Notes to Consolidated Financial Statements
December 31, 2019 and 2018
NOTE 1- Summary of History and Significant Accounting Policies
Nature of Operations
High Sierra Technologies, Inc., (the Company) was incorporated in the State of Nevada on August 6, 2018. It was formed with the intention that it would become the assignee, owner and licensor of certain Intellectual Property that was, prior to assignment, the property of Vincent C. Lombardi, Ph.D. (the Intellectual Property) who is an officer, director and co-founder of the Company. The Company was further formed with the goal that it would continue to develop and expand its intellectual property portfolio with an emphasis on the recreational cannabis industry as well as the industrial hemp industry.
The Company is a start-up that develops patents and other products used in the processing of cannabis, including industrial hemp, and will license these technologies to companies in the industry. The Company will likely incur research and development expenses in the future, and intends to develop a policy regarding the same. The Company was growing industrial hemp on a 200 acre property it leases in McDermitt, Nevada and incurred expenses in relation to this project and the failure of the crop (see Note 10).
Gulf & Orient Steamship Company, LTD (Gulf) was incorporated in the State of Colorado on May 9, 1996. Gulf originally intended to engage in the business of marine transportation.
On November 1, 2017, Gulf incorporated Gulf Acquisition, Inc., a Utah corporation for the sole purpose of completing an Agreement and Plan of Merger.
On December 31, 2018, Gulf entered into a Share Exchange Agreement with the Company and all the shareholders of the Company. The shareholders of the Company were issued shares of the Gulfs common stock on a one for one share basis in exchange for their shares of the Companys common stock. The Share Exchange was treated as a recapitalization, and as a result, the consolidated financial statements are presented under successor entity reporting.
Basis of presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
The Company consolidates its subsidiaries (High Sierra Technologies, Inc., a Nevada corporation, and Gulf Acquisition, Inc., a Utah corporation) in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, "[t]he usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50% of the outstanding voting shares of another entity is a condition pointing toward consolidation." All inter-company transactions have been eliminated during consolidation.
Concentration of Risk
The Company places its cash and temporary cash investments with established financial institutions. At times, such cash and investments may be in excess of the FDIC insurance limit.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
27
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation - Stock Based Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to third parties, employees and directors, including stock options. Effective January 1, 2019, the Company adopted ASU 2018-07, Compensation Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
ASC 718 requires companies to estimate the fair value of share-based awards to employees and directors on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by the Company's stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
All transactions in which goods or third-party services are the consideration received for the issuance of equity instruments are accounted for under ASC 505, until January 1, 2019, and are based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable on the earlier of the commitment date or completion date.
Upon the adoption of ASU 2018-07, the Company measured the fair value of equity instruments for nonemployee based payment awards on the grant date.
Investment in Growing Crops
The Companys Investment in Growing Crops represented the total cost of the crop inputs in the ground. These were recorded at cost and were to be expensed to cost of goods sold once the crops were harvested and sold.
The crop harvest for the year failed and the Company incurred a $246,914 loss from the preparation, planting and harvesting of the crop.
Long-lived Assets
Long-lived assets are stated at cost. Maintenance and repairs are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, which is five years.
Where an impairment of a propertys value is determined to be other than temporary, an impairment for the estimated potential loss is recorded to adjust the property to its net realizable value.
When items of building or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. The Company does not have any long-lived tangible assets, which are considered to be impaired as of December 31, 2019 and 2018.
The Company applies the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10, Property, Plant and Equipment, where applicable to all long lived assets. FASB ASC 360-10 addresses accounting and reporting for impairment and disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with FASB ASC 360-10. FASB ASC 360-10 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
28
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
Intangible Assets
Goodwill and intangible assets are reviewed for potential impairment in accordance with ASC 350, Intangibles - Goodwill and Other, whenever events or circumstances indicate that their carrying amounts may not be recoverable. The Company had no such intangibles at December 31, 2019 and 2018, and recorded no impairment losses during the year ended December 31, 2019 or during the period from August 6, 2018 (inception) through December 31, 2018.
Revenue Recognition
The Company applies ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Advertising
Advertising costs are expensed as incurred. Advertising expenses for the year ended December 31, 2019 were $0. Advertising expenses for the period from August 6, 2018 (inception) through December 31, 2018 were $0.
Fair Value of Financial Instruments
The Company adopted FASB ASC 820, Fair Value Measurements and Disclosures, which provides a framework for measuring fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices for identical assets and liabilities in active markets;
Level 2 Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.
Emerging Growth Company Critical Accounting Policy Disclosure
The Company qualifies as an emerging growth company under the 2012 JOBS Act. Section 107 of the JOBS Act 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. As an emerging grown company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has chosen to opt out of such extended transition period, and as a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.
29
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
Income Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. 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 the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (Section 740-10-25). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
Loss Per Share
Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period, unless their effect is anti-dilutive due to continuing losses. There were no potentially dilutive shares outstanding as of December 31, 2019 and 2018.
Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations or financial position.
NOTE 2 Financial Condition and Going Concern
The Companys financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has sustained operating losses during the current year-to-date and may not achieve the level of profitable operations to sustain its activities. These factors raise substantial doubt as to its ability to obtain debt and/or equity financing and achieve profitable operations.
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company it may be required to curtail its operations.
30
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
NOTE 3 Investment in Growing Crops
Investment in growing crops consisted of the cost of the crop inputs in the ground at December 31, 2019 and were recorded at cost and were expensed to Crop Loss on the statement of operations since the crop harvest and related farming activities failed. The Company incurred a loss from the crop activities in the amount of $246,914. The Company is continuing to pursue opportunities in the recreational and industrial cannabis industries.
NOTE 4 Property and Equipment
At December 31, 2019 and 2018, property and equipment consisted of the following:
|
|
|
| |
|
Useful Lives
|
December 31,
2019
|
|
December 31, 2018
|
|
|
|
|
|
Equipment
|
5
|
$176,750
|
|
$ -
|
Less: accumulated depreciation
|
|
(15,705)
|
|
-
|
|
|
$161,045
|
|
$ -
|
Depreciation expense was $15,705 for the year ended December 31, 2019.
NOTE 5 Intangibles
During the period from inception to December 31, 2018, the Company acquired certain provisional patents and other rights for common stock in the Company for a value of $7,863. The Company has impaired the value of these patents due to the uncertainty of their future benefit or utilization.
NOTE 6 Notes Payable
The Companys debt consists of the following:
| |
|
December 31, 2019
|
Notes payable, 9-14% interest, interest and principal due April 10, 2020 through July 31, 2020, unsecured(1)
|
$350,000
|
|
|
Total due
|
350,000
|
Current Portion
|
350,000
|
Long-term portion
|
$ -
|
(1)
One note for $50,000 includes as an additional return on the debt a 3% interest in the Gross Crop Yield from the Companys hemp crop in McDermitt, NV. No accrual has been made for this interest due to no expected proceeds from a Gross Crop Yield.
(2)
All notes that have become due to the date of this report have been extended to a future due date.
During the year ended December 31, 2019, the Company borrowed funds from non-related parties in order to cover expenses being incurred in connection with the Companys commercial hemp farming activities. Information concerning these loans include the following:
(a)
On June 6, 2019, the Company borrowed $50,000 from Larry Mamey and entered into an unsecured promissory note which originally bore interest at nine percent (9.0%) per annum and was due six (6) months later. The note was subsequently amended twice. On March 5, 2020 accrued interest was paid to Mr. Mamey, and the note was amended to increase the interest rate to twelve percent (12.0%) per annum and to extend the due date to June 6, 2020;
31
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
(b)
On July 10, 2019, the Company borrowed $50,000 from Or Crown Auto / James Katsanevas entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. On January 9, 2020, accrued interest was paid to Or Crown Auto / James Katsanevas, and the note was amended to increase the interest rate to twelve percent (12.0%) per annum, and extend the due date to April 10, 2020. On or about April 10, 2020, Michael Vardakis purchased the note from Or Crown Auto / James Katsanevas and paid the accrued interest through April 10, 2020. The note was then amended to increase the interest rate for the period of the extension to fourteen percent (14.0%) per annum, and to extend the due date to July 10, 2020;
(c)
On July 31, 2019, the Company borrowed $50,000 from Leland A. and Terri L. Martineau and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. The promissory note to the Martineaus also contains an assignment of a 3.0% interest in the Gross Crop Yield from the Companys 2019 hemp crop in McDermitt, Nevada. On January 30, 2020, accrued interest was paid to the Martineaus and the note was amended to increase the interest rate to twelve percent (12.0%) per annum, and extend the due date to April 30, 2020. On April 29, 2020 additional accrued interest was paid to the Martineaus through April 30, 2020, and the note was amended to the note was amended to increase the interest rate for the period of the extension to fourteen percent (14.0%) per annum and to extend the payment due date to July 31,2020;
(d)
On July 30, 2019, the Company borrowed $50,000 from Biored N.V., a Belgian corporation, and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. On January 29, 2020 the note was amended to increase the interest rate for the period of the extension to twelve percent (12.0%) per annum and extend the due date to July 30, 2020;
(e)
On August 8, 2019, the Company borrowed $50,000 from Michael Vardakis, and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. On February 7, 2020 accrued interest was paid to Mr. Vardakis and the note was amended to increase the interest rate for the period of the extension to twelve percent (12.0%) per annum and extend the due date to May 8, 2020. On May 7, 2020, the accrued interest was paid to Mr. Vardakis, and the note was amended to increase the interest rate for the period of the extension to fourteen percent (14.0%) per annum and extend the due date to August 8, 2020;
(f)
On August 24, 2019, the Company borrowed $50,000 from Michael Vardakis and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. It was amended to increase the interest rate to fourteen percent (14.0%) for the period of the extension and to extend the due date to August 24, 2020;
(g)
On September 11, 2019, the Company borrowed $25,000 from Michael Vardakis and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. It was amended on March 10, 2020 to extend the due date to August 11, 2020 and increase the interest rate to fourteen percent (14.0%).
(h)
On November 1, 2019, the Company borrowed $25,000 from Michael Vardakis and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and was due six (6) months later. It was amended to increase the interest rate to fourteen percent (14.0%) and to extend the due date to August 1, 2020;
32
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
NOTE 7 Notes Payable-Related Party
The Companys debt consists of the following:
| |
|
December 31, 2019
|
Notes payable, 1.69-12% interest, interest and principal due November 5, 2020 through November 30, 2020, unsecured
|
$34,557
|
|
|
Total due
|
34,557
|
Current Portion
|
34,557
|
Long-term portion
|
$ -
|
(1)
All notes that have become due to the date of this report have been extended to a future due date.
During the year ended December 31, 2019, the Company borrowed funds from our current President and director, Vincent C. Lombardi in order to cover expenses being incurred in connection with the Companys commercial hemp farming activities. Information concerning these loans include the following:
(a)
On July 17, 2019, the Company borrowed $2,500 from our current President and director, Vincent C. Lombardi, and entered into an unsecured promissory note which initially bore interest at nine percent (9.0%) per annum and is due six (6) months later. The note was amended to increase the interest rate to twelve percent (12%) per annum and to extend the due date to June 17, 2020. It was amended again to extend the due date to November 17, 2020.
(b)
On August 30, 2019, the Company borrowed $18,900 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which originally bore interest at one and 91/100 percent (1.91%) per annum and was due one (1) month later. The due date was subsequently extended to November 30, 2019. On November 29, 2019 the note was amended to increase the interest rate for the period of the extension to twelve percent (12.0%) per annum, and to extend the due date to January 30, 2020. On January 19, 2020, the note was amended to increase the interest rate for the period of the extension to twelve percent (12.0%) per annum, and to extend the due date to April 30, 2020. It was amended again to extend the due date to November 30, 2020;
(c)
On September 5, 2019, the Company borrowed $9,157 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which initially bore interest at one and 85/100 percent (1.85%) per annum and was due one (1) month later. This loan was extended until December 5, 2019. On December 4, 2019, the note was amended to extend the due date to February 5, 2020. On February 4, 2020 the note was amended to increase the interest rate during the period of extension to twelve percent (12.0%) per annum and to extend the due date to May 5, 2020. It was amended again to extend the due date to November 5, 2020;
(d)
On October 18, 2019, the Company borrowed $4,000 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which originally bore interest at one and 69/100 percent (1.69%) per annum and was due one (1) month later. On November 17, 2019, the note was amended to increase the interest rate during the period of the extension to twelve percent (12.0%) per annum and to extend the due date to May 18, 2020. It was amended again to extend the due date to November 18, 2020.
33
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
NOTE 8 Income Taxes
The Company adopted the provisions of ASC 740-10, which clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements. ASC 740-10 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The application of income tax law is inherently complex. Laws and regulation in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding the income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.
The Company has no unrecognized tax benefit, which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit during the year ended December 31, 2019.
We classify interest and penalties arising from the underpayment of income taxes in the statement of income under general and administrative expenses. As of December 31, 2019, we had no accrued interest or penalties related to uncertain tax positions.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The components of deferred income tax assets (liabilities) at December 31, 2019, were as follows:
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|
| |
|
|
December 31,
|
|
Rate
|
2019
|
2018
|
Federal loss carryforward
|
21%
|
$ 108,941
|
$ 8,929
|
Valuation allowance
|
|
(108,941)
|
(8,929)
|
Deferred tax asset
|
|
$ -
|
$ -
|
Due to the passage of the Tax Cuts and Jobs Act on December 20, 2017 the rate of the U.S. Federal Income Tax dropped from 34% to 21%, which is a flat percentage tax rate used for the calculation of the deferred income tax assets.
The new law also changes the rules on NOL carry forward. The 20-year limitation was eliminated, giving the taxpayer the ability to carry forward losses indefinitely. However, utilization of NOL carry forwards arising after January 1, 2018, will now be limited to 80 percent of taxable income.
34
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Financial Statements
December 31, 2019 and 2018
NOTE 9 Capital Changes
Common Stock
On December 31, 2018 we entered into a Share Exchange Agreement (the Agreement) with High Sierra Technologies, Inc., a Nevada corporation (High Sierra) and all of the shareholders of High Sierra, pursuant to which we acquired 100% of the issued and outstanding shares of common stock of High Sierra (the Share Exchange or Acquisition). The Acquisition of High Sierra was consummated on the same date, and High Sierra is now a wholly-owned subsidiary of the Company. As consideration for the Share Exchange, we issued a total of 15,433,025 shares of our common stock to the High Sierra shareholders.
The Company issued 15,433,025 shares of its common stock at $.001 per share for a total of $25,083, during the period ended December 31, 2018 of which $12,250 was paid for in cash, $7,683 was paid by the contribution of certain intangibles, and $5,150 was for services.
The Company issued 100,000 shares of its common stock for consulting services on May 26, 2019 valued at $100,000, which was the fair market value of the stock. This agreement was rescinded and the shares of common stock were returned on December 30, 2019.
The Company issued 100,000 shares of its common stock for product (seeds) on May 26, 2019 valued at $100,000, which was the fair market value of the stock. This agreement was rescinded and the shares of common stock were returned on December 30, 2019.
Offering of Securities
The Company filed an S-1 Registration Statement on June 10, 2019. The Company was offering a maximum of 3,500,000 shares of our common stock, and (ii) the resale by certain Selling Stockholders of the Company of up to 2,500,500 shares of common stock held by Selling Stockholders of the Company.
The Company was offering these securities at a price of $2.50 per share and would result in gross proceeds to the Company of $8,750,000.
This registration of securities was rescinded on a Post-Effective Amendment Dated December 5, 2019.
NOTE 10 Contingencies and Commitments and Legal Matters Agreement and Plan of Merger
Management of the Company has conducted a diligent search and concluded that there were no commitments, contingencies, or legal matters pending at the balance sheet dates, other than what has been disclosed below.
The Company on May 13, 2019 entered into an Agricultural Lease for approximately 200 acres in Northern Nevada to plant its Hemp Grow for 2019.
The term of the lease is for five years commencing May 18, 2019 through May 17, 2024.
There are no minimum fixed monthly payments due on this lease, but an annual participation bonus in an amount equal to fifteen percent of the gross crop yield from the leasehold properties. The Gross Crop Yield is defined by the actual amount received from the crop harvest less all expenses derived from the growing, processing and sale of the crop harvested from the Property.
The Company is solely responsible for all crop care, labor, irrigation, insurance, taxes, repairs and maintenance of the crop, equipment and other costs of planting, raising and harvesting of crops. The Company is responsible for all other miscellaneous cost to grow and take it to market.
Due to the lease payments being variable, the Company has not recorded a right of use asset or lease liability on the balance sheet and will recognize the variable lease payments in the period when the obligation for those payments has occurred in accordance with ASC 842, Leases.
No gross crop yields have been achieved by the Company to date, and therefore no lease payments have been made or required under the lease terms. The Hemp Grow farming activities were ceased at the end of 2019, and the leased property is not currently being used by the Company.
35
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
NOTE 11 Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2019 through the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statement other than the events described immediately below.
On February 14, 2020, the Company borrowed $1,600 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which bears interest at nine and 00/100 percent (9.0%) per annum and is due on May 14, 2020. It was amended to increase the interest rate to twelve percent (12.0%) and to extend the due date to November 14, 2020.
On February 24, 2020, the Company borrowed $1,000 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which bears interest at nine and 00/100 percent (9.0%) per annum and is due on May 24, 2020. It was amended to increase the interest rate to twelve percent (12.0%) and to extend the due date to November 24, 2020.
On March 16, 2020, the Company borrowed $1,000 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which bears interest at nine and 00/100 percent (9.0%) per annum and is due on June 16, 2020. It was amended to increase the interest rate to twelve percent (12.0%) and to extend the due date to November 16, 2020.
On April 21, 2020, the Company borrowed $3,000 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which bears interest at nine and 00/100 percent (9.0%) per annum and is due on July 21, 2020. It was amended to increase the interest rate to twelve percent (12.0%) and to extend the due date to November 21, 2020.
On May 6, 2020, the Company borrowed $1,000 from our current President and director, Vincent C. Lombardi and entered into an unsecured promissory note which bears interest at nine and 00/100 percent (9.0%) per annum and is due on August 6, 2020. It was amended to increase the interest rate to twelve percent (12.0%) and to extend the due date to November 6, 2020.
36
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Identification of Directors and Executive Officers
Below are the names of and certain information regarding the Companys current executive officers and directors. All of these persons were appointed effective as of the closing of the acquisition of High Sierra:
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|
|
|
|
| |
Name
|
|
Age
|
|
Position
|
|
Date Named to Board of Directors/as Executive Officer
|
Vincent C. Lombardi
|
|
55
|
|
Director, Chief Executive Officer and President
|
|
December 2018
|
Gregg W. Koechlein
|
|
71
|
|
Chief Financial Officer, Chief Operating Officer, Treasurer, Secretary and Director
|
|
December 2018 as an officer and March 2019 as a Director
|
Glenn C. Miller
|
|
69
|
|
Chief Scientific Officer
|
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December 2018
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Jeffrey M. Pogol
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Vice President
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December 2019
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Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.
The authorized number of directors to constitute our Board of Directors is presently two. Pursuant to the terms of the Share Exchange Agreement, High Sierra and the Company agreed that the Companys Board of Directors, as of the Closing of the Share Exchange, would consist of two members. Our Board of Directors is now comprised of Messrs. Lombardi and Koechlein. Executive officers are appointed by the Board of Directors and serve at its pleasure.
The principal occupation and business experience during the past five years for our executive officers and directors is as follows:
Vincent C. Lombardi, Ph.D., President, Chief Executive Officer and Director
Dr. Lombardi has served as the Companys Chief Executive Officer, President and as a Director since December 31, 2018. He has served in those capacities for High Sierra since its inception in August 2018 and continues to do so. For the past five years, Dr. Lombardi has managed a basic and clinical research program. He received his Ph.D. in Biochemistry from the University of Nevada, Reno in 2006. He has previously served as the Director of Research for the Nevada Center for Biomedical Research and is also an Adjunct Assistant Professor of Biochemistry with the University of Nevada, College of Agriculture, Biotech, Natural Resources. While Dr. Lombardi is a classically trained Biochemist, he has extensive research experience in the field of Immunology and specifically, in studying the innate immune system and how it relates to chronic disease. He also has substantial experience in clinical research, has authored dozens of peer-reviewed scientific publications. Prior to his career in science, Dr. Lombardi worked in the investment industry from 1983 to 1999 as a securities broker, an over-the-counter securities trader and as an investment banker. Dr. Lombardi is the inventor of High Sierras intellectual property and will guide the Company as its President and Chief Executive Officer.
Gregg W. Koechlein, Esq., Chief Operating Officer, Chief Financial Officer, Secretary, Treasurer, General Counsel and Director
Mr. Koechlein has served as the Companys Chief Operating Officer, Chief Financial Officer, Secretary, Treasurer and General Counsel since December 31, 2018. He has served as a Director since March 2019. He has served in those capacities for High Sierra since its inception in August 2018 and continues to do so. Mr. Koechlein has maintained an active law practice for the last five years focusing mainly on transactional work, state and federal court litigation and federal appellate work. He has also provided consulting services to various clients in the medical, clinical laboratory and restaurant sectors. Mr. Koechlein received his Juris Doctor degree from the Loyola Law School in Los Angeles, California in 1984. He brings to the Company over 33 years of legal experience and
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over 45 years of business experience. From 1987 to 1989 Mr. Koechlein was Vice President of Manufacturing and General Counsel of Super Shops, Inc. He served as its President, Chief Operating Officer and General Counsel from 1989 to 1997. As President, he was responsible for all operational and strategic aspects of a chain of 165 retail stores in 31 states, employing nearly 2000 people. These operations included a mail order sister company startup that had first year annual revenues of $35 million. During his tenure, Super Shops, Inc. grew from 53 to 165 stores, one to four warehouses and the annual consolidated revenues grew from $80 million to approximately $250 million. During this same time period, the Mallory, Inc. subsidiary nearly tripled its annual revenues.
Jeffrey M. Pogol, Vice President
Mr. Pogol was elected as a Vice President of the Company in December 2019. Mr. Pogol has over 30 years of experience in the field of sales and marketing. In 1985 he served as a sales closer at the Tahoe Sands Resort in Tahoe Vista, California. From 1988 to 1992 Mr. Pogol was the head of High Technology Sales for Migent Software Company located in Incline Village, Nevada. From 1992 to 1995 Mr. Pogol served as a High Technology Sales Representative for the Market Broadcasting Corporation. From 1995 to 1998 Mr. Pogol was an owner/partner in a clothing retailer known as Name Brand Liquidators in Truckee, California. Since that time, Mr. Pogol has worked in the Mortgage Banking Industry. During this period, Mr. Pogol has earned numerous awards and honors for excellence in sales and team leadership.
Glenn C. Miller, Ph.D., Chief Scientific Officer
Dr. Miller serves as the Companys Chief Scientific Officer. He has served in those capacities for High Sierra since its inception in August 2018 and continues to do so. For the past five years, Dr. Miller has managed a basic research program. Dr. Miller is a Professor of Natural Resources and Environmental Science at the University of Nevada, Reno. He received his B.S. in Chemistry from the University of California, Santa Barbara and a Ph.D. in Agricultural and Environmental Chemistry (1977) from the University of California at Davis. Following graduate studies, he spent a year of postdoctoral study at the EPAs Environmental Research Laboratory in Athens, Georgia. He has been on the UNR faculty since 1978 and was Director of the Graduate Program in Environmental Sciences and Health from 1996-2006 and Director of the Center for Environmental Sciences and Engineering from 1999-2003. Dr. Miller also currently serves on the State of Nevadas Medical Marijuana Independent Laboratory Advisory Committee. As a member of the Scientific Advisory Committee, Dr. Miller brings over 40 years of scientific experience to the Company.
Scientific Advisory Committee
The Companys Scientific Advisory Committee consists of Karen Schlauch, Ph.D., Timothy Bailey, Ph.D. and Ruben Dagda, Ph.D. Its purpose is to advise the Board of Directors concerning scientific matters related to the development and application of existing and new technologies. Persons may be elected to, and removed from, the committee by vote of the Companys Board of Directors. Certain information concerning the persons who serve on the committee follows:
Karen Schlauch, Ph.D.
Dr. Schlauch received a B.S. Mathematics / Computer Science from the University of Illinois in 1989. She received a M.A. in Mathematics in 1991 from Eastern Illinois University as well as a M.S. in Mathematics from New Mexico State University in 1994. Dr. Schlauch received her Ph.D. in Mathematics from New Mexico State University in 1998. She completed her Post-Doctoral Fellowship in 2000 at the National Center for Genome Resources in Santa Fe, New Mexico. Her interest in the fields of human biostatistics and bioinformatics began with research at the human genetics research institute at DeCODE Genetics in Reykyavik, Iceland, and continued with genomics research in obesity and liver disease at George Mason University and INOVA Fairfax Hospital, as well as at the genotyping facility at the Boston University School of Medicine. Her current work is centered on providing developing new and robust mathematical and (bio)statistical tools to analyze large whole-genome datasets for researchers state-wide, including GWAS studies, next-generation experiments, and Mass Spectrometry studies.
Timothy Bailey, Ph.D.
Dr. Bailey received a B.S. in Mathematical Science in 1977 from Stanford University. He received both a M.S. in 1991 and a Ph.D. in Computer Science from the University of California, San Diego. He completed a Post-Doctoral Fellowship at the San Diego Supercomputer Center in 2000 and a second Post-Doctoral Fellowship at the Karolinska Institute in Stockholm, Sweden in 2001. From 2002 to 2015, Dr. Bailey was a Professor and held various Research Fellowships at the University of Queensland, Brisbane, Old, Australia. Dr. Bailey was the creator of the sequence motif discovery algorithm MEME. This is one of the most heavily used software tools in bioinformatics and has been used to discover and characterize patterns in DNA, RNA and protein sequences. These patterns encode biological signals such as transcription binding sites, splice junctions and the active sites of
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enzymes. The discovery and characterization of motifs has been important in the study of many biological processes including the regulation of gene expression. MEME has been used and cited over 7000 times. MEME was one of the first algorithms introduced to attack the problem of motif discovery in unaligned sets of sequences, and continues to be used by thousands of biologists each year. In addition to motif discovery tools, Dr. Baileys research has also developed several widely-used tools used for scanning DNA, RNA or protein sequences for motifs represented as weight matrices. These tools can look for sequences enriched in a set of motifs (MAST), individual motif occurrences (FIMO and GLAM2Scan), and sequences containing clusters of motifs characteristic of gene regulatory modules (MCAST).
Ruben Dagda, Ph.D.
Dr. Dagda received his Ph.D. in pharmacology from the University of Iowa and his postdoctoral training in neuropathology at the University of Pittsburgh School of Medicine. He is currently investigating the molecular mechanisms that lead to mitochondrial dysfunction and oxidative stress in cell culture, tissue and animal models of Parkinsons disease. He has authored over 42 research manuscripts and review articles in the areas of toxicology, mitochondrial function, autophagy, neurodegeneration, neuropathology and neurobiology. As an Associate Professor at the University of Nevada, Reno School of Medicine, he is currently investigating the pathological mechanisms by which neurons degenerate in models of Parkinsons disease and Alzheimers disease. He currently holds a provisional patent to develop intranasal formulations that can restore brain energy, and reverse neurodegeneration and motor symptoms as shown by in vivo animal models of Parkinsons disease. In addition, he is the director of the Cell Imaging and Metabolic Core that is equipped with state-of-the art automated fluorescent imager and several metabolic analyzers to screen for compounds that can reverse neurodegeneration and mitochondrial dysfunction at the University of Nevada, Reno School of Medicine.
Directorships Held in Other Reporting Companies
None of our directors or executive officers is a director of a company that is required to file reports under Sections 15 or 13(d) of the Exchange Act.
Director Independence
We have no independent directors at the present time. We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be independent and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of independent directors.
Family Relationships
There are no family relationships among our Directors or executive officers.
Involvement in Certain Legal Proceedings
During the past 10 years, no director, promoter or control person of the Company:
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has filed a petition under federal bankruptcy laws or any state insolvency laws, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
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was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
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was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting the following activities:
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
Engaging in any type of business practice; or
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Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
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was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in the preceding bullet point, or to be associated with persons engaged in any such activity;
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was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
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was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
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was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
any Federal or State securities or commodities law or regulation; or
any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
any law or regulation prohibiting mail or wire fraud in connection with any business activity; or
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was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, or any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Promoters and control persons.
See the heading Transactions with Related Persons in Part III, Item 13, below.
Compliance with Section 16(a) of the Exchange Act
Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review during the fiscal year ended December 31, 2018, there were no reports required to be filed.
Code of Ethics
We have adopted a Code of Ethics for our principal executive and financial officers. Our Code of Ethics was filed as an Exhibit to our Form 10-K Annual Report for the year ended December 31, 2013, and is referenced in Part IV, Item 15.
Corporate Governance
Nominating Committee
We have not established a Nominating Committee because of our limited operations; and because we have only two directors and executive officers, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee. Following the entry into any business combination or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated and undertaken by new management.
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Audit Committee
We have not established an Audit Committee because of our limited operations; and because we have only two directors and executive officers, we believe that we are able to effectively manage the issues normally considered by an Audit Committee. Following the entry into any business combination or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated and undertaken by new management.
ITEM 11: EXECUTIVE COMPENSATION
The following tables disclose certain compensation information concerning the Companys officers and directors. Please note that Vincent C. Lombardi became an officer and director of the Company on December 31, 2018, Gregg W. Koechlein became an officer of the Company on December 31, 2018 and a director on March 26, 2019, Michael Vardakis resigned as an officer on December 31, 2018 and as a director on March 25, 2019, and Melissa Ladakis resigned all positions she held with the Company on December 31, 2018.
SUMMARY COMPENSATION TABLE