per share for $250,000 in cash.
On July 30, 2021, the investor holding 500,000 shares of Series B-2
Preferred Stock converted these shares into 833,333 common shares
according to the conversion rights.
On August 27, 2021, two warrant holders exercised cashless
warrants. The Company issued 8,808 shares of common stock in
relation to these warrants being exercised.
On October 27, 2021, the Company issued 52,848 shares of common
stock to GS Capital, LLC for a conversion of $11,027 in convertible
debt. See Note 5.
On November 17, 2021, the Company issued 83,043 shares of common
stock to GS Capital, LLC for a conversion of $8,745 in convertible
debt. See Note 5.
On December 13, 2021, the Company issued 224,964 shares of common
stock to GS Capital, LLC for a conversion of $8,774 in convertible
debt. See Note 5.
See Part II – Unregistered Sales of Equity Securities and Use of
Proceeds regarding the sale of unregistered securities and use of
proceeds.
NOTE 10 – JOINT VENTURE
On August 24, 2020, with an effective date of July 1, 2020, the
Company entered into a joint venture agreement with Paul Hervey
(“Hervey”) for the purpose of cultivating hemp. Hervey is a
licensed hemp cultivator in good standing under the laws of North
Carolina with approximately 3,700 square feet of greenhouse
cultivation space and approximately 9 acres of farmable land (the
“Facility”). Under the joint venture agreement, Good Hemp will
contribute up to $160,000 for the preparation of the Facility, as
well as up to $174,000 as ongoing operational expenses for the
joint venture, and Hervey will contribute exclusive use of the
Facility, as well as purchase services and/or purchase or lease
necessary equipment for the planting, cultivation and irrigation
for growing hemp, and profits shall be split equally by the parties
after reimbursement of expenses paid by the parties. The joint
venture shall conduct business under the name “Olin Farms, LLC”. On
or about August 20, 2020, the Company compensated Hervey $53,433.33
for the initial expenses of the joint venture. The payment was made
as follows: (i) a check payable to Hervey in the amount of
$33,433.33, and (ii) the issuance of 40,000 shares of Company
common stock in lieu of a $20,000 cash payment. On or about August
21, 2020, the Company made an initial cash contribution to Olin
Farms, LLC, in the amount of $10,000.00. In October 2021, the
Company made the decision to terminate this joint venture and all
operations have been stopped and Olin Farms, LLC was dissolved. The
Company recognized a loss on investment of $66,655.
NOTE 11 – INCOME TAXES
The company operates in the United States; accordingly, federal and
state income taxes have been provided based upon the tax laws and
rates of the United States deferred taxes are determined based on
the temporary differences between the financial statement and
income tax bases of assets and liabilities as measured by the
enacted tax rates, which will be in effect when these differences
reverse.
The Company is subject to United States income taxes at a rate of
21%. The reconciliation of the provision for income taxes at the
United States statutory rate compared to the Company’s income tax
expense as reported is as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Income tax (payable) recovery at statutory rate of 21%
|
|
$ |
(587,177 |
) |
|
$ |
(291,746 |
) |
Valuation allowance change
|
|
|
587,177 |
|
|
|
291,746 |
|
Provision for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
NOTE 12 – DISCONTINUED OPERATIONS
The Company decided during the year to discontinue operations of
its majority owned subsidiary, Good Hemp Wellness, LLC. In October
2021, the Company dissolved this entity in accordance with the laws
and regulations of North Carolina.
In accordance with the provisions of ASC 205-20, there were no
assets and liabilities to reflect as discontinued operations in the
Consolidated Balance Sheets as of December 31, 2021 and 2020.
In accordance with the provisions of ASC 205-20, the Company has
not included in the results of continuing operations the results of
operations of the discontinued operations in the Consolidated
Statements of Operations. The results of operations for this entity
for the years ended December 31, 2021 and 2020 have been reflected
as discontinued operations in the Consolidated Statements of
Operations, and consist of the following:
|
|
For the Years Ended
|
|
|
|
December 31, 2021
|
|
|
December 31, 2020
|
|
Net sales
|
|
$ |
4,189 |
|
|
$ |
- |
|
Cost of sales
|
|
|
2,044 |
|
|
|
- |
|
Gross profit
|
|
|
2,145 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
75,977 |
|
|
|
- |
|
Operating loss
|
|
|
(73,832 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Loss before taxes of discontinued operations
|
|
|
(73,832 |
) |
|
|
- |
|
Provision for income taxes of discontinued operations
|
|
|
- |
|
|
|
- |
|
Net loss of discontinued operations
|
|
$ |
(73,832 |
) |
|
$ |
- |
|
In accordance with the provisions of ASC 205-20, the Company has
separately reported the cash flow activity of the discontinued
operations in the Consolidated Statements of Cash Flows. The cash
flow activity from discontinued operations for the years ended
December 31, 2021 and 2020 have been reflected as discontinued
operations in the Consolidated Statements of Cash Flows and consist
of the following:
|
|
For the Years Ended
|
|
|
|
December 31, 2021
|
|
|
December 31, 2020
|
|
DISCONTINUED OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss of discontinued operations
|
|
$ |
(78,832 |
) |
|
$ |
- |
|
Net cash used in operating activities of discontinued
operations
|
|
$ |
(78,832 |
) |
|
$ |
- |
|
NOTE 13 – SUBSEQUENT EVENTS
The Company has evaluated all transactions from December 31, 2021,
through the financial statement issuance date for subsequent event
disclosure consideration and noted no significant subsequent event
that needs to be disclosed other than as set forth below.
On March 8, 2022, the Company entered into a Plan and Agreement of
Merger (the “PXS Merger Agreement”) with Petro X Solutions, Inc.
(“PXS”), a Wyoming corporation, pursuant to which a wholly-owned
subsidiary of the Company will merge (the “PXS Merger”) with and
into PXS, with PXS becoming our wholly-owned subsidiary as a result
of the PXS Merger. Pursuant to the PXS Merger Agreement, an
aggregate of 100,000,000 shares of Company common stock will be
issued to the shareholders of PXS in the PXS Merger. The PXS Merger
closing is to occur upon the satisfaction of several conditions,
including (i) customary closing conditions, including the receipt
of necessary approval from each of the Company and PXS, the
accuracy of the representations and warranties of the other party,
performance by the other party of its obligations under the PXS
Merger Agreement, and the absence of any material adverse changes
in the condition of the other party, and (ii) the reformation of
promissory notes payable to our current management.
On March 14, 2022, the Company entered into another Plan and
Agreement of Merger dated March 9, 2022 (the "Restoration Merger
Agreement"), with Restoration Artechs, Inc. ("Restoration"), a
California corporation, pursuant to which a wholly-owned subsidiary
of the Company will merge (the "Restoration Merger") with and into
Restoration, with Restoration becoming our wholly-owned subsidiary
as a result of the Restoration Merger. Pursuant to the Restoration
Merger Agreement, 25,000,000 shares of Company common stock will be
issued to the shareholder of Restoration in the Restoration Merger.
The Restoration Merger closing is to occur upon the satisfaction of
several conditions, including (i) customary closing conditions,
including the receipt of necessary approval from each of the
Company and Restoration, the accuracy of the representations and
warranties of the other party, performance by the other party of
its obligations under the Restoration Merger Agreement, and the
absence of any material adverse changes in the condition of the
other party, and (ii) the reformation of promissory notes payable
to our current management.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the fiscal year ended December 31, 2021, there have been no
disagreements with our independent registered public accounting
firm on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of the accounting
firm would have caused them to make reference thereto in their
report on the financial statements.
Item 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure
Controls and Procedures
Under the supervision and with the participation of our principal
executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term
is defined under Rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act).
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files
or submits under the Exchange Act is accumulated and communicated
to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar
functions as appropriate to allow timely decisions regarding
required disclosure. We concluded that our disclosure controls and
procedures as defined in Rule 13a-15(e) under the Exchange Act were
not effective as of December 31, 2021, to ensure that information
required to be disclosed in reports we file or submit under the
Exchange Act is recorded, processed, and summarized and reported
within the time periods specified in SEC rules and forms and our
disclosure controls and procedures were also ineffective to ensure
that the information required to be disclosed in reports that we
file under the Exchange Act is accumulated and communicated to our
principal executive and financial officers to allow timely
decisions regarding required disclosures.
Management’s Annual Report on Internal Control over
Financial Reporting
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting as
defined in rule 13a-15(f) and 15d-15(f) under the Exchange Act.
Internal control over financial reporting is a process designed by,
or under the supervision of the CEO to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external
purposes in accordance with generally accepted accounting
principles. Internal controls over financial reporting includes
those policies and procedures that (i) pertain to the maintenance
of records which in reasonable detail accurately and fairly reflect
the transactions and disposition of the Company’s assets; (ii)
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of consolidated financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are
being made in accordance with authorizations of management and
directors of the issuer; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could
have a material effect on the Company’s consolidated financial
statements.
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.
A material weakness is a deficiency or a combination of
deficiencies in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim consolidated financial
statements will not be prevented or detected on a timely basis.
In evaluating the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2020, management used
the criteria established in the Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on the
criteria established by COSO, management (with the participation of
the CEO and CFO) identified the following material weaknesses in
the Company’s internal control over financial reporting as of
December 31, 2021, which arose from the limited number of number of
staff at the Company and the inability to achieve proper
segregation of duties:
|
·
|
The Company lacked effective controls for ensuring the accuracy of
reporting over significant account balances, including the review,
approval, and documentation of related transactions and account
reconciliations and other complex accounting procedures.
|
|
·
|
The Company lacked effective controls because their directors are
not independent.
|
As a result of these material weaknesses, management concluded that
the Company did not maintain effective internal control over
financial reporting as of December 31, 2021, based on the criteria
established in Internal Control – Integrated Framework (2013)
issued by COSO.
This Annual Report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to
rules of the Security and Exchange Commission that permit us to
provide only management’s report in this Annual Report.
Limitations on the Effectiveness of Controls
The Company’s management, including the CEO and acting CFO, does
not expect that our disclosure controls and procedures or our
internal control over financial reporting will prevent or detect
all error and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objectives will be met.
Further, the design of the control system must reflect that there
are resource constraints and that the benefits must be considered
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or
mistake. Controls can also be circumvented by the individual acts
of some persons, by collusion of two or more people, or by
management override of controls. The design of any system of
controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks. Over
time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with
policies or procedures.
Changes in Internal Control over Financial
Reporting
Except as set forth above, there were no changes in our internal
control over financial reporting that occurred during the period
covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
Attestation Report of the Registered Public Accounting
Firm
This annual report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by our independent registered public
accounting firm pursuant to temporary rules of the SEC that permit
us to provide only management’s report in this annual report on
Form 10-K.
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate
Governance.
The following table sets for the names, ages and positions of our
board members and executive officers as of March 23, 2022:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
William Alessi
|
|
49
|
|
Chief Executive Officer and Chairman
|
Chris Chumas
|
|
35
|
|
Director
|
Rodney Sperry
|
|
54
|
|
Chief Financial Officer
|
Directors are generally elected at an annual shareholders’ meeting
and hold office until the next annual shareholders’ meeting, or
until their successors are elected and qualified. Executive
officers are elected by directors and serve at the board’s
discretion.
Mr. Alessi, appointed as a member of our Board of Directors and our
Chief Executive Officer and President on February 10, 2018, has
been the Founder and CEO of Alpha Modus, Corp., a software and
technology company, since August 2014, and the Managing Director of
Hybrid Titan Management, LLC since September 11, 2000. He was
formerly the interim CEO of RMD Entertainment Group, Inc. from
April of 2017 through October of 2017, and was the interim CEO of
Land Star, Inc. from April of 2017 to December of 2017. On December
10, 2021, Mr. Alessi resigned as CEO of the Company but remained
the President of the Company. On or about January 14, 2022, was
reappointed as our CEO.
Mr. Chumas, appointed as a member of our Board of Directors on July
11, 2019, served as an IBM sales executive from 2008-2017. In 2017,
he began working with erwin, Inc. as an Enterprise Solution
Strategist. He also serves as the Chief Strategy Officer and on the
Board of Alpha Modus, Corp. since 2018.
Mr. Sperry, appointed as our Chief Financial Officer on June 22,
2021, has fifteen years of experience in public company accounting.
His industry background includes audits for both private and
publicly traded companies in various industries including
manufacturing, distribution, mining, energy, and not for profit
organizations. He has served as outside controller for several
public companies over the last eleven years and has been
responsible for SEC filings and compliance. Mr. Sperry was a
licensed CPA in the State of Utah from February 2001 through
September 2014, and he has operated his own accounting and business
consulting practice for the past twelve years. He obtained his
Bachelor’s degree in accounting from Westminster College and his
Master’s degree in business administration (MBA) from Utah State
University.
The Company believes that its directors are qualified to serve as
directors due to their experience in the capital markets and retail
industries, and their general business knowledge.
The Company does not have an independent director, as that term is
defined in Section 803 of the NYSE Company Guide. The Company does
not have a financial expert.
Indemnification of Directors and Officers
Pursuant to Section 78.7502 of the Nevada Revised Statutes, we have
the power to indemnify any person made a party to any lawsuit by
reason of being a director or officer of the Company, or serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. Our articles of incorporation provide that the Company
shall indemnify its directors and officers to the fullest extent
permitted by Nevada law.
With regard to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
us of expenses incurred or paid by a director, officer or
controlling person of the Corporation in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the common shares
being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by us is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the
final adjudication of such case.
Director Compensation
There are no formal agreements with our directors for compensation,
although they have received shares for their services from time to
time.
Director Independence
During the period ended December 31, 2021, we had no independent
directors.
Involvement on Certain Material Legal Proceedings During
the Last Five Years
No director, officer, significant employee or consultant has been
convicted in a criminal proceeding, exclusive of traffic
violations.
No bankruptcy petitions have been filed by or against any business
or property of any director, officer, significant employee or
consultant of the Company nor has any bankruptcy petition been
filed against a partnership or business association where these
persons were general partners or executive officers.
No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise
limited from involvement in any type of business, securities or
banking activities.
No director, officer or significant employee has been convicted of
violating a federal or state securities or commodities law.
Directors’ and Officers’ Liability Insurance
The Company maintains directors’ and officers’ liability insurance
insuring our directors and officers against liability for acts or
omissions in their capacities as directors or officers.
Code of Ethics
We intend to adopt a code of ethics that applies to our officers,
directors and employees, including our principal executive officer
and principal accounting officer, but have not done so to date due
to our relatively small size. We intend to adopt a written code of
ethics in the near future.
Board Composition
Our By-Laws provide that the Board of Directors shall consist of
not less than one nor more than fifteen directors. Each director of
the Company serves until his successor is elected and qualified,
subject to removal by the Company’s majority shareholders. Each
officer shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined by the
Board of Directors and shall hold his office until his successor is
elected and qualified, or until his earlier resignation or
removal.
No Committees of the Board of Directors; No Financial
Expert
We do not presently have a separately constituted audit committee,
compensation committee, nominating committee, executive committee
or any other committees of our Board of Directors. Nor do we have
an audit committee or financial expert. Management has determined
not to establish an audit committee at present because our limited
resources and limited operating activities do not warrant the
formation of an audit committee or the expense of doing so. As
such, our entire Board of Directors acts as our audit committee. We
do not have a financial expert serving on the Board of Directors or
employed as an officer based on management’s belief that the cost
of obtaining the services of a person who meets the criteria for a
financial expert under Section 407 of the Sarbanes-Oxley Act of
2002 and Item 407(d) of Regulation S-K is beyond our limited
financial resources and the financial skills of such an expert are
simply not required or necessary for us to maintain effective
internal controls and procedures for financial reporting in light
of the limited scope and simplicity of accounting issues raised in
our financial statements at this stage of our development.
Compliance with Section 16(A) of the Exchange
Act
Section 16(a) of the Exchange Act requires the Company’s directors,
executive officers and persons who beneficially own 10% or more of
a class of securities registered under Section 12 of the Exchange
Act to file reports of beneficial ownership and changes in
beneficial ownership with the SEC. Directors, executive officers
and greater than 10% stockholders are required by the rules and
regulations of the SEC to furnish the Company with copies of all
reports filed by them in compliance with Section 16(a).
Based solely on our review of certain reports filed with the
Securities and Exchange Commission pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended, the reports required
to be filed with respect to transactions in our common stock during
the fiscal year ended December 31, 2020, were timely, except that
Ms. Setzer and Mr. Shellady did not timely file a Form 3 or Form 4
upon their appointments as executive officers of the Company.
Item 11. Executive Compensation.
The following table summarizes the compensation earned by the
Company’s principal executive officers during the two years ended
December 31, 2021 and 2020.
Summary Compensation Table
Name and
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
Principal
|
|
Fiscal
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
Position
|
|
Year
|
|
|
(1)
|
|
|
|
(2)
|
|
|
|
(3)
|
|
|
|
(4)
|
|
|
|
(5)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Alessi
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Chief Executive Officer & Director
|
|
2020
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney Sperry
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
11,840 |
|
|
$ |
11,840 |
|
Chief Financial Officer (6)
|
|
2020
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emma Setzer
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Chief Financial Officer (7)
|
|
2020
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jose Rodriguez
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Former Chief Financial Officer (8)
|
|
2020
|
|
$ |
14,175 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
14,175 |
|
__________
(1)
|
The dollar value of salary (cash and non-cash) earned.
|
(2)
|
The dollar value of bonus (cash and non-cash) earned.
|
(3)
|
The value of the shares of restricted stock issued as compensation
for services computed in accordance with ASC 718 on the date of
grant.
|
(4)
|
The value of all stock options computed in accordance with ASC 718
on the date of grant.
|
(5)
|
All other compensation received that could not be properly reported
in any other column of the table.
|
(6)
|
Mr. Sperry was appointed as our Chief Financial Officer on June 22,
2021.
|
(7)
|
Ms. Setzer was appointed as our Chief Financial Officer on
September 15, 2020, through June 22, 2021, when she resigned as our
Chief Financial Officer.
|
(8)
|
Mr. Rodriguez served as our Chief Financial Officer from November
19, 2019, through September 14, 2020, when he resigned as our Chief
Financial Officer.
|
Long-Term Incentive Plans. The Company does not
provide its officers or employees with pension, stock appreciation
rights, long-term incentive or other plans, nor does it provide
non-qualified deferred compensation to its officers or employees,
and therefore, the Summary Compensation Table above does not
include columns for nonequity incentive plan compensation and
nonqualified deferred compensation earnings, since there were
none.
Employee Pension, Profit Sharing or other Retirement
Plans. The Company does not have a defined benefit,
pension plan, profit sharing or other retirement plan, although it
may adopt one or more of such plans in the future.
Executive Compensation. Mr. Rodriguez was paid
$14,175 for his services as CFO in 2020 prior to his resignation in
September of 2020. Mr. Sperry was paid $11,840 for his services as
CFO in 2021. Mr. Alessi and Ms. Setzer were not compensated by the
Company for their services as executive officers during
2020.
Compensation Committee Interlocks and Insider
Participation. During the years ended December 31, 2021
and 2020, none of the Company’s officers was also a member of the
compensation committee or a director of another entity, which other
entity had one of its executive officers serving as one of the
Company’s directors.
Outstanding Equity Awards
Our directors and officers do not have unexercised options, stock
that has not vested, or equity incentive plan awards.
Compensation of Directors
Director Compensation Table
|
|
Fiscal
|
|
Fees Earned
or
Paid in
Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
All Other Compensation
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
(1)
|
|
|
|
(2)
|
|
|
|
(3)
|
|
|
|
(4)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Alessi
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
2020
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris Chumas
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
2020
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Spoone
|
|
2021
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
2020
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
__________
(1)
|
The dollar value of salary (cash and non-cash) earned.
|
(2)
|
The value of the shares of restricted stock issued as compensation
for services computed in accordance with ASC 718 on the date of
grant.
|
(3)
|
The value of all stock options computed in accordance with ASC 718
on the date of grant.
|
(4)
|
All other compensation received that could not be properly reported
in any other column of the table.
|
Mr. Alessi, Mr. Chumas and Mr. Spoone were not compensated for
their services as directors of the Company. Mr. Alessi’s
compensation as an executive officer of the Company is described in
the executive compensation descriptions above. As disclosed above,
Mr. Alessi originally received 30,000,000 Class A Preferred Shares,
and subsequently transferred 6,000,000 Class A Preferred Shares to
Mr. Chumas.
On July 22, 2019, the Company purchased 6,000,000 Class A Preferred
Shares from Chris Chumas for $100,000. Payment for the preferred
shares was in the form of a Company promissory note issued to Mr.
Chumas. The note bears interest at 8% per year, was due and payable
on December 31, 2019, is unsecured, and is still outstanding as of
the date hereof.
Messrs. Alessi, Chumas and Spoone were not compensated for their
services as directors of the Company during 2020 and 2021.
Employment Contracts, Termination of Employment,
Change-in-Control Arrangements
The Company does not have employment or director agreements with
Mr. Alessi, Ms. Setzer, Mr. Chumas, or Mr. Spoone. On June 24,
2020, the Company entered into a consulting services agreement with
Mr. Shellady, pursuant to which Mr. Shellady will (i) render
marketing, sales, distribution, and branding services to the
Company; and (ii) will be paid $5,000 per month and 100,000 shares
of Company common stock for services rendered during the initial
term from July 1, 2020, through December 31, 2020.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Security Ownership of Certain Beneficial
Owners
The following table lists, as of December 31, 2020, the
shareholdings of (i) each person owning beneficially 5% or more of
the Company’s outstanding shares of common stock; (ii) each
executive officer of the Company, and (iii) all officers and
directors as a group. Unless otherwise indicated, each owner has
sole voting and investment power over his shares of common stock.
Information relating to beneficial ownership of common stock by our
principal shareholders and management is based upon information
furnished by each person using beneficial ownership’ concepts under
the rules of the Securities and Exchange Commission. Under these
rules, a person is deemed to be a beneficial owner of a security if
that person has or shares voting power, which includes the power to
vote or direct the voting of the security, or investment power,
which includes the power to vote or direct the voting of the
security. The person is also deemed to be a beneficial owner of any
security of which that person has a right to acquire beneficial
ownership within 60 days. Under the Securities and Exchange
Commission rules, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed
to be a beneficial owner of securities as to which he or she may
not have any pecuniary beneficial interest. Except as noted below,
each person has sole voting and investment power.
The percentages below are calculated based on 27,712,260 shares of
our common stock issued and outstanding as of April 12, 2022.
Except as disclosed herein, we do not have any outstanding options,
or other securities exercisable for or convertible into shares of
our common stock. Unless otherwise indicated, the address of each
person listed is c/o Good Hemp, Inc., 20311 Chartwell Center Drive,
Suite 1469, Cornelius, NC 28031.
Name of Beneficial Owner
|
|
Title of Class
|
|
Amount and Nature of Beneficial Ownership
(1)
|
|
|
Percent of Class (2)
|
|
William Alessi (3)
|
|
Common Stock
|
|
|
6,392,141 |
|
|
|
23.07 |
% |
Chris Chumas (5)
|
|
Common Stock
|
|
|
6,800,000 |
|
|
|
24.54 |
% |
S. Mark Spoone (5)
|
|
Common Stock
|
|
|
375,000 |
|
|
|
1.35 |
% |
Scott Shellady (4)
|
|
Common Stock
|
|
|
50,000 |
|
|
|
0.18 |
% |
Emma Setzer (4)
|
|
Common Stock
|
|
|
- |
|
|
|
-
|
%
|
Rodney Sperry (4)
|
|
Common Stock
|
|
|
- |
|
|
|
-
|
%
|
All Officers and Directors as a Group
|
|
Common Stock
|
|
|
13,617,141 |
|
|
|
49.14 |
% |
T.J. Puchyr (6)
|
|
Common Stock
|
|
|
6,000,000 |
|
|
|
21.65 |
% |
_________
(1)
|
Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Each
of the beneficial owners listed above has direct ownership of and
sole voting power to the shares of the Company's common stock and
preferred stock.
|
(2)
|
As of April 12, 2022, a total of 27,712,260 shares of the Company's
common stock are considered to be outstanding pursuant to SEC Rule
13d-3(d)(1). For each Beneficial Owner listed, any options
exercisable within 60 days have been also included for purposes of
calculating their percent of class.
|
(3)
|
Officer and director.
|
(4)
|
Officer
|
(5)
|
Director
|
(6)
|
Held in name of Spire Holdings, LLC. Mr. Puchyr has voting
and dispositive power with respect to the shares held in the name
of Spire Holdings, LLC.
|
Item 13. Certain Relationships and Related Transactions,
and Director Independence.
Director Independence
Our securities are not listed on a national securities exchange or
on any inter-dealer quotation system which has a requirement that a
majority of directors be independent. Our board of directors has
undertaken a review of the independence of each director by the
standards for director independence set forth in the NASDAQ
Marketplace Rules. Under these rules, a director is not considered
to be independent if he or she also is an executive officer or
employee of the corporation. Our board of directors has determined
that the Company does not have any independent directors.
Item 14. Principal Accountant Fees and
Services.
The following table sets forth fees billed to us by our independent
auditors for the years ended December 31, 2021 and 2020 for (i)
services rendered for the audit of our annual financial statements
and the review of our quarterly financial statements, (ii) services
rendered that are reasonably related to the performance of the
audit or review of our financial statements that are not reported
as Audit Fees, and (iii) services rendered in connection with tax
preparation, compliance, advice and assistance.
Services
|
|
2021
|
|
|
2020
|
|
Audit fees
|
|
$ |
25,500 |
|
|
$ |
6,500 |
|
Audit-related fees
|
|
|
- |
|
|
|
- |
|
Tax fees
|
|
|
- |
|
|
|
- |
|
All other fees
|
|
|
- |
|
|
|
- |
|
Total fee
|
|
$ |
25,500 |
|
|
$ |
6,500 |
|
PART IV
Item 15. Exhibits and Financial Statement
Schedules.
The following exhibits are filed with this Form 10-K or
incorporated by reference:
Exhibit
|
|
Description
|
2.1
|
|
Plan and Agreement of Merger among Good Hemp, Inc., Good Hemp Name
Change Subsidiary, Inc. and Petro X Solutions, Inc. (incorporated
by reference to Exhibit 2.1 to Current Report on Form 8-K filed on
March 11, 2022)
|
2.2
|
|
Plan and Agreement of Merger among Good Hemp, Inc., Good Hemp Name
Change Subsidiary 2, Inc. and Restoration Artechs, Inc.
(incorporated by reference to Exhibit 2.1 to Current Report on Form
8-K filed on March 22, 2022)
|
3.1
|
|
Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to Registration Statement on Form S-1
filed on September 23, 2020, file no. 333-248986)
|
3.2
|
|
Articles of Merger (changing Company name) (incorporated by
reference to Exhibit 3.2 to Registration Statement on Form S-1
filed on September 23, 2020, file no. 333-248986)
|
3.3
|
|
Bylaws (incorporated by reference to Exhibit 3.2 to Annual Report
on Form 10-K filed on May 25, 2018, file no. 000-54509)
|
3.4
|
|
Certificate of Designation of Series B-1 Convertible Preferred
Stock (incorporated by reference to Exhibit 3.1 to Current Report
on Form 8-K filed on July 27, 2020, file no. 000-54509)
|
3.5
|
|
Certificate of Designation of Series B-2 Convertible Preferred
Stock (incorporated by reference to Exhibit 3.2 to Current Report
on Form 8-K filed on July 27, 2020, file no. 000-54509)
|
10.1
|
|
Intellectual Property Purchase Agreement, between the Company and
Good Hemp Living, LLC, dated February 6, 2019 (incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K filed on
February 12, 2019, file no. 000-54509)
|
10.2
|
|
Branding Agreement between the Company and Spire Holdings, LLC,
effective as of February 28, 2020 (incorporated by reference to
Exhibit 10.2 to Current Report on Form 8-K filed on March 2, 2020,
file no. 000-54509)
|
10.3
|
|
Joint Venture Agreement of Olin Farms, LLC, between the Company and
Paul Hervey, dated July 1, 2020 (incorporated by reference to
Exhibit 10.3 to Registration Statement on Form S-1 filed on
September 23, 2020, file no. 333-248986)
|
10.4
|
|
Promissory Note dated July 17, 2019, issued by the Company to
William Alessi (incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1 filed on September 23, 2020,
file no. 333-248986)
|
10.5
|
|
Promissory Note dated July 17, 2019, issued by the Company to
JanBella Group, LLC (incorporated by reference to Exhibit 10.5 to
Registration Statement on Form S-1 filed on September 23, 2020,
file no. 333-248986)
|
10.6
|
|
Promissory Note dated July 17, 2019, issued by the Company to Chris
P. Chumas (incorporated by reference to Exhibit 10.6 to
Registration Statement on Form S-1 filed on September 23, 2020,
file no. 333-248986)
|
10.7
|
|
Promissory Note dated July 22, 2019, issued by the Company to
William Alessi (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 filed on September 23, 2020,
file no. 333-248986)
|
10.8
|
|
Promissory Note dated July 22, 2019, issued by the Company to Chris
P. Chumas IRA (incorporated by reference to Exhibit 10.8 to
Registration Statement on Form S-1 filed on September 23, 2020,
file no. 333-248986)
|
10.9
|
|
Consulting Services Agreement between the Company and Scott
Shellady, dated June 24, 2020 (incorporated by reference to Exhibit
10.1 to Current Report on Form 8-K filed on June 30, 2020, file no.
000-54509)
|
10.10
|
|
Amendment to Branding Agreement between the Company and Spire
Holdings, LLC, entered into February 10, 2021 (incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K filed on
February 16, 2021, file no. 000-54509)
|
10.11
|
|
Securities Purchase Agreement, between the Company and Leonite
Capital LLC, dated March 25, 2021 (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K filed on March 30, 2021,
file no. 000-54509)
|
10.12
|
|
Senior Secured Convertible Promissory Note dated February March 25,
2021, issued by the Company to Leonite Capital LLC (incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K filed on
March 30, 2021, file no. 000-54509)
|
10.13
|
|
Common Stock Purchase Warrant, dated March 25, 2021, issued to
Leonite Capital LLC (incorporated by reference to Exhibit 10.3 to
Current Report on Form 8-K filed on March 30, 2021, file no.
000-54509)
|
10.14
|
|
Pledge and Security Agreement between the Company and Leonite
Capital LLC, dated March 25, 2021 (incorporated by reference to
Exhibit 10.4 to Current Report on Form 8-K filed on March 30, 2021,
file no. 000-54509)
|
10.15
|
|
Membership Interest Purchase Agreement, between the Company and the
Sellers, dated April 1, 2021 (incorporated by reference to Exhibit
10.1 to Current Report on Form 8-K filed on April 7, 2021, file no.
000-54509)
|
10.16
|
|
Employment Agreement, between the Company and Kenneth Morgan, dated
April 1, 2021 (incorporated by reference to Exhibit 10.1 to Current
Report on Form 8-K filed on April 7, 2021, file no.
000-54509)
|
10.17
|
|
Common Stock Warrant, dated April 1, 2021, issued to Kenneth Morgan
(incorporated by reference to Exhibit 10.2 to Current Report on
Form 8-K filed on April 7, 2021, file no. 000-54509)
|
10.18
|
|
Securities Purchase Agreement, entered into between Good Hemp, Inc.
and GS Capital Partners, LLC, dated April 21, 2021 (incorporated by
reference to Exhibit 10.1 to Current Report on Form 8-K filed on
April 26, 2021, file no. 000-54509)
|
10.19
|
|
Convertible Promissory Note dated April 21, 2021, by Good Hemp,
Inc. to GS Capital Partners, LLC (incorporated by reference to
Exhibit 10.2 to Current Report on Form 8-K filed on April 26, 2021,
file no. 000-54509)
|
10.20
|
|
Securities Purchase Agreement, entered into between Good Hemp, Inc.
and Metrospaces, Inc., dated May 4, 2021 (incorporated by reference
to Exhibit 10.1 to Current Report on Form 8-K filed on May 6, 2021,
file no. 000-54509)
|
10.21
|
|
Convertible Promissory Note dated May 4, 2021, by Good Hemp, Inc.
to Metrospaces, Inc. (incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K filed on May 6, 2021, file no.
000-54509)
|
10.22
|
|
Engagement Agreement, between Good Hemp, Inc. and Sperry Advisory
Services, LLC, dated June 16, 2021 (incorporated by reference to
Exhibit 10.1 to Current Report on Form 8-K filed on June 25, 2021,
file no. 000-54509)
|
10.23
|
|
Securities Purchase Agreement, entered into between Good Hemp, Inc.
and Geneva Roth Remark Holdings, Inc., dated August 13, 2021
(incorporated by reference to Exhibit 10.1 to Current Report on
Form 8-K filed on August 26, 2021, file no. 000-54509)
|
10.24
|
|
Promissory Note dated August 13, 2021, by Good Hemp, Inc. to Geneva
Roth Remark Holdings, Inc. (incorporated by reference to Exhibit
10.2 to Current Report on Form 8-K filed on August 26, 2021, file
no. 000-54509)
|
10.25
|
|
Securities Purchase Agreement, entered into between Good Hemp, Inc.
and Jefferson Street Capital LLC, dated October 5, 2021
(incorporated by reference to Exhibit 10.1 to Current Report on
Form 8-K filed on October 20, 2021, file no. 000-54509)
|
10.26
|
|
Inventory Financing Promissory Note dated October 5, 2021, by Good
Hemp, Inc. to Jefferson Street Capital LLC (incorporated by
reference to Exhibit 10.2 to Current Report on Form 8-K filed on
October 20, 2021, file no. 000-54509)
|
10.27
|
|
Securities Purchase Agreement, entered into between Good Hemp, Inc.
and Sixth Street Lending LLC, dated October 19, 2021 (incorporated
by reference to Exhibit 10.1 to Current Report on Form 8-K filed on
October 27, 2021, file no. 000-54509)
|
10.28
|
|
Convertible Promissory Note dated October 19, 2021, by Good Hemp,
Inc. to Sixth Street Lending LLC (incorporated by reference to
Exhibit 10.2 to Current Report on Form 8-K filed on October 27,
2021, file no. 000-54509)
|
31.1 *
|
|
Certification by the Principal Executive
Officer
|
31.2 *
|
|
Certification by the Principal Accounting
Officer
|
32.1 *
|
|
Certifications by the Principal Executive
Officer
|
32.2 *
|
|
Certifications by the Principal
Accounting Officer
|
101 INS **
|
|
Inline XBRL Instance Document (the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document).
|
101 SCH **
|
|
Inline XBRL Taxonomy Extension Schema Document
|
101 CAL **
|
|
Inline XBRL Taxonomy Calculation Linkbase Document
|
101 DEF **
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
101 LAB **
|
|
Inline XBRL Taxonomy Labels Linkbase Document
|
101 PRE **
|
|
Inline XBRL Taxonomy Presentation Linkbase Document
|
104 **
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).
|
*Filed herewith.
** XBRL (Extensible Business Reporting Language) information is
furnished and not filed or a part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933, as amended, is deemed not filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, and otherwise
is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
GOOD HEMP, INC.
|
|
|
|
|
|
Dated: April 22, 2022
|
By:
|
/s/ William Alessi
|
|
|
|
William Alessi
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
By:
|
/s/ Rodney Sperry
|
|
|
|
Rodney Sperry
|
|
|
|
Chief Financial Officer
|
|
Pursuant to the requirements of the Securities Exchange Act of
l934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ William Alessi
|
|
Director
|
|
April 22, 2022
|
William Alessi
|
|
|
|
|
/s/ Chris Chumas
|
|
Director
|
|
April 22, 2022
|
Chris Chumas
|
|
|
|
|
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