ITEM 1. BUSINESS
Business Development
We were incorporated in the State of Colorado
on May 9, 1996, with an authorized capital of 55,000,000 shares, comprised of 50,000,000 shares of common stock, and 5,000,000 shares
of non-voting preferred stock, both with no par value per share. We were formed for the primary purpose of engaging in the business of
marine transportation and to provide ocean going shipping of goods internationally. Our proposed business operations were unsuccessful,
and we had no material business operations from March 7, 1997 through December 31, 2018.
We voluntarily filed our Form 10-SB Registration
Statement so that we could become a “reporting issuer” under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
On December 31, 2018 (the “Closing Date”
or “Closing”), 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.
The Share Exchange was treated as a recapitalization
of the Company for financial accounting purposes. High Sierra is considered the acquirer for accounting purposes, and our historical financial
statements before the Share Exchange were replaced with the historical financial statements of High Sierra.
Under the terms of the Agreement, as consideration
for the Acquisition, the shareholders of High Sierra who collectively owned 15,433,025 shares of common stock of High Sierra, received
one (1) share of our common stock for each one (1) share of High Sierra common stock exchanged in the transaction. As a result, the High
Sierra shareholders, as a group, received 15,433,025 shares of our common stock in the exchange, which represented approximately 76.44%
of the 20,189,642 issued and outstanding shares of our common stock immediately following the Acquisition.
The Agreement provided that at the Closing the
Company would cause its Board of Directors to elect Vincent C. Lombardi to the Company’s Board of Directors to serve together with
Michael Vardakis, that the pre-Closing officers of the Company (Michael Vardakis and Melissa Ladakis) would resign, and that the Board
of Directors would appoint Vincent C. Lombardi as Chief Executive Officer and President, and Gregg W. Koechlein as the Chief Financial
Officer, Secretary and Treasurer of the Company. Mr. Koechlein was also appointed as the Chief Operating Officer. This all occurred on
the Closing Date.
On March 25, 2019 a Special Meeting of the Company’s
Stockholders was held at which the stockholders voted to change the Company’s name to High Sierra Technologies, Inc., and to approve
certain other changes in the Company’s Articles of Incorporation which are described in the Company’s Definitive Proxy Statement.
These changes became effective on April 1, 2019.
On March 25, 2019 following the shareholder meeting,
Michael Vardakis resigned as a director of the Company. On March 26, 2019, Vincent C. Lombardi, as the only remaining director of the
Company, appointed Gregg W. Koechlein as a director of the Company to fill the vacancy left by Mr. Vardakis’ resignation.
Description of Business
The Company’s business is now focused on
the business of its wholly-owned subsidiary, High Sierra Technologies, Inc. (“High Sierra”). High Sierra was incorporated
in the State of Nevada in August of 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 High Sierra. High Sierra 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 current Intellectual Property portfolio consists
of all of the rights, title and interest that Dr. Lombardi had in certain two Provisional Patent Applications (collectively, the “Applications”).
Assignments of both of these applications, which assign their ownership to High Sierra, have been filed with the United States Patent
& Trademark Office. The Applications have since been incorporated into and converted into two all-encompassing Utility Patent Applications
which have been filed with numerous governmental agencies in the United States, Canada and multiple other countries in Europe as is discussed
below (collectively the “Utility Patent Application”). As of the date hereof, there have been two United States Patents issued
based on the Utility Patent Application as is also discussed below. As of the date hereof, the Company also has several ongoing Utility
Patent Applications in the United States, Europe and Canada.
The Intellectual Property
High Sierra originally owned two Provisional Patent
Applications which it acquired from Dr. Lombardi by way of assignments. The first Application, which was converted into a
Utility Patent Application which subsequently became an issued United States Patent (United States Patent Number 10,737,198), describes
a new and novel cannabis product that is produced by removing or significantly reducing the naturally occurring compliment of volatile
organic molecules from cannabis, which primarily consist of terpenes, and are collectively known as the essential oils. This new
and novel cannabis product embodies any product produced from any of the flowering plants of the genus Cannabis, using any convenient
method for removing or significantly reducing the naturally occurring compliment of essential oils, and, which at the same time, generally
preserves the naturally occurring compliment of cannabinoids in a product that retains the naturally occurring physical structure of cannabis
plant material that is normally consumed by way of smoking (combustion and subsequent inhalation) and also leaves the modified harvested
cannabis plant material undamaged and still in a condition that it can be smoked in the same manner as before it was modified by the process
and/or processes described herein. As used herein, the term “cannabis” includes industrial hemp which is defined as the plant
Cannabis sativa L. having a Δ9-tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis
(“Hemp”).
The second Application, which was converted into
a Utility Patent Application which subsequently became an issued United States Patent (United States Patent Number 10,835,839), describes
a new and novel cannabis product that is produced by further modifying a cannabis product based on the first Application containing cannabis
plant material that has been previously modified by removing or significantly reducing the naturally occurring compliment of volatile
organic molecules, which primarily consist of terpenes, and are collectively known as the essential oils, so as to create a low, or no,
odor and reduced flavor form of cannabis product. The previously modified cannabis product is then subjected to additional modification,
or modifications, consisting of the addition of volatile organic molecules, either naturally occurring or synthetically produced, including,
but not limited to, essential oils, flavorings or terpenes and terpenoids so as to cause it to have new and unique odors and flavors.
By using the techniques and processes covered
by the two Applications and resulting patents, High Sierra can create a low, or no, odor and reduced flavor form of cannabis, which can
be used in that state or modified to have new and unique odors and flavors.
High Sierra’s Intellectual Property encompasses
the dried cannabis plant material, or flower, that is intended to be smoked, as well as any dried cannabis plant material that is intended
to be smoked and to which flavoring is added. It should be noted that this technology is also applicable to the use of hemp-based products
that are to be smoked both in non-flavored and flavored forms.
The Applications and the Utility Patent Application
are based on the premise that cannabis (also known as marijuana) which is a preparation of the cannabis plant that encompasses at least
three genera of flowering plant in the family of Cannabaceae including Cannabis sativa, Cannabis indica and Cannabis
ruderalis has a distinct odor and flavor, primarily as a result of several volatile small molecules known as terpenes. These terpenes
are also present in the genus of the flowering plant commonly known as hemp. Although the odor and flavor that results from the
presence of these terpenes is desirable to many users of cannabis and/or hemp, the strong and pungent odor, as well as the distinctive
flavor, is undesirable by others especially due to the fact that the odor lingers after use of cannabis and/or hemp. Additionally, the
characteristic odor makes it obvious that a given individual has recently used cannabis and/or hemp. Since a user of hemp is doing so
for solely medicinal purposes, High Sierra believes this negative characteristic is of even greater importance to a user of a hemp-based
product. Furthermore, the strong and pervasive odor, as well as the distinctive flavor, that results from the presence of these terpenes
represents an obstacle for creating a flavored form of cannabis and/or hemp which High Sierra believes to be desirable.
High Sierra has engaged the law firm of Oliff
PLC to prosecute its Provisional Patent Applications and its Utility Patent Applications. In January 2019, the two provisional patent
Applications were combined into one broad and all-encompassing Utility Patent Application which was filed with the United States Patent
and Trademark Office, the Canadian Intellectual Property Office and under the provisions of the Patent Cooperation Treaty (“PCT”)
which will afford High Sierra additional temporary protection in an additional 152 other countries. In the United States, this all-encompassing
Utility Patent Application was subsequently split into two Utility Patent Applications both of which subsequently resulted in United States
Patents being issued.
High Sierra’s current Intellectual Property
Applications are specific to the dried cannabis plant material where the characteristic odor and flavor have been removed or significantly
reduced as well as products that utilizes the first product. High Sierra believes that its intellectual property may be able to be expanded
to include other opportunities in the cannabis and industrial hemp markets. High Sierra is currently attempting to develop such
products, independently, and through joint venture arrangements. However, the Company can offer no assurance that High Sierra will
be successful in this effort.
The Company’s Patented and Patent Pending
products and the processes by which they are generated are specific to modified forms of cannabis which have little or none of the characteristic
odors common to cannabis, as well as any modified or flavored products produced with the previously modified cannabis products. The Company
believes that these products and processes may also be applicable to industrial hemp as defined in the Hemp Farming Act of 2018.
On March 25, 2020, the Company received an International
Preliminary Report of Patentability for its Patent Cooperation Treaty Application Number PCT/US2019/014778, CANNABIS PRODUCTS MODIFIED
BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, in which Claims Numbered 1-84 were characterized
as novel and Claims Numbered 1-17, 63-70, 83 and 84 were characterized as inventive steps.
On June 5, 2020, the United States Patent and
Trademark Office, by way of an Office Action dated May 29, 2020, notified the Company that Claims Numbered 1-17, 63-70 and 83-84 of Patent
Application Number 16/255,157, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS,
were now allowed. These are four of the seven main claims in Patent Application Number 16/255,157. In response to this, the Company’s
outside Patent Counsel, Oliff PLC, has filed an Amendment to Patent Application Number 16/255,157 so that these Claims can be issued a
formal Notice of
Allowance which would then lead to the issuance
of a Utility Patent for these Claims. As a result of this action by our attorneys at Oliff PLC, on June 19, 2020, the United States Patent
and Trademark Office issued a formal Notice of Allowance and Fee(s) Due which will allow the Utility Patent to be issued once the fees
are paid. This Patent was issued as United States Patent Number 10,737,198 on August 11, 2020. The Company’s attorneys at Oliff
PLC also prepared a Continuation Application for Claims Numbered 18-62 and 71-82 so that the Company can continue to prosecute these Claims
separately. This Continuation Application has resulted in the issuance of United States Patent Number 10,835,829 on November 17, 2020.
On August 11, 2020, the United States Patent and
Trademark Office issued United States Patent Number 10,737,198 to the Company as assignee of Application Number 16/255.157, CANNABIS PRODUCTS
MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, filed by Vincent Lombardi, one of the founders
of the Company and its current President and Chief Executive Officer.
On November 17, 2020, the United States Patent
and Trademark Office issued United States Patent Number 10,835,839 to the Company as assignee of Application Number 16/255.157, CANNABIS
PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, filed by Vincent Lombardi, one
of the founders of the Company and its current President and Chief Executive Officer.
Now United States Patents Numbers 10,737,198 and
10,835,839 have been formally issued, the Company intends to begin actively marketing and licensing its patented technologies in both
the cannabis and hemp market spaces as well as pursuing its own uses of its patented technologies in relation to various end user products
that can benefit from its patented technologies. In regards to the issuance of United States Patents Numbered 10,737,198 and 10.835,839,
Vincent C. Lombardi, President and Chief Executive Officer of the Company, has stated that “we believe the effect of the issuance
of Patents Numbered 10,737,198 and 10,835,839 is that it will allow the Company to be able to effectively control the marketplace for
low, or no, odor cannabis and hemp products in the United States which will allow the Company to start generating licensing revenue from
the technology disclosed in United States Patents Numbered 10,737,198 and 10,835,839.”
The Company has received a First Office Action
on its Canadian Patent Application Number 3,031,123, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE
UNSATURATED HYDROCARBONS, and its attorneys at Oliff PLC and Bereskin & Parr in Canada have responded to it. The Company has also
recently amended its Canadian Patent Application so that it accurately reflects the claims embodied in United States Patents Numbered
10,737,198 and 10,835,839 as well as the Continuation Application Number 17,098/539 filed on November 16, 2020. The Company has received
a Second Office Action to this Amended Canadian Patent Application and, in concert with its attorneys, has recently responded to it.
The Company’s outside Patent Counsel, Oliff
PLC has completed the Application to the European Patent Office (“EPO”) based on Patent Cooperation Treaty Application Number
PCT/US2019/014778, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS. It
has been filed as European Patent Office Application Number 19743904.5. The Company has also recently amended its EPO Application so that
it accurately reflects the claims embodied in United States Patents Numbered 10,737,198 and 10,835,839 as well as the Continuation Application
Number 17,098/539 filed on November 16, 2020. This EPO Application, as amended, will allow the Company to simultaneously prosecute its
PCT Application in a total of 44 different countries in Europe and the surrounding areas as well as Hong Kong. The Company has received
a First Office Action to its European Patent Office Application Number 19743904.5. The Company and its attorneys at Oliff PLC and Astrum
Element One Limited in the United Kingdom are in the process of preparing a response to it.
On February 8, 2022, the United States Patent
and Trademark Office issued a Notice of Allowance for the Company’s Continuation Application No. 17/098,539 which was filed on November
16, 2020. Once the filing fee is paid, the Letters Patent will issue and the Company will then have a third United States Patent.
The Company is in the process of preparing a Continuation
in Part Application for Continuation Application No. 17/098,539 which should result in the Company receiving a fourth United States Patent
in due time.
Marketing Plans to License the Intellectual
Property
High Sierra is now marketing the licensing of
its technology in states in the U.S. where cannabis and/or hemp has been legalized both for medicinal and/or recreational use. It
also plans to use a similar marketing strategy in all provinces in Canada which have legalized both the medicinal and recreational uses
of cannabis as of October 17, 2018. Hemp has long been legal in Canada. High Sierra is targeting entities that are licensed to produce,
process and/or manufacture cannabis and/or hemp related products. High Sierra also believes that its technology will be of interest
to tobacco companies in the United States, Canada and other places if those companies choose to enter the cannabis and/or hemp marketplaces
as the legalization of cannabis and/or hemp progresses.
High Sierra considers every manufacturer of cannabis
and/or hemp products a potential customer. Because each is registered with its respective State and are of public record, High Sierra
has begun to identify each manufacturer for a direct marketing campaign. High Sierra plans to aggressively exploit what it believes to
be niche areas of the cannabis and/or hemp markets that are not currently being addressed.
Presently, manufacturers of cannabis and/or hemp
products are limited to selling low-odor cannabis and/or hemp for smoking, as an extract, and are limited to selling flavored product
either as an extract for smoking or edibles. While it is possible to produce a flavored dried plant form without first removing the natural
complement of terpenes, High Sierra believes that the strong natural smell and flavor makes it impractical to add additional flavoring
other than additional terpenes.
Because low odor or no odor cannabis and/or hemp
plant material products for smoking are novel and currently do not exist, it is High Sierra’s goal to create a market for such products
by demonstrating their utility and desirability. Low-odor cannabis and/or hemp plant material allows one to smoke cannabis and/or hemp
without its use being apparent due to the residual smell on the user. It also allows the user the convenience of smoking cannabis and/or
hemp in the form of a rolled cigarette or a pipe. Because low-odor and flavored cannabis and/or hemp plant material can be conveniently
made into cigarettes, it is High Sierra’s belief that as cannabis and/or hemp gain acceptance according to local and Federal laws,
that the large tobacco companies will want to enter the cannabis and/or hemp market spaces and will rely on their present business model
of selling cigarettes that are pre-packaged. These companies are all potential clients to license High Sierra’s technology.
Artemis Holdings Agreement
On October 14, 2020, we entered into an exclusive
Letter Agreement with Artemis Holdings, LLC pursuant to which Artemis Holdings, LLC was to assist us in maximizing the value of our patents
and patents pending for odorless cannabis. Artemis was to provide a detailed market analysis of the patents and to assist with any licensing
or sale of the patents. The agreement was for a period of nine months, and then it automatically renewed for additional one month periods
until either party terminated it. The Company agreed to pay Artemis a fee of $5,000 per month during the term, and a transaction fee of
7.5% of the gross proceeds of any transaction (sale, license, etc.) arranged by Artemis. The parties mutually agreed to terminate the
agreement effective April 1, 2021, and neither party owes any further obligations to the other following the termination.
Consulting Agreement
On August 14, 2020, we entered into a non-exclusive
Consulting Agreement with Stanley Berk/Steven Leatherman (“SBSL Consultants”) and Jeff Baclet/Tom Prutzman (“Consultants”)
pursuant to which the SBSL Consultants and other Consultants agreed to review short term and long term business forecasts for the Company,
review documents for due diligence purposes, seek out private and public funding for the Company, and seek out potential licensing partners
and potential buyers of the Company’s intellectual property. They referred the Company to Artemis Holdings, LLC. See above. The
term of the Agreement was for six months. The Company agreed to pay a consulting fee of $7,500 per month (to be deferred until the Company
has raised at least $500,000), and 5.0% of funds raised from any source brought to the Company by the Consultants. The Consultants were
also granted warrants to purchase 5.0% of the securities sold in such fundraising at the same price, which is exercisable for a
period of 5 years. This August 14, 2020 Consulting
Agreement was amended on December 28, 2020 and became effective on January 1, 2021. Under the terms of this amendment the term of the
Agreement became one year ending on December 31, 2021. The consulting fees were reduced to $1,200 per month, a potential bonus of $45,000
was incorporated, the referral fees were reduced to 2% and the warrants to be issued were set at to 2.5% of the value of certain transactions
caused by Admiral Investment Banking and 2% of the value of certain transactions caused by Artemis Holdings Group, LLC. A copy of the
Amended Consulting Agreement is attached to our Annual Report for the year ended December 31, 2020 as Exhibit 10.7. This Agreement terminated
on its own terms on December 31, 2021 and the parties have no further obligations to each other.
Admiral Investment Banking Agreement
On December 28, 2020 the Company entered into
an Agreement with Admiral Investment Banking (“Admiral”) to market our Private Placement Offering of 2,000,000 shares of common
stock to accredited investors. The Agreement was for the period of one year and had certain renewal provisions. The Agreement provided
for commissions of 8% of monies generated by Admiral to be paid to Admiral. It also provided for an override of 2% to be payable to Admiral
in the event of the inclusion of another broker/dealer in a transaction. The Agreement also provided for the issuance of warrants to Admiral
or its principals in certain instances if so designated by Admiral. The warrants are exercisable at $0.01 per share for a period of five
(5) years after the issuance date and cover a total of 50,000 shares. The Company gave notice to Admiral on October 8, 2021 that the Company
was terminating the Agreement effective as of November 10, 2021, but the outstanding warrants are still in effect.
Possible Hemp Cigarette Business
High Sierra has identified a growing market place
for hemp cigarettes especially those that can benefit from High Sierra’s patented and patent pending technologies. It is the intention
of High Sierra to enter into this market place as soon as possible after it receives sufficient funding from its Private Placement Offerings.
To that effect, the Company is now negotiating with one of the largest hemp cigarette manufacturers in the country to enter into a joint
venture to produce and market a new brand of low odor hemp cigarettes. The negotiations have resulted in the execution of a non-binding
Letter of Intent dated February 18, 2022, by the parties to enter into a Joint Venture to manufacture, market and distribute hemp cigarettes
and hemp-based products in the United States, Canada and Mexico using its Patented and Patent Pending Technologies. The Company can offer
no assurance that it will successfully raise the funds needed to enter into this market place. The Company is in the process of negotiating
definitive agreements related to this Letter of Intent
General Information Concerning Cannabis and Hemp and Related Regulatory
Laws
Currently, cannabis is consumed in three forms.
The dried plant material that is smoked, extracts of cannabis that are smoked using devices such as e-cigarettes, and cannabis consumables.
Hemp based products may also be consumed by these same three methods as well as being used as a topical application to the skin. High
Sierra’s Intellectual Property is currently specific for dried cannabis plant material, including hemp, which is intended to be
consumed by smoking which High Sierra believes to be the largest segment of the cannabis related market.
Recreational cannabis is now currently legal in
18 states and the District of Columbia and medicinal cannabis is legal in 35 states, the District of Columbia, Guam and Puerto Rico. Thirteen
states and the U.S. Virgin Islands have passed laws decriminalizing cannabis in some form. In addition, Canada has legalized both medicinal
and recreational cannabis in all provinces as of October 17, 2018. Hemp, which is defined as cannabis, with a tetrahydrocannabinol (THC)
content of less than 0.3%, has long been legalized in Canada. It should be noted that cannabis continues to be illegal at the Federal
level in the United States. It should be further noted that, with the President’s signature on the Hemp Farming Act of 2018 that
was passed overwhelmingly by Congress, the non-psychoactive components of cannabis, such as cannabidiol will become legal in all states
and will cease to be controlled substances that come under the authority of the Food and Drug Administration.
With the enactment on December 20, 2018 of the
Hemp Farming Act of 2018, hemp and/or cannabidiol based products are no longer classified as controlled substances. High Sierra believes
that its technology will also be readily applicable to hemp and/or cannabidiol based products that may be consumed via combustion and
subsequent
inhalation and/or ingestion in various forms.
Because there are currently known uses of hemp and/or cannabidiol products that use combustion and subsequent inhalation as a method of
consumption, High Sierra believes that such producers and users of these products will see a similar advantage to the use of High Sierra’s
technologies as do the producers and users of medical and recreational cannabis products that are consumed via combustion and subsequent
inhalation and/or ingestion in various forms.
Because High Sierra’s business model is
based on (1) the licensing of its technology, and (2) the production and marketing of hemp cigarettes using its various patented and patent
pending technologies, it is not necessary for High Sierra to handle, sell or distribute cannabis in order to benefit from the rapidly
expanding cannabis market. Accordingly, High Sierra is not directly subject to the limitations imposed by these existing Federal laws
in the United States as they may relate to cannabis. With the enactment on December 20, 2018 of the Hemp Farming Act of 2018, hemp-based
products have ceased to be controlled substances that come under the authority of the Drug Enforcement Administration thus providing High
Sierra an opportunity in a new marketplace that is not subject to the same level of Federal regulation as is the marijuana form of cannabis.
This puts High Sierra in a unique position to benefit from the rapidly expanding cannabis and hemp industries, while at the same time,
not being directly subject to the Federal controlled substance laws of the United States.
Market Place Overview
According to a report by the Brightfield Group,
the global cannabis market is currently estimated to be worth $7.7 billion and will likely experience a compound annual growth rate of
60 percent as other countries liberalize their marijuana laws. It should also be noted that Wall Street analysts have projected that the
change in the laws related to cannabis in Canada could create as much as $5 billion in additional sales. The international market for
cannabis is projected to hit $51.1 billion by 2025. New Frontier Data has estimated that North American cannabis sales could reach $35.2
billion in 2022 and $49.0 billion by 2025.
High Sierra believes that cannabis products that
employ its technology (with respect to utilizing unflavored product as the starting material to make a flavored product) will create a
significant addition to the existing cannabis markets. High Sierra further believes that it is reasonable to project a similar percentage
of flavored cannabis sales as opposed to non-flavored cannabis sales (30%). If trends for tobacco cigarettes are an indication of future
cannabis cigarette sales, flavored cannabis cigarettes could represent a market of $8.84 billion (based on $29.4 billion total 2021 cannabis
sales). High Sierra believes that it may earn significant licensing revenue from licensing its existing technology, based on its proposed
10% licensing fee. If large tobacco companies enter the cannabis marketplace, they are likely to represent a new and highly significant
licensing revenue source for High Sierra.
Currently, companies such as Canopy Growth, Cronos
Group and Tilray which are based in Canada have begun to be traded both on the NASDAQ and the New York Stock Exchange. Constellation Brands
has recently invested $4 billion in Canopy Growth based on its belief in the strong future for the market place for cannabis.
It should be noted that none of these statistics
or projections include products based on the non-psychoactive components of cannabis, such as hemp and/or cannabidiol. These are markets
that Statista has estimated will grow from $108 million in 2014 to $1.5 billion in 2022. High Sierra believes that its opportunities will
be increased with its proposed entrance into the non-psychoactive components of cannabis, such as hemp and/or cannabidiol marketplaces.
Potential Acquisition
On December 28, 2021, the Company executed a non-binding
Letter of Intent to acquire an Oregon Corporation specializing in hemp-related products in a Share Exchange Transaction pursuant to 26
U.S.C. §368. This Letter of Intent was subsequently amended on January 22, 2022.
Competition
High Sierra is not aware of any other companies
that are working on similar technology that can be applied to cannabis and/or hemp flower products to remove or significantly reduce the
odor and flavor of such products which are consumed by smoking and/or ingestion. However, High Sierra believes that eventually there may
be competitors. High Sierra believes that it will have an early competitive advantage being the first to enter this line of business and
file for patent protection as has been discussed in other places herein. It believes that its Provisional Patent Applications and its
Utility Patent Application, if granted, will give High Sierra some significant protection from competing companies.
There are numerous other companies and individuals
that compete in the hemp cigarette market place. Some of those companies are substantially larger than we are and some may have much greater
financial resources than we do. We can offer no assurance that we will be able to compete successfully against our competitors in this
line of business.
Employees
As of the date of this Report, we have only four
part-time employees who are our officers Vincent C. Lombardi, Gregg W. Koechlein, Jeffrey M. Pogol and Glenn C. Miller, and no full time
employees. Mr. Lombardi, Mr. Koechlein and Mr. Pogol each devote approximately sixteen (16) hours per week to the business of the Company,
and Mr. Miller devotes approximately eight (8) hours per week to the business of the Company. They may be compensated for their part time
services on an as needed basis. For example, on February 26, 2021, we issued 10,000 shares of our restricted common stock to Jeffrey M.
Pogol and 10,000 shares of our restricted common stock to another service provider for services rendered valued in the amount of $2,000
each, and on January 1, 2021 Gregg W. Koechlein was paid $7,500 for services. On November 12, 2021 Gregg Koechlein was also paid $5,000.00
for services. We have no written employment agreements. We have never experienced a work stoppage and believe our relationship with our
employees is good.
Effect of Existing or Probable Governmental
Regulations on our Business
We are subject to the following regulations of
the SEC and applicable securities laws, rules and regulations:
Smaller Reporting Company
We are subject to the reporting requirements of
Section 13 of the Exchange Act, and subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting
company.” That designation will relieve us of some of the informational requirements of Regulation S-K applicable to larger companies.
Sarbanes/Oxley Act
We are also subject to the Sarbanes/Oxley Act
of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public
companies and strengthen auditor independence. It also requires steps to enhance the direct responsibility of senior members of management
for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit,
and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’
appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls;
auditor attestation to management’s conclusions about internal controls; prohibits certain insider trading during pension fund blackout
periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud,
among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act will substantially increase our legal and accounting
costs.
Exchange Act Reporting Requirements
Section 14(a) of the Exchange Act requires all
companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC
regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders at special or annual meetings thereof
or pursuant to a written consent will require us to provide our stockholders with the information outlined in Schedules 14A or 14C of
Regulation 14; preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive
copies of this information are forwarded to our stockholders.
We are also required to file Annual Reports on
SEC Form 10-K and Quarterly Reports on SEC Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain
material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the
ordinary course of business; and bankruptcy) in a Current Report on SEC Form 8-K.
Emerging Growth Company
We are and we will remain
an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012(the “JOBS Act”), until
the earliest to occur of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject
to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the completion of this primary offering,
(iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities,
or (iv) the date on which we are deemed a "large accelerated filer" (with at least $700 million in public float) under the Exchange
Act.
As an "emerging growth
company", we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to
public companies. These provisions include:
|
· |
only two years of audited financial statements in addition to any required unaudited interim financial statements
with correspondingly reduced “Management’s Discussion and Analysis” disclosure; |
|
· |
reduced disclosure about our executive compensation arrangements; |
|
· |
no requirement that we hold non-binding advisory votes on executive compensation or golden parachute arrangements;
and |
|
· |
exemption from the auditor attestation requirement in the assessment of our internal control over financial
reporting. |
We have taken advantage of
some of these reduced burdens, and thus the information we provide stockholders may be different from what you might receive from other
public companies in which you hold shares. 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. However, we are choosing to “opt out” of such extended transition period, and
as a result, we 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. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period
for complying with new or revised accounting standards is irrevocable.
Notwithstanding the above,
we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer,
or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million
and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered
a “smaller reporting company”, at such time as we cease being an “emerging growth company”, the disclosure we
will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either
an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging
growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in
their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act (“SOX”) requiring that independent
registered public accounting firms provide an attestation report on the effectiveness of internal control
over financial
reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required
to provide two years of audited financial statements in annual reports.
Start-up Stage
The Company is in the start-up stage and has generated
no revenue as of the date hereof. In the past three (3) years, we have been funded primarily through loans from non-related third parties,
our officers, directors and our shareholders and through the sale of Notes and Shares of our common stock.
Cost and Effects of Compliance with Environmental Laws
Our current business operations are not subject
to any material environmental laws, rules or regulations that would have an adverse material effect on our business operations or financial
condition or result in a material compliance cost.