File
No. [ ]
An Offering Statement pursuant
to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this
Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted
before the Offering Statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer
to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation
or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation
to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains
the URL where the Final Offering Circular or the Offering Statement in which such Final Offering Circular was filed may be obtained.
PART
II – INFORMATION REQUIRED IN OFFERING CIRCULAR
| PRELIMINARY
OFFERING CIRCULAR |
|
SUBJECT
TO COMPLETION |
|
DATED
AUGUST 22, 2023 |
HUMBL,
Inc.
600
B Street, Suite 300
San
Diego, California 92101
UP
TO [ ] SHARES OF COMMON STOCK
HUMBL,
Inc., a Delaware corporation (“we,” “us,” “our,” or the “Company”), is offering up to
[ ] shares of our common stock (the “Offering”). The initial price per share is $[ ] for an Offering amount of
up to $10,000,000 (the “Maximum Offering”) on a best efforts basis. There is no required minimum number of securities
or amount of proceeds that must be sold as a condition to completion of the Offering.
We
may conduct an initial closing (the “Initial Closing”) at any time (the “Initial Closing Date”) provided that
the Offering Statement has been qualified by the Securities and Exchange Commission (the “Commission”). Thereafter, this
Offering will terminate at the earlier of: (1) the date at which the Maximum Offering has been sold; (2) the date which is one year after
this Offering being qualified by the Commission; or (3) the date on which this Offering is earlier terminated by us in our sole discretion
(the “Termination Date”).
If,
on the Initial Closing Date, we have sold less than the Maximum Offering, then we may hold one or more additional closings for additional
sales (each an “Additional Closing”) until the Termination Date. We will consider various factors in determining the timing
of any Additional Closings, including but not limited to the amount of proceeds received at the Initial Closing, any Additional Closings
that have already been held, and indications of interest shown by any additional prospective investors.
From
the date of qualification until the Initial Closing Date, and thereafter pending any Additional Closings on subsequent closing dates
(“Additional Closing Dates,” and with the Initial Closing Date, a “Closing Date”) the proceeds from the Offering
will be kept in an escrow account. Upon the Initial Closing Date and upon each Additional Closing Date, if any, the proceeds therefrom
will be distributed to us and the associated securities will be issued to the investors therein. We have engaged [ ], to act as our escrow
agent for the Offering (together with permitted assignees, the “Escrow Agent”). We will pay the Escrow Agent a $[ ] fee for
its services for the Offering. If the Initial Closing never occurs, any proceeds from the Offering will be promptly returned to investors
by the Escrow Agent, without deduction or interest. (See “Plan of Distribution.”)
We
have engaged [ ] (“Placement Agent”) to act as our placement agent and broker-dealer of record for this Offering. In connection
with this Offering, we are paying the Placement Agent [ ]% of the gross proceeds of the Offering.
The
minimum purchase requirement per investor is $[ ] (or [ ] shares of common stock); however, we can waive the minimum purchase requirement
on a case-by-case basis in our sole discretion. We expect to commence the sale of the shares as of the date on which the Offering Statement,
of which this Offering Circular is a part, is qualified by the Commission.
Our
common stock is currently listed on OTC Pink Current Information by OTC Markets Group, Inc. (“OTC Pink”) with the stock symbol
“HMBL.” On July [ ], 2023, the closing bid price for our common stock as reported on the OTC Pink was $[ ] per share. We
plan to apply to up list our common stock to a national securities exchange in the future. However, we cannot provide any assurance that
our application will be completed and/or accepted by any such national securities exchange.
Currently,
our officers and directors own 68% of our voting stock. After the Offering, assuming all of the shares being offered are sold, our officers
and directors will hold [ ]% of the voting power of our outstanding common stock.
Investing
in our common stock involves a high degree of risk. (See “Risk Factors” beginning on page
8.)
This
Offering will terminate at the earlier of (i) the date at which the Maximum Offering amount set forth above has been sold, or (ii) the
date at which this Offering is earlier terminated by us at our sole discretion. At least every 12 months after this Offering has been
qualified by the Commission, we will file a post-qualification amendment to include our recent financial statements.
The
United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the
terms of the Offering, nor does it pass upon the accuracy or completeness of any Offering Circular or other solicitation materials. These
securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent
determination that the securities offered are exempt from registration.
Generally,
no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income
or net worth. Different rules apply to accredited investors and non-natural persons. (See “Plan of Distribution—Investment
Limitations.”) Before making any representation that your investment does not exceed applicable thresholds, we encourage
you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
The
securities described in this Offering Circular (the “Offering Circular”) may not be sold until qualified by the Commission.
This Offering Circular is not an offer to sell, nor solicitation of an offer to buy, any of our securities in any state or other jurisdiction
in which such sale is prohibited. This Offering Circular follows the disclosure format prescribed by Part I of Form S-1 pursuant to the
general instructions of Part II(a)(1)(ii) of Form 1-A.
For
more information concerning the procedures of the Offering, please refer to “Plan of Distribution” beginning on page 57.
The
date of this Offering Circular is August 22, 2023
TABLE
OF CONTENTS
ABOUT
THIS OFFERING STATEMENT
As
used in this Offering Circular, unless the context otherwise requires or indicates, references to the “Company,” “we,”
“our,” “ourselves,” and “us” refer to HUMBL, Inc. and our subsidiaries, HUMBL Blockchain Services,
Inc., Ixaya Business SA de CV, and HUMBL Chile SpA.
You
should rely only on the information contained in this Offering Circular prepared by us or on our behalf that we have referred you to.
We have not authorized anyone to provide you with additional or different information. If anyone provides you with additional, different,
or inconsistent information, you should not rely on it. We take no responsibility for, and can provide no assurance as to, the reliability
of any other information that others may give you. This Offering Circular is an offer to sell only the shares offered hereby and only
under circumstances and in jurisdictions where it is lawful to do so. We are offering to sell and seeking offers to buy our common stock
only in jurisdictions where offers and sales are permitted. We are not making an offer of these securities in any state, country, or
other jurisdiction where the offer is not permitted. You should not assume that the information in this Offering Circular is accurate
as of any date other than the date of the applicable document regardless of its time of delivery or the time of any sales of our common
stock. Our business, financial condition, results of operations and cash flows may have changed since the date of the applicable document.
This
Offering Circular describes the specific details regarding this Offering and the terms and conditions of our common stock being offered
hereby and the risks of investing in our common stock. For additional information, please see the section entitled “Where You Can
Find More Information.”
You
should not interpret the contents of this Offering Circular to be legal, tax advice, business, or financial advice. You should consult
with your own advisors for that type of advice and consult with them about the legal, tax, business, financial, and other issues that
you should consider before investing in our common stock.
MARKET
AND INDUSTRY DATA
This
Offering Circular includes industry and trade association data, forecasts, and information that we have prepared based, in part, upon
data, forecasts, and information obtained from independent trade associations, industry publications and surveys, government agencies,
and other independent information publicly available to us. Statements as to our market position are based on market data currently available
to us. Industry publications, surveys, and forecasts generally state that the information contained therein has been obtained from sources
believed to be reliable. Although we believe these sources are reliable, we have not independently verified the information obtained
from these sources. Some data is also based on our good faith estimates, which are derived from management’s knowledge of the industry
and independent sources.
We
believe our internal research is reliable, even though such research has not been verified by any independent sources. While we are not
aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject
to change based on various factors, including those discussed under the heading “Risk Factors” in this Offering Circular.
In
addition, forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties
regarding the other forward-looking statements in this Offering Circular. Trademarks used in this Offering Circular are the property
of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such
trademarks. In addition, certain market and industry data has been obtained from publicly available industry publications. These sources
generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness
of the information are not guaranteed. We have not independently verified the data obtained from these sources. Forecasts and other forward-looking
information obtained from these sources are subject to the same qualifications and additional uncertainties regarding the other forward-looking
statements in this Offering Circular.
OFFERING
CIRCULAR SUMMARY
This
summary highlights information contained elsewhere in this Offering Circular, but it does not contain all of the information that you
may consider important in making your investment decision. Therefore, you should read this entire Offering Circular carefully, including,
in particular, the “Risk Factors” section of this Offering Circular.
Our
Company
HUMBL,
Inc. (“we,” “us,” “our,” “HUMBL,” or the “Company”) is a digital wallet
and web platform company. Our products are designed to help consumers, business, and government clients use technology in ways that improve
the speed, cost and transparency of digital commerce. HUMBL is built on fully verified profiles (KYC / KYB), helping eliminate the fake
profiles, bots, and merchandise that have plagued larger marketplace and social media platforms.
Operations
We
are organized into two divisions: a) HUMBL – Consumer division, and b) HUMBL – Commercial division (HBS). Through these two
divisions, we offer our core products and services of a) digital wallet and b) web platform.
HUMBL
– A Digital Commerce Platform
HUMBL
delivers a digital wallet and web platform as our core services. HUMBL provides customers with the ability to connect with consumers
and merchants that have all been fully verified, eliminating fake profiles, ratings and reviews.
| 1. | HUMBL
Wallet |
| 2. | HUMBL.com
– Web Platform |
| 3. | HUMBL
Commercial Services |
HUMBL
Wallet
The
HUMBL Wallet is a 4.9 star application that is available for download on major app stores. The HUMBL Wallet is the centerpiece of the
consumer experience on the HUMBL platform. The HUMBL Wallet consolidates a variety of services for customers in one place—including
a search engine, social media, marketplace, and digital payments—and helps us to verify customers and merchants
HUMBL
Web Platform
The
HUMBL Search Engine is available via the HUMBL Wallet and the HUMBL web platform. The HUMBL Search Engine allows customers to search
for articles, news, images, videos, and more. The search engine also serves as a discovery layer for consumers to search for verified
merchandise and tickets.
HUMBL
provides primary and secondary (resale) tickets. The ticketing content provided on HUMBL Tickets spans across major live music, sports,
festivals, and events in multiple countries. HUMBL Tickets advertises its services primarily across social media, including its own HUMBL
Social platform.
The
HUMBL Marketplace was designed to pair authenticated buyers and sellers in verified, digital commerce.
The
HUMBL Marketplace mitigates forgeries by pairing physical merchandise with digital certificates of registration. Merchandise is made
available on the HUMBL platform and is verified, registered, and cataloged on the blockchain.
We
are a software platform and do not act as a broker, financial institution, or creditor for digital collectibles. We facilitate transactions
between the buyer and seller in the auction/sale process, but we are not a party to any agreement between the buyer and seller or between
any users.
HUMBL
Social is one of the world’s first user-verified social media platforms in the world. The social media platform is available via
web browser and the HUMBL Wallet.
In
addition to traditional marketplace listings, HUMBL has also created metaverse stores. Our first metaverse store was created for Major
League Baseball (MLB) player Ke’Bryan Hayes and his father Charlie Hayes, a retired Major League Baseball player.
HUMBL
- Commercial Division (HBS)
Our
digital wallet and website can also be used as a white label or “Powered by HUMBL” solution for commercial clients, including
for the government and for stadiums, arenas, and leagues.
History
and Development of the Company
We
were formed under the name Ponca Acquisition Corporation in Nevada on May 3, 2000, as a “blank check” development stage company.
Following a series of name changes and changes in the focus of our business, on November 18, 2008, we filed Form 15 with the SEC to terminate
our registration with the SEC.
On
March 12, 2009, we redomiciled to Oklahoma and on March 16, 2009, changed our name from IWT Tesoro Corporation to Tesoro Distributors,
Inc. Tesoro Enterprises, Inc., an Oklahoma corporation, was incorporated on November 12, 2009, as a subsidiary of Tesoro Distributors,
Inc. On March 11, 2010, we changed our name to Tesoro Enterprises, Inc. and received a new symbol of “TSNP” following FINRA
review of our name and symbol change request.
On
November 30, 2020, we changed our domicile to Delaware. On December 3, 2020, we merged with HUMBL LLC to conduct the business of HUMBL
LLC through a reverse merger. On February 26, 2021, FINRA announced the change of our name from Tesoro Enterprise, Inc. to HUMBL, Inc.
and the change of our trading symbol from “TSNP” to “HMBL,” effective March 26, 2021.
Recent
Updates
HUMBL
is strongly focused on: a) digital wallet, b) web platform, c) “Powered by” white label services. As our platform grew, we
wanted to re-focus our priorities and therefore eliminated previous features or offerings from our platform, as follows:
| 1. | Elimination
of Digital Assets |
| - | HUMBL
no longer carries any digital assets or NFTs on its balance sheet. |
| - | HUMBL
no longer offers any purchase, sale or swaps of digital assets or NFTs through our product
lines. |
| - | HUMBL
no longer provides third party referrals to Wyre, or similar, for the custody of digital
assets or yield programs. |
| 2. | Elimination
of Non-Digital Wallet and Web Platform Services |
HUMBL
no longer plans to service the United States Air Force contract from our commercial division through the acquisition of BizSecure, as
we are prioritizing our digital wallet and web platform.
Summary
Risk Factors
An
investment in our securities involves risks. You should consider carefully the risks discussed below and described more fully along with
other risks under “Risk Factors” in this Offering Circular before investing in our securities.
| ● |
|
This
is a highly speculative investment. |
| |
|
|
| ● |
|
We
have inadequate capital and need additional financing to accomplish our business and strategic plans. The terms of subsequent financings,
if any, may adversely impact your investment. If we fail to obtain the capital necessary to fund our operations, we may be required
to cease or curtail our operations. |
| |
|
|
| ● |
|
If
you purchase common stock in this Offering, you will experience immediate dilution. |
| |
|
|
| ● |
|
Our
executive officers and directors will control us and they have discretionary authority over the use of proceeds. |
| |
|
|
| ● |
|
Our
independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which
may hinder our ability to obtain future financing. |
| |
|
|
| ● |
|
We
may be subject to risks related to the protection and enforcement of our intellectual property rights, and third parties may enforce
their intellectual property rights against us. |
| |
|
|
| ● |
|
We
may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies that could
harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense. |
| |
|
|
| ● |
|
Our
international operations expose us to a number of risks. |
| |
|
|
| ● |
|
We
may not be able to compete successfully against existing or future competitors including larger, well-established and well-financed
mobile app companies. |
| |
|
|
| ● |
|
Our
common stock is controlled by insiders. |
| |
|
|
| ● |
|
If
we do not meet the listing standards of a national securities exchange and if our application is not approved by a national securities
exchange, our investors’ ability to make transactions in our securities will be limited, and we will be subject to additional
trading restrictions. |
Corporate
Information
Our
principal executive offices are located at 600 B Street, Suite 300, San Diego, California 92101.
Our
main telephone number is 786-738-9012. Our website is www.humbl.com. The information contained on, or that can be accessed through, our
website is not incorporated by reference and is not a part of this Offering Circular.
THE
OFFERING
| Common
stock offered by us |
|
Up
to [ ] shares (the “Maximum Offering”). |
| |
|
|
| Common
stock outstanding immediately prior to this offering |
|
[ ] shares. |
| |
|
|
| Common
stock to be outstanding after this Offering |
|
[ ] shares (assuming we sell the Maximum Offering amount). |
| |
|
|
| Use
of proceeds |
|
We
expect to receive net proceeds from this Offering of approximately $[ ] (assuming we sell the Maximum Offering amount). We intend
to use the net proceeds from this Offering for platform development; sales and marketing; working capital; customer service; and
ticketing hardware. (See “Use of Proceeds.”) |
| |
|
|
| Dividend
policy |
|
We
currently intend to retain our future earnings, if any, to finance the development and expansion of our business. The determination
to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations,
capital requirements, restrictions contained in any financing instruments, and such other factors as our board of directors deems
relevant in its discretion. (See “Dividend Policy.”) |
| |
|
|
| Control |
|
Upon
completion of this Offering, Brian Foote, our President and Chief Executive Officer, will control more than 50% of the voting power
of our capital stock principally through his ownership of Series A and Series B Preferred Stock. (See “Management.”). |
| |
|
|
| Risk
factors |
|
Investing
in our common stock involves a high degree of risk. (See “Risk Factors.”) |
| |
|
|
| Listing |
|
Our
common stock is quoted for trading on the OTC Pink under the symbol “HMBL.” As of July [ ], 2023, the closing bid price
for our common stock as reported on OTC Pink was $[ ] per share. In the future, we plan to apply to up list our common stock to a
national securities exchange. However, no assurance can be given that our application will be completed and/or approved. |
Except
as otherwise indicated, all information in this Offering Circular is based on 3,303,378,809 shares outstanding as of the date of this
Offering Circular, and:
| |
● |
assumes
that we sell the Maximum Offering amount; |
| |
|
|
| |
● |
excludes
20,000,000 shares of our common stock reserved for future issuance in connection with awards under our 2021 Stock Incentive Plan
(our “2021 Stock Option Plan”) (pursuant to which we have issued to our employees, officers, and directors options exercisable
for 4,005,000 shares of common stock as of the date of this Offering Circular); and |
| |
|
|
| |
● |
excludes
390,408 shares of our outstanding Series B Preferred Stock which is convertible to up to 3,904,080,000 shares of common stock, subject
to certain volume restrictions. |
(See
“Description of Capital Stock.”)
SUMMARY
FINANCIAL INFORMATION
The
following information represents selected audited financial information for our Company for the years ended December 31, 2022 and 2021
and unaudited for the three months ended March 31, 2023 and 2022. The historical financial data presented below is not necessarily indicative
of our financial results in future periods, and the results for the year ended December 31, 2022 or the quarter ended March 31, 2023
are not necessarily indicative of our operating results to be expected for the full fiscal year ending December 31, 2023 or any other
period. You should read the summary consolidated financial information in conjunction with the audited consolidated financial statements
and the accompanying notes included elsewhere in this Offering Circular and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Our unaudited consolidated interim financial statements are prepared and presented in accordance
with United States generally accepted accounting principles, or U.S. GAAP. Our consolidated financial statements have been prepared on
a basis consistent with our audited financial statements and include all adjustments, consisting of normal and recurring adjustments
that we consider necessary for a fair presentation of the financial position and results of operations as of and for such periods.
The
following table sets forth the summary operations for the years ended December 31, 2022 and 2021:
| | |
For the Years Ended | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Revenues | |
$ | 2,768,534 | | |
$ | 1,372,444 | |
| Cost of Revenues | |
$ | 1,401,658 | | |
$ | 855,805 | |
| Gross Profit | |
$ | 1,366,876 | | |
$ | 516,639 | |
| Development Costs | |
$ | 2,363,225 | | |
$ | 2,117,683 | |
| Professional Fees | |
$ | 4,288,782 | | |
$ | 3,787,539 | |
| Settlement | |
$ | 3,752,400 | | |
$ | 1,870,000 | |
| Stock-based compensation | |
$ | 12,199,063 | | |
$ | 10,734,834 | |
| Impairment – intangible assets including goodwill | |
$ | 10,424,214 | | |
$ | 5,470,150 | |
| Impairment – digital assets | |
$ | 1,606,784 | | |
$ | 34,570 | |
| General and Administrative Expenses | |
$ | 7,919,753 | | |
$ | 4,761,175 | |
| Interest Expense | |
$ | (1,570,754 | ) | |
$ | (932,632 | ) |
| Amortization of Debt Discounts | |
$ | (1,672,940 | ) | |
$ | (838,941 | ) |
| Gain on Sale of Digital Assets | |
$ | 297,895 | | |
$ | 47,875 | |
| Beneficial conversion feature | |
$ | - | | |
$ | (3,300,000 | ) |
| Loss on sale of assets | |
$ | (57,318 | ) | |
$ | - | |
| Loss on conversion of convertible notes payable | |
$ | (753,858 | ) | |
$ | - | |
| Other income | |
$ | - | | |
$ | 28,200 | |
| Provision for Income Taxes | |
$ | 4,950 | | |
$ | 4,950 | |
| Net Loss from Continuing Operations | |
$ | (44,949,270 | ) | |
$ | (33,193,643 | ) |
Balance
Sheet Data:
(in
thousands)
| As
of December 31, 2022 | |
Actual | | |
As
Adjusted(1) | |
| Cash
and cash equivalents | |
$ | 301 | | |
$ | [ ] | |
| Total
assets | |
| 2,796 | | |
| [ ] | |
| Accumulated
deficit | |
| (92,316 | ) | |
| ([ ] | ) |
| Total
stockholders’ equity (deficit) | |
$ | (19,487 | ) | |
$ | ([ ] | ) |
| (1)
|
On
an as adjusted basis to give further effect to our issuance and sale of the Maximum Offering at an offering price of $[ ] per share,
after deducting the estimated offering expenses payable by us. |
RISK
FACTORS
An
investment in our common stock involves a high degree of risk and should be considered highly speculative. Before making an investment
decision, you should carefully consider the following risk factors, which address the material risks concerning our business and an investment
in our common stock, together with the other information contained in this Offering Circular. If any of the risks discussed in this Offering
Circular occur, our business, prospects, liquidity, financial condition, and results of operations could be materially and adversely
affected. Some statements in this Offering Circular, including statements in the following risk factors, constitute forward-looking statements.
Please refer to the section entitled “Cautionary Note Concerning Forward-Looking Statements.”
Risks
Related to Our Financial Position
Our
operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. If we do not
continue as a going concern, investors could lose their entire investment.
Our
operating losses and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We have an
accumulated deficit of $(99,218,747) as of December 31, 2022 as well as a net loss of $48,567,938 and $49,656,004 for the years ended
December 31, 2022 and 2021, respectively. We may never achieve profitability. If we do not generate sufficient revenues, do not achieve
profitability and do not have other sources of financing for our business, we may have to curtail or cease our development plans and
operations, which could cause investors to lose the entire amount of their investment.
Our
independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which
may hinder our ability to obtain future financing.
Our
financial statements as of December 31, 2022 have been prepared under the assumption that we will continue as a going concern for the
next 12 months. Our independent registered public accounting firm included in its opinion for the year ended December 31, 2022 an explanatory
paragraph referring to our recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern
without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to develop profitable
operations and to obtain additional funding sources. Our financial statements as of December 31, 2022 did not include any adjustments
that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by our
auditors, and our potential inability to continue as a going concern, in future years could materially adversely affect our share price
and our ability to raise new capital or enter into strategic alliances.
If
we do not begin to generate significant revenues, we will still need to raise additional capital to meet our long-term business requirements.
Any such capital raising may be costly or difficult to obtain and would likely dilute current stockholders’ ownership interests.
If we are unable to secure additional financing in the future, we will not be able to continue as a going concern.
If
we do not begin to generate significant revenues from our operations we will need additional capital, which may not be available on reasonable
terms or at all. The raising of additional capital will dilute current stockholders’ ownership interests. We may need to raise
additional funds through public or private debt or equity financings to meet various objectives including, but not limited to:
| |
● |
maintaining
enough working capital to run our business; |
| |
● |
pursuing
growth opportunities, including more rapid expansion; |
| |
● |
acquiring
complementary businesses and technologies; |
| |
● |
making
capital improvements to improve our infrastructure; |
| |
● |
responding
to competitive pressures; |
| |
● |
complying
with regulatory requirements for advertising or taxation; and |
| |
● |
maintaining
compliance with applicable laws. |
Any
additional capital raised through the sale of equity or equity-linked securities may dilute current stockholders’ ownership percentages
and could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool
of outstanding equity. The terms of those securities issued by us in future capital transactions may be more favorable to new investors,
and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further
dilutive effect that is different from or in addition to that reflected in the capitalization described in this report.
Further,
any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to
obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and we may not be able to
continue operating if we do not generate sufficient revenues from operations needed to stay in business.
We
may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities
law compliance fees and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we
issue, such as convertible notes and warrants, which may adversely impact our financial condition.
We
may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our level of marketing efforts
to expand the number of customers and merchants using our products and acquisition of suitable target companies and could cause our business
plan to fail.
We
will need substantial additional funding to increase our customer base and pursue our acquisition of companies and business units that
meet our desired standards. There are no assurances that future funding will be available on favorable terms or at all. The failure to
fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of
operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to reduce our efforts to enlist
more customers and merchants to use our technology and to delay, reduce or eliminate our acquisition strategy. Any of these events could
significantly harm our business, financial condition, and prospects.
If
we fail to obtain the capital necessary to fund our operations, we may be required to cease or curtail our operations.
Although
we expect the net proceeds of this offering to be sufficient to satisfy our capital requirements for a period of 12 months from the date
of this Offering Circular, we believe that we will need to raise substantial additional capital to fund our continuing operations. Our
business or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial additional
funding may be required to maintain operations, fund expansion, develop new or enhanced products, acquire complementary products or businesses,
or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment. In addition, we may
need to accelerate the growth of our sales capabilities and distribution beyond what is currently envisioned, and this would require
additional capital. However, we may not be able to secure funding when we need it or on favorable terms. If we cannot raise adequate
funds to satisfy our capital requirements, we may have to cease or curtail our operations.
Even
if we can raise additional funding, we may be required to do so on terms that are dilutive to you.
The
capital markets have been unpredictable in the past. In addition, it is generally difficult for early-stage companies to raise capital
under current market conditions. The amount of capital that a company such as ours is able to raise often depends on variables that are
beyond our control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If we are able to consummate
a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable
terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially
adversely affected.
We
anticipate our operating expenses will increase, and we may never achieve profitability.
As
a result of some or all of these factors in combination, we anticipate that we will incur significant financial losses in the foreseeable
future. There is limited history upon which to base any assumption as to the likelihood that we will prove successful. We cannot provide
investors with any assurance that our business will attract customers and investors. If we are unable to address these risks, there is
a high probability that our business will fail.
We
have a history of net losses and anticipate increasing operating expenses in the future, and may not be able to achieve and, if achieved,
maintain profitability.
We
have operated at a net loss since our inception. We may not achieve or maintain profitability in the future. Because the market for our
products and services is rapidly evolving, it is difficult for us to predict our future results of operations or the limits of our market
opportunity. We expect our operating expenses to significantly increase over the next several years as we hire additional personnel,
expand our partnerships, operations and infrastructure, and continue to enhance our products and services and develop and expand their
features, integrations, and capabilities. We also intend to continue to build and enhance our platforms through both internal research
and development and possible pursuing acquisitions that can contribute to the capabilities of our platforms. If our revenue does not
increase to offset the expected increases in our operating expenses, we may not be profitable in future periods. In future periods, our
revenue growth could slow or our revenue could decline for a number of reasons, including any failure to increase the number of companies
wanting to advertise on our platform or grow the size of our engagements with new and existing customers, a decrease in the growth of
our overall market, our failure, for any reason, to continue to capitalize on growth opportunities, slowing demand for our products,
additional regulatory burdens, or increasing competition. As a result, our past financial performance may not be indicative of our future
performance.
Access
to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could
adversely affect our ability to maximize our returns.
In
the event we need to seek third-party sources of financing, we will depend, in part, on:
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general
market conditions; |
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the
market’s perception of our growth potential; |
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our
current and expected future earnings; |
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our
cash flow; and |
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the
market price per share of our common stock. |
Recently,
domestic financial markets have experienced unusual volatility, uncertainty, and a tightening of liquidity in both the investment grade
debt and equity capital markets. Credit spreads for major sources of capital widened significantly during the U.S. credit crisis as investors
demanded a higher risk premium. Given the current volatility and weakness in the capital and credit markets, potential lenders may be
unwilling or unable to provide us with financing that is attractive to us or may charge us prohibitively high fees in order to obtain
financing. Consequently, there is greater uncertainty regarding our ability to access the credit market in order to attract financing
on reasonable terms. Investment returns on our assets and our ability to make acquisitions could be adversely affected by our inability
to secure additional financing on reasonable terms, if at all.
Depending
on market conditions at the relevant time, we may have to rely more heavily on additional equity financings or on less efficient forms
of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations,
future business opportunities, and other purposes. We may not have access to such equity or debt capital on favorable terms at the desired
times, or at all.
These
broad market fluctuations may adversely affect the market price of our common stock. Financial markets have historically, at times, experienced
significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that
have often been unrelated to the operating performance, underlying asset values, or prospects of such companies.
Accordingly,
the market price of our common stock may decline even if our operating results, underlying asset values, or prospects have not changed.
Additionally, these factors as well as other related factors may cause decreases in asset values that are deemed to be other than temporary,
which may result in impairment losses. There can be no assurance that continuing fluctuations in the price and volume of our common stock
will not occur. If such increased levels of volatility and market turmoil continue, our operations could be adversely impacted and the
trading price of our common stock may be materially adversely affected.
We
use estimates, opinions, and assumptions that may be speculative.
No
representation or warranty can be given that the estimates, opinions, or assumptions made herein will prove to be accurate. Any such
estimates, opinions, or assumptions should be considered speculative and are qualified in their entirety by the information and risks
disclosed in this Offering Circular. The assumptions and facts upon which any estimates or opinions herein are based are subject to variations
that may arise as future events occur. There is no assurance that actual events will correspond with the assumptions. Potential investors
are advised to consult with their tax and business advisors concerning the validity and reasonableness of the factual, accounting, and
tax assumptions. Neither our officers and directors nor any other person or entity makes any representation or warranty as to our potential
future profitability.
Changes
in accounting rules, assumptions, and/or judgments could materially and adversely affect us.
Accounting
rules and interpretations for certain aspects of our operations are highly complex and involve significant assumptions and judgment.
These complexities could lead to a delay in the preparation and dissemination of our financial statements. Furthermore, changes in accounting
rules and interpretations or in our accounting assumptions and/or judgments, such as asset impairments, could significantly impact our
financial statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior
period financial statements. Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial
condition, and results of operations.
Risks
Related to our Products, Services, and Intellectual Property
We
are subject to cyber security risks and risks of data loss or other security breaches.
Our
business involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk
of loss or misuse of this information, and to resulting claims, fines, and litigation. We have been subjected to a variety of cyber-attacks,
which have increased in number and variety over time. We believe our systems are probed by potential hackers virtually 24/7, and we expect
the problem will continue to grow worse over time. Cyber-attacks may target us, our customers, our suppliers, banks, credit card processors,
delivery services, e-commerce in general or the communication infrastructure on which we depend. Any compromise of our security could
result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a
loss of confidence in our security measures, any of which could have a material adverse effect on our financial results and business.
Moreover, any insurance coverage we may carry may be inadequate to cover the expenses and other potential financial exposure we could
face as a result of a cyber-attack or data breach.
We
rely on third-party systems to conduct our business and relationships with payment processors, advertisers, third party sellers of our
mobile apps, and our revenues and market share may decrease if these third-party relationship and systems are unavailable in the future
or if they no longer offer quality performance.
We
rely on third-party computer systems and third-party service providers to host our website and to advertise and deliver the products
sold on our website to customers. We also rely on third-party licenses for components of the software underlying our technology platform.
Any interruption in our ability to obtain the products or services of these or other third parties or deterioration in their performance
could impair the timing and quality of our own service. If our service providers fail to deliver high-quality services in a timely manner
to our customers, our services will not meet the expectations of our customers and our reputation and brand will be damaged. Furthermore,
if our arrangements with any of these third parties are terminated, we may not find an alternate source of systems support on a timely
basis or on terms as advantageous to us. In addition, our contracts or arrangements with suppliers do not provide for the continuation
of particular pricing practices, for the availability of any specific services and generally may be terminated by either party. If we
are unable to develop and maintain relationships with these third-party suppliers that will allow us to obtain sufficient levels of service
on acceptable commercial terms, such inability could harm our business, prospects, financial condition and results of operations.
Any
failure to protect our future intellectual property rights could impair our ability to protect our technology and our brand.
We
expect to rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions, to protect
our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection and any
of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our
intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary information,
develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our business. The
failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our business,
financial condition and results of operations.
We
may be subject to risks related to the protection and enforcement of our intellectual property rights, and third parties may enforce
their intellectual property rights against us.
The
ownership and protection of our intellectual property rights is a significant aspect of our future success. We rely on patent applications,
trade secrets, trademarks, service marks technical know-how and other proprietary information (collectively, “Intellectual
Property”) to maintain our competitive position. We try to protect our Intellectual Property by seeking registered protection where
possible, developing and implementing standard operating procedures to protect Intellectual Property and entering into agreements with
parties that have access to our Intellectual Property, such as our employees and consultants, to protect confidentiality and ownership.
It
is possible that we may fail to identify Intellectual Property, fail to protect or enforce our Intellectual Property, inadvertently disclose
such Intellectual Property or fail to register rights in relation to such Intellectual Property.
In
relation to our agreements with parties that have access to our Intellectual Property, any of these parties may breach those agreements,
and we may not have adequate remedies for any specific breach. In relation to our security measures, such security measures may be breached,
and we may not have adequate remedies for any such breach. In addition, certain of our Intellectual Property, which has not yet been
applied for or registered, may otherwise become known to or be independently developed by competitors or may already be the subject of
applications for intellectual property registrations filed by our competitors, which could have a material adverse effect on our business,
financial condition and results of operations.
We
cannot provide any assurance that our Intellectual Property will not be disclosed in violation of agreements or that competitors will
not otherwise gain access to our Intellectual Property or independently develop and file applications for intellectual property rights
that adversely affect our Intellectual Property rights. Unauthorized parties may attempt to copy, reverse engineer, or otherwise obtain
and use our Intellectual Property. Identifying and policing the unauthorized use of our current or future Intellectual Property rights
could be difficult, expensive, time-consuming and unpredictable, as may be enforcing these rights against unauthorized use by others.
We may be unable to effectively monitor and evaluate the products being distributed by our competitors and the processes used to produce
such products. Additionally, if the steps taken to identify and protect our Intellectual Property rights are deemed inadequate, we may
have insufficient recourse against third parties for enforcement of our Intellectual Property rights.
In
any infringement proceeding, some or all of our Intellectual Property rights or arrangements or agreements seeking to protect the same
for our benefit may be found invalid, unenforceable, or anti-competitive. An adverse result in any litigation or defense proceedings
could put one or more of our Intellectual Property rights at risk of being invalidated or interpreted narrowly and could put existing
intellectual property applications at risk of not being issued. Any or all of these events could have a material adverse effect on our
business, financial condition and results of operations.
Additionally,
other parties may claim that our products or services infringe on their proprietary rights or other intellectual property rights. Parties
making claims against us may obtain injunctive or other equitable relief, which may have an adverse impact on our business. Such claims,
whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions,
temporary restraining orders and/or require the payment of damages. In addition, we may need to obtain licenses from third parties who
allege that we have infringed on their lawful rights. However, such licenses may not be available on terms acceptable to us, if at all.
In addition, we may not be able to obtain licenses on terms that are favorable to us, or at all, or other rights with respect to intellectual
property that we do not own.
Risks
Related to our Business
We
may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies that could harm
our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.
As
part of our business strategy, we may pursue acquisitions of businesses and assets or enter into strategic alliances and collaborations,
to initiate and then expand our operations. We may not identify or complete these transactions in a timely manner, on a cost-effective
basis, or at all, and we may not realize the anticipated benefits of any such transaction, any of which could have a detrimental effect
on our financial condition, results of operations and cash flows. We have limited experience with acquiring other companies and assets
and limited experience with forming strategic alliances and collaborations. We may not be able to find suitable acquisition candidates,
and if we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and we may
incur additional debt or assume unknown or contingent liabilities in connection therewith. Integration of an acquired company or assets
may also disrupt ongoing operations, require the hiring of additional personnel and the implementation of additional internal systems
and infrastructure, especially the acquisition of commercial assets, and require management resources that would otherwise focus on developing
our existing business. We may not be able to find suitable strategic alliance or collaboration partners or identify other investment
opportunities, and we may experience losses related to any such investments.
To
finance any acquisitions or collaborations, we may choose to issue debt or equity securities as consideration. Any such issuance of securities
would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other
assets or companies or fund a transaction using our stock as consideration. Alternatively, it may be necessary for us to raise additional
funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us,
or at all.
We
intend to make acquisitions that could disrupt our operations and adversely impact our business and operating results.
We
intend to attempt to acquire complementary e-commerce businesses and to support the transition and integration of acquired operations
with our ongoing business as a part of our growth strategy. Other than as disclosed herein, we currently have no binding commitments
or agreements with respect to any such acquisitions and there can be no assurance that we will eventually consummate any acquisitions.
The process of integrating acquired assets into our operations may result in unforeseen operating difficulties and expenditures and may
absorb significant management attention that would otherwise be available for the ongoing development of our business. In addition, we
have limited experience in performing acquisitions and managing growth. There can be no assurance that the anticipated benefits of any
acquisition will be realized. In addition, future acquisitions could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, any of which
could materially and adversely affect our operating results and financial position. In addition, acquisitions also involve other risks,
including risks inherent in entering markets in which we have no or limited prior experience and the potential loss of key employees.
If
we fail to manage our growth effectively, our business, financial condition, results of operations and prospects could be materially
and adversely affected.
As
of the date of this Offering Circular, we have 10 full-time employees, along with a number of independent contractors and subsidiary
employees. As our growth plans proceed and development and commercialization plans and strategies develop, we expect to need additional
development, managerial, operational, sales, marketing, financial, accounting, legal, and other resources. In addition, we may enter
into new markets as we seek to expand globally the adoption of our products and services.
The
potentially rapid growth we may experience in our business, both organically and inorganically, may place significant demands on our
operational infrastructure. As usage of our products and services grows, we will need to devote additional resources to improving and
maintaining our infrastructure. In addition, we will need to appropriately scale our internal business systems and our services organization
to serve our growing customer base. Any failure of or delay in these efforts could lead to impaired system performance and reduced customer
satisfaction, resulting in decreased sales to customers, lower dollar-based net retention rates, which would hurt our revenue growth
and our reputation. Even if we are successful in our expansion efforts, they will be expensive and complex, and require the dedication
of significant management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to
scale our internal infrastructure. We cannot be sure that the expansion of and improvements to our internal infrastructure will be effectively
implemented on a timely basis, if at all, and such failures could harm our business, financial condition, and results of operations.
If
we are unable to attract new customers, retain existing customers, expand our products and services offerings with existing customers,
or identify areas of higher growth, our revenue growth and profitability will be harmed.
Our
success depends on our ability to acquire new customers, retain existing customers, expand our engagements with existing customers, and
identify areas of higher growth, and to do so in a cost-effective manner. We have made significant investments related to customer acquisition
and retention, expect to continue to spend significant amounts on these efforts in future periods, and cannot guarantee that the revenue
from new or existing customers will ultimately exceed the costs of these investments.
Additionally,
if we fail to deliver a quality user experience, or if customers do not perceive the products and services we offer to be of high value
and quality, we may be unable to acquire or retain customers. Additionally, if we are unable to acquire or retain customers to a level
that where our revenues will exceed our losses from the user side, , we may be unable to achieve our operational objectives. Consequently,
our prices may increase, or may not decrease to levels sufficient to generate customers’ interest, our revenue may decrease, our
margins may decline, and we may not achieve or maintain profitability. As a result, our business, financial condition, and results of
operations may be materially and adversely affected.
Our
international operations expose us to a number of risks.
We
expect that our current limited international activities will grow significantly. In certain international market segments, we have relatively
little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It can be costly to establish,
develop, and maintain international operations and promote our brand internationally. Our international operations may not become profitable
on a sustained basis.
In
addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:
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local
economic and political conditions; |
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government
regulation (such as regulation of our product and service offerings and of competition); restrictive governmental actions (such as
trade protection measures, including export duties and quotas and custom duties and tariffs); nationalization; and restrictions on
foreign ownership; |
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restrictions
on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content,
including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules,
regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property
rights; |
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business
licensing or certification requirements, such as for imports, exports, web services, and electronic devices; |
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limitations
on the repatriation and investment of funds and foreign currency exchange restrictions; |
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limited
fulfillment and technology infrastructure; |
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shorter
payable and longer receivable cycles and the resultant negative impact on cash flow; |
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laws
and regulations regarding privacy, data protection, data security, network security, consumer protection, payments, advertising,
and restrictions on pricing or discounts; |
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lower
levels of use of the Internet; |
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lower
levels of consumer spending and fewer opportunities for growth compared to the United States; |
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lower
levels of credit card usage and increased payment risk; |
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difficulty
in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences; |
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compliance
with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government
officials and other third parties; |
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laws
and policies of the United States and other jurisdictions affecting trade, foreign investment, loans, and taxes; and |
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geopolitical
events, including war and terrorism. |
We
have an evolving business model with still untested growth initiatives.
We
have an evolving business model and intend to implement new strategies to grow our business in the future. Among other strategies for
organic growth, we intend to recruit country partners to sell and distribute our technologies. There can be no assurance that
we will be successful in developing new product categories or in entering new specialty markets or in implementing any other growth strategies.
Similarly, there can be no assurance that we already have or will be able to obtain or retain any employees, consultants or other resources
with any specialized skills or relationships to successfully implement our strategies in the future.
Our
expansion into new products, services, technologies, and geographic regions subjects us to additional risks.
We
may have limited or no experience in our newer markets, and our customers may not adopt our product or service offerings. These offerings,
which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service
disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may not meet our expectations,
and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts
we invest in new technologies, products, or services could result in the value of those investments being written down or written off.
We
may not be able to compete successfully against existing or future competitors including larger, well-established and well-financed mobile
app companies.
Many
of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we do. In addition, some of our competitors may be able to devote greater resources
to marketing and promotional campaigns, adopt more aggressive pricing and devote substantially more resources to systems development
than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We
cannot provide assurance that we will be able to compete successfully against existing or future competitors.
Our
business depends on effective marketing, including marketing via email and social networking messaging, and we intend to increase our
spending on marketing and branding, which may adversely affect our financial results.
We
depend on effective marketing to attract customers and merchants. We depend on email and social networking messaging to promote our site
and offerings and to generate a substantial portion of our revenues. If we are unable to develop, implement and maintain effective and
efficient cost-effective advertising and marketing programs, it would have a material adverse effect on our financial results and business.
Further, as part of our growth strategies, we intend to increase our spending on marketing and branding initiatives significantly, which
may adversely affect our financial results. There is no assurance that any increase in our marketing or branding expenditures will result
in increased market shares or will ultimately have a positive effect on our financial results.
Use
of social media may adversely impact our reputation.
There
has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other
forms of internet-based communications that allow individuals access to a broad audience of consumers and other interested persons. Consumers
value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information
without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms
and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers
and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information,
including inaccurate information, is seemingly limitless and readily available. Information concerning our Company may be posted on such
platforms and devices at any time. Information posted may be adverse to our interests, may be inaccurate, and may harm our performance,
prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could
be used for the dissemination of trade secret information or otherwise compromise valuable Company assets, all of which could harm our
business, prospects, financial condition and results of operations.
If
we fail to protect and maintain our brand, our ability to attract and retain customers will be impaired, our reputation may be harmed,
and our business, financial condition, results of operations and prospects may suffer.
We
believe that maintaining and promoting our brand in a cost-effective manner is critical to expanding our base of customers. Maintaining,
promoting, and positioning our brand and the reputation of our businesses will depend on our ability to provide useful, reliable information,
products, and services.
We
may introduce, or make changes to, features, products, services, privacy practices, or terms of service that customers do not like, which
may materially and adversely affect our brand. Our brand promotion activities may not generate customer awareness or increase revenue,
and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote
and maintain our brand or if we incur excessive expenses in this effort, our business could be materially and adversely harmed.
Harm
to our brands can arise from many sources, including failure by us or our partners and service providers to maintain security measures,
satisfy expectations of service and quality, inadequate protection or misuse of information with respect to customers’ affairs
or strategies, personally identifiable information, compliance failures and claims, regulatory inquiries and enforcement, rumors, litigation
and other claims, misconduct by our partners, employees or other counterparties, any of which could lead to a tarnished reputation and
loss of customers.
Any
negative publicity about our industry or our Company, the quality and reliability of our products and services, our compliance and risk
management processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy,
data protection, and information security practices, litigation, regulatory licensing and infrastructure, and the experience of our customers
with our products or services could adversely affect our reputation and the confidence in and use of our products and services. If we
do not successfully maintain a strong and trusted brand, our business, financial condition, and results of operations could be materially
and adversely affected.
Risks
Related to Our Organization and Structure
Our
plans for expansion cannot be implemented if we lose our key personnel or cannot recruit additional personnel.
We
depend substantially on the continued services, specialized knowledge and performance of our senior management, particularly Brian Foote,
our President and CEO, Jeffrey Hinshaw, our COO and CFO. While we have employment agreements with these executives, those employment
agreements do not prevent such employees from terminating their employment with us at any time. As a result, these executives may elect
to pursue other opportunities at any time. If either of these individuals choose to leave our Company, we may lose a significant number
of supplier relationships and operating expertise which they have developed over many years and which would be difficult to replace.
The loss of the services of any executive officer or other key employee could hurt our business.
In
addition, as our business expands, we will need to add new information technology and engineering personnel to maintain and expand our
website and systems and customer support personnel to serve our growing customer base. If we are unable to hire and successfully train
employees or contractors in these areas, users of our website may have negative experiences and we may lose customers, which would diminish
the value of our brand and harm our business. The market for recruiting qualified information technology and other personnel is extremely
competitive, and we may experience difficulties in attracting and retaining employees. Should we fail to retain or attract qualified
personnel, we may not be able to compete successfully or implement our plans for expansion.
Applicable
regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to
retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain
or retain listing of our common stock.
As
a fully reporting company under Section 13 of the Securities Exchange Act of 1934 (the “Exchange Act”), we may be unable
to attract and retain those qualified officers, directors and members of board committees required to provide for effective management
because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal
executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations
and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock
exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as
directors and executive officers.
Further,
some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s
independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining
directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management
of our business and its ability to obtain or retain listing of our shares of common stock on any stock exchange (assuming we elect to
seek and are successful in obtaining such listing) could be adversely affected.
Our
common stock is controlled by insiders.
Our
officers and directors beneficially own approximately 68% of our outstanding shares of capital stock through their ownership of Series
A and B preferred shares. Such concentrated control may adversely affect the price of our common stock. Investors who acquire common
stock may have no effective voice in our management. Sales by our insiders or affiliates along with any other market transactions, could
negatively affect the market price of our common stock.
Our
President and CEO, Brian Foote, has voting control of our capital stock and, as a result, owners of our common stock may be unable to
influence management and exercise control over our business.
Our
largest stockholder, Brian Foote, our President and CEO, will control approximately 61% of the voting power of our capital stock principally
through his ownership of Series A and Series B preferred stock. Brian Foote owns 7,000,000 shares of Series A preferred stock which has
the voting power of 1,000 shares of our common stock for each share of Series A preferred stock and 198,421 shares of Series B preferred
stock, each such share having the voting power of 10,000 shares of our common stock. As a result, he is able to: elect or defeat the
election of our directors, amend or prevent amendment to our certificates of incorporation or bylaws, effect or prevent a merger, sale
of assets or other corporate transaction, and control the outcome of any other matter submitted to the stockholders for vote. Accordingly,
other stockholders may be unable to influence management and exercise control over our business.
We
may change our operational policies and business and growth strategies without stockholder consent which may subject us to different
and more significant risks in the future.
Our
board of directors determines our operational policies and business and growth strategies. Our board of directors may make changes to,
or approve transactions that deviate from, those policies, guidelines, and strategies without a vote of, or notice to, our shareholders.
This could result in us conducting operational matters, making investments, or pursuing different business or growth strategies than
those contemplated in this Offering Circular. Under any of these circumstances, we may expose ourselves to different and more significant
risks in the future, which could have a material adverse effect on our business, prospects, liquidity, financial condition, and results
of operations.
Financial
reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required
to devote substantial time to compliance matters.
As
a publicly traded company, we incur significant legal, accounting and other expenses. The obligations of being a public company in the
United States require significant expenditures and places significant demands on our management and other personnel, including costs
resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance
practices, including those under the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules
require the establishment and maintenance of effective disclosure and financial controls and procedures and internal control over financial
reporting among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Our management
and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep
pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other
potential problems.
Failure
to maintain effective internal control over our financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002,
as amended (“Sarbanes-Oxley”) could cause our financial reports to be inaccurate.
We
are required pursuant to Section 404 of the Sarbanes-Oxley Act to maintain internal control over financial reporting and to assess and
report on the effectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management
in our internal control over financial reporting. Although we prepare our financial statements in accordance with accounting principles
generally accepted in the United States, our internal accounting controls may not meet all standards applicable to companies with publicly
traded securities. If we fail to implement any required improvements to our disclosure controls and procedures, we may be obligated to
report control deficiencies which may cause us to become subject to regulatory sanction or investigation. Further, these outcomes could
damage investor confidence in the accuracy and reliability of our financial statements.
Delaware
law, our Certificate of Incorporation and our Bylaws provides for the indemnification of our officers and directors at our expense, and
correspondingly limits their liability, which may result in a major cost to us and hurt the interests of our shareholders because corporate
resources may be expended for the benefit of officers and/or directors.
Our
Certificate of Incorporation and Bylaws include provisions that eliminate the personal liability of our directors for monetary damages
to the fullest extent possible under the laws of the State of Delaware or other applicable law. These provisions eliminate the liability
of our directors and our shareholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care.
Under Delaware law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director’s
duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment
of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived
an improper benefit. These provisions do not affect a director’s liabilities under the federal securities laws or the recovery
of damages by third parties.
Some
provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others,
even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our
current management.
Provisions
in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party
to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management.
These include provisions that:
●
permit our Board of Directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as it
may designate, of which we have designated 7,000,000 Series A preferred stock with 1,000 votes per share, all of which are held by Brian
Foote, our CEO; issue 570,000 Series B preferred stock with 10,000 votes per share, 400,175 of which are issued and outstanding;
●
provide that all vacancies on our Board of Directors, including as a result of newly created directorships, may, except as otherwise
required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
●
not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in
any election of directors to elect all of the directors standing for election;
●
provide that special meetings of our stockholders may be called by a majority of the Board of Directors; and
●
provide that our Board of Directors is expressly authorized to make, alter or repeal the bylaws.
These
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult
for stockholders to replace members of our Board of Directors, who are responsible for appointing the members of our management. Any
provision of our articles of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control
could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the
price that some investors are willing to pay for our common stock.
Our
bylaws include a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us, remove current management or to be acquired by a third party.
Our
bylaws require that, unless we consent in writing to the selection of an alternative forum, either (i) the Court of Chancery of the State
of Delaware is to be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting
a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (c) any action
asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or our bylaws or (d) any
action or proceeding asserting a claim governed by the internal affairs doctrine or (ii) the federal district court in the State of Delaware
will be the exclusive forum for a cause of action arising under the Securities Act and the Exchange Act. In addition, our bylaws could
make it more difficult for a third party to acquire us or to remove current management through provisions that preclude cumulative voting
in the election of directors and that allow our bylaws to be adopted, amended or repealed by our board of directors.
This
exclusive forum provision will apply to other state and federal law claims including actions arising under the Securities Act (although
our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder).
Section 22 of the Securities Act, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce
any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to
whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented
to the foregoing provisions. This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable
judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our bylaws, a court
could rule that such a provision is inapplicable or unenforceable.
Acts
of war or terrorism may seriously harm our business.
Acts
of war, any outbreak or escalation of hostilities between the United States and any foreign power, or acts of terrorism may cause disruption
to the U.S. economy and cause economic changes that we cannot anticipate.
Risks
Related to this Offering and Ownership of our Common Stock
This
is a highly speculative investment.
There
is no guaranteed return on this investment. Our business is speculative and there is no assurance that we will satisfy any of our business
goals. Because an investment in our shares involves a high degree of risk, no assurance can be given that you will realize any return
on your investment, or that you will not lose your entire investment altogether.
We
have discretionary authority over the use of proceeds.
We
plan to use the net proceeds from this Offering for the purposes set forth under “Use of Proceeds.” However, we reserve the
right to use the funds obtained from this Offering for other similar purposes not presently contemplated which we deem to be in our best
interests in order to address changed circumstances or opportunities. As a result of the foregoing, we will have discretion with respect
to the use of the proceeds of this or any offering and may apply the proceeds in ways with which you do not agree. Investors must depend
upon our management’s judgment as to the use of proceeds. If we fail to apply these funds effectively, our business, results of
operations, and financial condition may be materially and adversely affected. Investors will not participate in these decisions and must
evaluate the consequent risk.
If
you purchase common stock in this Offering, you will experience immediate dilution.
The
Offering price of our common stock is higher than the net tangible book value per share of our common stock outstanding upon the completion
of this Offering. Accordingly, if you purchase common stock in this Offering, you will experience immediate dilution of approximately
$[ ] in the pro forma as adjusted net tangible book value per share of our common stock, assuming that we sell the Maximum Offering.
This means that investors that purchase shares of our common stock in this Offering will pay a price per share that exceeds the per share
net tangible book value of our assets.
Future
sales and issuances of our securities could result in additional dilution of the percentage ownership of our shareholders and could cause
our share price to fall.
We
expect that significant additional capital will be needed in the future to continue our planned operations, including research and development,
increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To
the extent we raise additional capital by issuing equity securities, our shareholders may experience substantial dilution. We may sell
common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from
time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may
be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders, and new investors
could gain rights superior to our existing shareholders.
We
currently do not intend to pay dividends on our common stock.
We
have never declared or paid cash dividends on our capital stock. We currently intend to retain our future earnings, if any, to finance
the development and expansion of our business. The determination to pay dividends will be at the discretion of our board of directors
and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments,
and such other factors as our board of directors deems relevant in its discretion. Accordingly, you may need to sell your shares of our
common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them,
or at all for an indefinite period of time, except as permitted under the Securities Act and the applicable securities laws of any other
jurisdiction.
The
price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The
trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
| |
● |
actual
or anticipated variations in our operating results; |
| |
● |
announcements
of developments by us or our competitors; |
| |
● |
regulatory
actions regarding our products; |
| |
● |
announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
| |
● |
adoption
of new accounting standards affecting our industry; |
| |
● |
additions
or departures of key personnel; |
| |
● |
introduction
of new products by us or our competitors; |
| |
● |
sales
of our common stock or other securities in the open market; and |
| |
● |
other
events or factors, many of which are beyond our control such as the continuation of disruptions due to COVID-19. |
The
stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price
of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated
against us, whether or not successful, could result in substantial costs and diversion of its management’s attention and resources,
which could harm our business and financial condition.
Because
our Offering does not have a minimum Offering amount, we may not raise enough funds to continue operations.
Because
our Offering lacks a minimum Offering amount, no minimum amount of funds are assured, and we may only receive proceeds sufficient to
fund operations for a short amount of time. We may then have to cease operations, and investors could then lose their entire investment.
Costs
and expenses of being a reporting company under the Exchange Act may be burdensome and prevent us from achieving profitability.
As
a public company, we are subject to the reporting requirements of the Exchange Act and parts of the Sarbanes-Oxley Act. We expect that
the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make
some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.
Our
securities are “Penny Stock” and subject to specific rules governing their sale to investors.
Under
SEC Rule 15g-9 we are a “penny stock,” which is defined as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for
transactions in penny stocks; and the broker or dealer receive from the investor a written agreement to the transaction, setting forth
the identity and quantity of the penny stock to be purchased.
To
approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment
experience objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that
person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions
in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to
the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination;
and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more
difficult for our shareholders to sell shares of our common stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the limited market in penny stocks.
FINRA
sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”)
has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing
that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that
speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers
to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect
on the market for our shares.
Because
we became public by means of a merger, we may not be able to attract the attention of major brokerage firms.
Additional
risks may exist since we became public through a merger with a publicly traded company. Securities analysts of major brokerage firms
may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance
can be given that brokerage firms will want to conduct any secondary offerings on behalf in the future.
If
we do not meet the listing standards of a national securities exchange our investors’ ability to make transactions in our securities
will be limited, and we will be subject to additional trading restrictions.
Our
securities currently are traded over-the-counter on OTC Pink and are not qualified to be listed on a national securities exchange, such
as NASDAQ or the NYSE. Accordingly, we face significant material adverse consequences, including:
●
a limited availability of market quotations for our securities;
●
reduced liquidity with respect to our securities;
●
our shares of common stock are currently classified as “penny stock” which requires brokers trading in our shares of common
stock to adhere to more stringent rules, resulting in a reduced level of trading activity in the secondary trading market for our shares
of common stock;
●
a limited amount of news and analyst coverage for our Company; and
●
a decreased ability to issue additional securities or obtain additional financing in the future.
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the
sale of certain securities, which are referred to as “covered securities.” Since our Common Stock is traded on OTC Pink,
our common stock is a covered security. Although the states are preempted from regulating the sale of our securities, the federal statute
allows the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then
the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer traded over-the-counter,
our common stock would not be a covered security and we would be subject to regulation in each state in which we offer our securities.
Future
offerings of debt securities, which would rank senior to our common stock upon our bankruptcy liquidation, and future offerings of equity
securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the
market price of our common stock.
In
the future, we may attempt to increase our capital resources by making offerings of debt securities or additional offerings of equity
securities. Upon bankruptcy or liquidation, holders of our debt securities and lenders with respect to other borrowings will receive
a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings
of our existing shareholders or reduce the market price of our common stock, or both. Our preferred stock, if issued, could have a preference
on liquidating distributions or a preference on dividend payments or both that could limit our ability to pay dividends or make liquidating
distributions to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions
and other factors beyond our control. As a result, we cannot predict or estimate the amount, timing, or nature of our future offerings,
and purchasers of our common stock in this Offering bear the risk of our future offerings reducing the market price of our common stock
and diluting their ownership interest in us.
Our
financial results fluctuate and may be difficult to forecast, and this may cause a decline in the trading price of our stock.
Our
revenues, expenses and operating results are difficult to predict given our limited history of current operations. We expect that our
operating results will continue to fluctuate in the future due to a number of factors, some of which are beyond our control. These factors
include, but are not limited to:
| |
● |
our
ability to increase our brand awareness; |
| |
● |
our
ability to attract new customers; |
| |
● |
our
ability to increase our customer base; |
| |
● |
the
amount and timing of costs relating to the expansion of our operations, including sales and marketing expenditures; |
| |
● |
our
ability to introduce new mobile payment offerings or customer services in a competitive environment; |
| |
● |
technical
difficulties consumers might encounter in using our mobile apps; and |
| |
● |
our
ability to manage third-party outsourced operations; |
Due
to all of these factors, our operating results may fall below the expectations of investors, which could cause a decline in the trading
price of our common stock.
Market
and economic conditions may negatively impact our business, financial condition and share price.
Concerns
over inflation, energy costs, geopolitical issues, the U.S. mortgage market and a declining real estate market, unstable global credit
markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity
and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and
expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years.
Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued
unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make
any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing
in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share
price. Additional factors that may affect the demand for products and services include, but are not limited to: changes in laws and regulations
effecting the digital and ecommerce industry; the nature and extent of competition from other companies; and changes in general economic,
political and market conditions in or any of the regions in which we conduct our business.
CAUTIONARY
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Various
statements contained in this Offering Circular, including those that express a belief, expectation, or intention, as well as those that
are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates
concerning the timing and success of specific projects and our future production, revenues, income, and capital spending. Our forward-looking
statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,”
“expect,” “intend,” “anticipate,” “potential,” “plan,” “goal”
or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this Offering Circular speak
only as of the date of this Offering Circular, and we disclaim any obligation to update these statements unless required by law, and
we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions
about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject
to significant business, economic, competitive, regulatory, and other risks, contingencies, and uncertainties, most of which are difficult
to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance,
or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking
statements:
| |
● |
changes
in assumptions used to make industry forecasts; |
| |
● |
continued
volatility and uncertainty in the credit markets and broader financial markets; |
| |
● |
our
future operating results and financial condition; |
| |
● |
our
business operations; |
| |
● |
changes
in our business and investment strategy; |
| |
● |
availability,
terms, and deployment of capital; |
| |
● |
changes
in, or the failure or inability to comply with, governmental laws and regulations; |
| |
● |
the
degree and nature of our competition; |
| |
● |
general
volatility of the capital markets and the lack of a public market for shares of our common stock; |
| |
● |
availability
of qualified personnel and our ability to retain our key personnel; |
| |
● |
our
financial performance; |
| |
● |
our
expected use of the proceeds from this Offering; and |
| |
● |
additional
factors discussed under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Our Business.” |
These
forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates
and assumptions as of the date of this Offering Circular and are subject to risks and uncertainties. We discuss many of these risks in
greater detail under “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks
emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on
our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained
in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking
statements.
You
should read this Offering Circular and the documents that we reference in this Offering Circular and have filed as exhibits to the Offering
Statement of which this Offering Circular forms a part with the understanding that our actual future results, levels of activity, performance
and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary
statements.
The
forward-looking statements made in this Offering Circular relate only to events as of the date on which such statements are made. We
undertake no obligation to update any forward-looking statements after the date of this Offering Circular or to conform such statements
to actual results or revised expectations, except as required by law.
USE
OF PROCEEDS
We
expect to receive net proceeds from this Offering of approximately $[ ], after deducting placement agent fees and commissions and estimated
offering expenses of $[ ].
| | |
Amount | | |
Percentage | |
| Net
proceeds to us(1) | |
$ | [ ] | | |
| 100 | % |
| | |
| | | |
| | |
| Use of
proceeds: | |
| | | |
| | |
| Platform
Development | |
$ | | | |
| 50 | % |
| Sales
and Marketing | |
$ | | | |
| 30 | % |
| Working
Capital | |
$ | | | |
| 10 | % |
| Customer
Service | |
$ | | | |
| 5 | % |
| Ticketing
Hardware | |
$ | | | |
| 5 | % |
| | |
| | | |
| | |
| Total | |
| | | |
| 100 | % |
| |
(1) |
Assuming
we sell the Maximum Offering amount. |
Platform
Development – We intend to use approximately half of the proceeds from this Offering to fund the continued technological
development of our platform. That includes hiring additional developers to continue development of our ticketing platform and our HUMBL
Wallet product.
Sales
and Marketing – We intend to use a significant portion of the proceeds for the sales and marketing of our products and
services to consumers.
Working
Capital – We will use a portion of the proceeds of this Offering for working capital and general corporate purposes, including
for the payment of our legal and audit expenses related to public company compliance.
Customer
Services – We intend to use a portion of the proceeds to increase our customer services related to the expansion of our
ticketing platform.
Ticketing
Hardware – We intend to use a portion of the proceeds to purchase scanners and other ticketing hardware to be used at stadiums
and other event venues.
The
expected use of net proceeds from this offering represents management’s estimates based upon current business and economic conditions.
We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend
on the uses set forth above. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering.
We reserve the right to use the net proceeds we receive in the offering in any manner we consider to be appropriate. Although we do not
contemplate changes in the proposed use of proceeds, to the extent we find that adjustment is required for other uses by reason of existing
business conditions, the use of proceeds may be adjusted. The actual use of the proceeds of this offering could differ materially from
those outlined above as a result of several factors including those set forth under “Risk Factors” and elsewhere in this
Offering Circular.
CAPITALIZATION
The
following table sets forth our capitalization as of the date of December 31, 2022:
| |
● |
on
an actual basis; and |
| |
|
|
| |
● |
as
adjusted to give effect to the sale of our common stock in this Offering, assuming an Offering price of $[ ] per share, after the
payment of the estimated Offering-related expenses payable by us and assuming we sell the Maximum Offering. |
This
table should be read in conjunction with the sections captioned “Use of Proceeds,” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes thereto
included elsewhere in this Offering Circular.
| | |
| |
| | |
Actual (as of
December 31,
2022) | | |
Pro Forma As
Adjusted | |
| | |
| | |
| |
| Cash | |
| 616,950 | | |
| | |
| Debt | |
| 30,226,213 | | |
| | |
| Stockholders’ equity (deficit): | |
| | | |
| | |
| Common stock, par value $0.00001, 12,500,000 shares authorized, 2,182,343,775 outstanding as of December 31, 2022 | |
| 21,823 | | |
| | |
| Series A Preferred stock, par value $0.00001, 7,000,000 shares authorized, 7,000,000 outstanding as of December 31, 2022 | |
| 70 | | |
| | |
| Series B Preferred stock, par value $0.00001, 570,000 shares authorized, 416,159 outstanding as of December 31, 2022 | |
| 4 | | |
| | |
| Additional paid-in capital | |
| 63,887,828 | | |
| | |
| Accumulated deficit | |
| (99,218,747 | ) | |
| ([ ] | ) |
| Accumulated other comprehensive income (loss) | |
| 19,454 | | |
| | |
| Total shareholders’ equity (deficit) | |
| (35,289,568 | ) | |
| | |
| Total capitalization | |
| (5,063,355 | ) | |
| | |
The
outstanding share information in the table above is based on 2,182,343,775 shares of our common stock outstanding as of December 31,
2022, and:
| |
● |
assumes
that we sell the Maximum Offering amount; |
| |
|
|
| |
● |
excludes
20,000,000 shares of our common stock reserved for future issuance in connection with awards under our 2021 Stock Incentive Plan
(our “2021 Stock Option Plan”) (pursuant to which we have issued to our employees, officers, and directors options exercisable
for 4,005,000 shares of common stock as of the date of this Offering Circular); and |
| |
|
|
| |
● |
excludes
390,408 shares of our outstanding Series B Preferred Stock which is convertible to up to 3,904,080,000 shares of common stock, subject
to certain volume restrictions. |
(See
“Description of Capital Stock.”)
DILUTION
If
you invest in our common stock, your ownership interest will be immediately diluted to the extent of the difference between the Offering
price per share of our common stock in this Offering and the net tangible book value per share of common stock upon completion of this
Offering.
Net
tangible book value per common share represents the amount of our total tangible assets less total liabilities, divided by the number
of shares of common stock outstanding. Our net tangible book value as of December 31, 2022 was $(36,247,380) or $(0.017) per share of
common stock, based upon 2,182,343,775 shares of common stock.
Investors
participating in this Offering will incur immediate, substantial dilution. After giving effect to the sale of shares of our common stock
by us at the Offering price of $[ ] per share, and after deducting the estimated Offering expenses payable by us, our net tangible book
value as of December 31, 2022 would have been approximately $[ ], or approximately $[ ] per share of common stock.
This
represents an immediate increase in net tangible book value of $[ ] per share to existing common shareholders, and an immediate dilution
of $[ ] per share to investors participating in this Offering.
The
following table illustrates this dilution on a per share basis:
| Assumed initial Offering price per share of common stock | |
$ | | |
| Pro forma net tangible book value per share as of December 31, 2022 | |
$ | | |
| Increase in pro forma net tangible book value per share after this Offering | |
$ | | |
| Pro forma as adjusted net tangible book value per share after this Offering | |
$ | | |
| Dilution in net tangible book value per share to new investors(1) | |
$ | | |
| (1) |
Dilution
is determined by subtracting net tangible book value per share of common stock after giving effect to the Offering from the Offering
price paid by a new investor. |
The
following table summarizes, as of the date of this Offering Circular, the differences between our existing shareholders and new investors
with respect to the number of shares of our common stock purchased from us, the total consideration paid and the average price per share
paid, assuming that we sell the maximum Offering amount. The calculations with respect to shares purchased by new investors in this Offering
reflect the Offering price of $[ ] per share, before deducting estimated Offering expenses payable by us, assuming that we sell the Maximum
Offering amount:
| | |
Shares
Purchased | | |
Total
Consideration | | |
Average
Price | |
| | |
Number | | |
Percentage | | |
Amount | | |
Percentage | | |
Per
Share | |
| Existing shareholders | |
| | | |
| | %
| |
$ | | | |
| | % | |
$ | | |
| New investors | |
| | | |
| | % | |
$ | | | |
| | % | |
$ | | |
| Total | |
| | | |
| 100 | % | |
$ | | | |
| 100 | % | |
| | |
The
outstanding share information in the table above is based on 2,182,343,775 shares of our common stock outstanding as of December 31,
2022, and:
| |
● |
assumes
that we sell the Maximum Offering amount; |
| |
|
|
| |
● |
excludes
20,000,000 shares of our common stock reserved for future issuance in connection with awards under our 2021 Stock Incentive Plan
(our “2021 Stock Option Plan”) (pursuant to which we have issued to our employees, officers, and directors options exercisable
for 4,005,000 shares of common stock as of the date of this Offering Circular); and |
| |
|
|
| |
● |
excludes
390,408 shares of our outstanding Series B Preferred Stock which is convertible to up to 3,904,080,000 shares of common stock, subject
to certain volume restrictions. |
(See
“Description of Capital Stock.”)
DIVIDEND
POLICY
We
currently intend to retain our future earnings, if any, to finance the development and expansion of our business. The determination to
pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations,
capital requirements, restrictions contained in any financing instruments, and such other factors as our board of directors deems relevant
in its sole discretion. Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and
you may not be able to sell your shares at or above the price you paid for them, if at all. (See “Risk Factors—Risks Related
to this Offering and Ownership of our Common Stock—We currently do not intend to pay dividends on our common stock.”)
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following in conjunction with the sections of this Offering Circular entitled “Risk Factors,” “Cautionary
Note Concerning Forward-Looking Statements,” and “Our Business” and our historical financial statements and related
notes thereto included elsewhere in this Offering Circular. This discussion contains forward-looking statements reflecting current expectations
that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking
statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in
this Offering Circular.
General
Our
executive offices are located at 600 B Street, Suite 300, San Diego, California 92101, telephone (786) 738-9012. Our corporate website
address is www.humbl.com.
Overview
HUMBL
is a digital wallet and web platform company. Our products are designed to help consumers, business and government clients use technology
in ways that improve the speed, cost, and transparency of digital commerce.
HUMBL
is built on fully verified profiles (KYC / KYB), helping eliminate the fake profiles, bots, and merchandise that have plagued larger
marketplace and social media platforms.
HUMBL
is organized into two divisions: a) HUMBL – Consumer division, and b) HUMBL – Commercial division (HBS). Through these two
divisions, we offer our core products and services of a) digital wallet and b) web platform.
We
provides customers with the ability to connect with consumers and merchants that have all been fully verified, eliminating fake profiles,
ratings and reviews.
We
are deeply focused on the following product lines:
| 1. | HUMBL
Wallet |
| 2. | HUMBL.com
– Web Platform |
| 3. | HBS
– White Label (“Powered by HUMBL”) |
HUMBL,
through its digital wallet and web platform, provides consumers with a search engine, social media, marketplace, and ticketing as core
services. These core services can also be white labeled for commercial clients such as major sports leagues, stadiums, arenas, and government
clients.
We
plan to drive our revenues through the following channels:
HUMBL
Wallet
| ● | We
plan to drive consumer acquisition primarily through the digital wallet. Consumers can be
monetized inside a digital wallet through the delivery of search advertising, social media
advertising, loyalty advertising, credit card payment transactions, ticketing sales, certificates
of authenticity and more. |
HUMBL
Web Platform
| ● | We
have developed one of the first digital wallet and web platforms that are connected together.
This means that any verified customers using the HUMBL.com web platform, are also connected
to a digital wallet for consumer and merchant transactions. |
| ● | The
HUMBL.com platform can be used to drive search advertising, social media advertising, loyalty
advertising, credit card payment transactions, ticketing sales, certificates of authenticity,
authentic merchandise purchases and more. |
HBS
Commercial Services (“Powered by HUMBL”)
| ● | We
also package our digital wallet and web platform for white-labeling by clients. |
| ● | Government
– We have secured approval to build a digital wallet for the County of Santa Cruz,
California. This digital wallet will be built in a modular way, that can be replicated for
other cities, counties, states and national government transactions and record keeping in
areas such as licensing, renewals and certificates. Once built, we plan to offer these digital
wallets for government in exchange for flat fee, a percentage of transactions, or a mix of
both. |
| ● | Stadiums,
Arenas and Leagues – We have secured approval to serve as the “Official Technology
Platform” of the Arena Football League (AFL), which is currently comprised of 16 teams
through the 2028 season. We plan to deliver digital wallet and web platform services, with
the goal of maximizing ticket revenues, merchandise sales and advertising programs across
league digital properties. We plan to be paid a percentage on every ticket sold by the league,
with annual escalators through the end of the 2028 season. We plan to replicate this model
across other teams, sports leagues, stadiums, arenas and festivals. |
Corporate
History
We
were incorporated in the state of Oklahoma on November 12, 2009 and redomiciled on November 30, 2020 to the state of Delaware.
On
December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the
terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred
Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of a one-for-four
reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares, and 10,000,000 preferred
shares.
After
the reverse merger was completed, HUMBL LLC ceased doing business, and all operations were conducted under Tesoro Enterprises, Inc. which
later changed its name to HUMBL, Inc. (“HUMBL” or the “Company”).
On
June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”), following which Tickeri became a subsidiary of HUMBL. On January 31,
2023, we sold Tickeri back to the former owners and reflected the loss on disposal in the Consolidated Statement of Operations.
On
June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in
producing movie trailers and other related content. As part of the acquisition we entered into certain debt instruments with the founders
of Monster that are in default as they were due December 31, 2022. On June 30, 2023, we sold Monster back to one of its former owners.
(See “Our Business—Recent Financings and Material Agreements—Monster Divestiture.”)
On
February 12, 2022, we entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). We determined this was
an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure is not
considered a significant subsidiary under Regulation S-X Rule 1-02(w).
On
March 3, 2022, we acquired Ixaya Business SA de CV, a Mexican corporation (“Ixaya”), under a Stock Purchase Agreement (“Ixaya
SPA”). We accounted for this acquisition as a business combination under ASC 805, and Ixaya is not considered a significant subsidiary
under Regulation S-X Rule 1-02(w).
On
November 2, 2022, we acquired BM Authentics (“BM”), a provider of sports merchandise ranging from autographed jerseys, bats,
balls, helmets, and photos.
Results
of Operations for the Years Ended December 31, 2022 and 2021
The
following table sets forth the summary operations for the years ended December 31, 2022 and 2021:
| | |
For the Years Ended | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| | |
| | |
| |
| Revenues | |
$ | 2,768,534 | | |
$ | 1,372,444 | |
| Cost of Revenues | |
$ | 1,401,658 | | |
$ | 855,805 | |
| Gross Profit | |
$ | 1,366,876 | | |
$ | 516,639 | |
| Development Costs | |
$ | 2,363,225 | | |
$ | 2,117,683 | |
| Professional Fees | |
$ | 4,288,782 | | |
$ | 3,787,539 | |
| Settlement | |
$ | 3,752,400 | | |
$ | 1,870,000 | |
| Stock-based compensation | |
$ | 12,199,063 | | |
$ | 10,734,834 | |
| Impairment - intangible assets including goodwill | |
$ | 10,424,214 | | |
$ | 5,470,150 | |
| Impairment - digital assets | |
$ | 1,606,784 | | |
$ | 34,570 | |
| General and Administrative Expenses | |
$ | 7,919,753 | | |
$ | 4,761,175 | |
| Interest Expense | |
$ | (1,570,754 | ) | |
$ | (932,632 | ) |
| Amortization of Debt Discounts | |
$ | (1,672,940 | ) | |
$ | (838,941 | ) |
| Gain on Sale of Digital Assets | |
$ | 297,895 | | |
$ | 47,875 | |
| Beneficial conversion feature | |
$ | - | | |
$ | (3,300,000 | ) |
| Loss on sale of assets | |
$ | (57,318 | ) | |
$ | - | |
| Loss on conversion of convertible notes payable | |
$ | (753,858 | ) | |
$ | - | |
| Other income | |
$ | - | | |
$ | 28,200 | |
| Provision for Income Taxes | |
$ | 4,950 | | |
$ | 4,950 | |
| Net Loss from Continuing Operations | |
$ | (44,949,270 | ) | |
$ | (33,193,643 | ) |
Revenues
Revenues
for the year ended December 31, 2022 were $2,768,534 as compared to $1,372,444 for the year ended December 31, 2021, an increase of $1,396,090.
The increase was due in large part to the services rendered from Monster Creative which increased $1,209,781 in 2022 versus 2021.
Cost
of Revenues and Gross Profit
Cost
of revenues for the year ended December 31, 2022 were $1,401,658 as compared to $855,805 for the year ended December 31, 2021, an increase
of $545,853. The increase was primarily due to the direct labor attributable to our production services. Our gross profit grew by 165%
from 2021 to 2022 as a result of the production services.
Operating
Expenses
Operating
expenses for the year ended December 31, 2022 were $42,554,221 as compared to $28,775,951 for the year ended December 31, 2021, an increase
of $13,778,270. Operating expenses consists of development costs, professional fees and general and administrative expenses and non-cash
charges for impairment expenses and stock-based compensation as fully described below. We expect our development costs and professional
fees to decrease in our next 12 months as we look to scale back on outside contract labor. Approximately 71% of our operating expenses
relate to non-cash charges in 2022 and these charges comprise of over $27,982,000. We do expect that our non-cash charges will be much
lower in the future as our stock-based compensation will be reduced and we have already impaired most of our intangible assets and all
of our goodwill.
Development
Costs
Development
costs which consist of salaried and outsourced technical consultants for the year ended December 31, 2022 were $2,363,225 compared with
$2,117,683 for the year ended December 31, 2021. The increase of development costs related to the roll out of various projects such as
the HUMBL Wallet and Search3 that are in development.
Professional
Fees
Professional
fees which consist of contracted individuals and companies, legal, audit and accounting costs for the year ended December 31, 2022 were
$4,288,782 compared to $3,787,539 for the year ended December 31, 2021. The increase in professional fees related to the professional
fees incurred in regulatory filings including OTC compliance and reporting as well as increases in consultant costs. We expect that these
costs will decrease during 2023.
Settlement
We
incurred $3,752,400 in settlement expenses which are included in our operating expenses for the year ended December 31, 2022 related
to agreements with individuals for liabilities incurred. We incurred $1,870,000 in settlement expenses for the year ended December 31,
2021.
Stock-Based
Compensation
We
incurred $12,199,063 in stock-based compensation expenses for the year ended December 31, 2022 compared to $10,734,834 for the year ended
December 31, 2021 related to agreements with consultants, advisors, and directors for services rendered. We expect our stock-based compensation
expenses to decline in the next 12 months due to the vesting terms of such grants. The awards provided were valued in accordance with
ASC 718 at fair value.
Impairment
of Intangible Assets including Goodwill and Digital Assets
We
incurred $10,424,214 in non-cash charges related to impairment of intangible assets including goodwill, and $1,606,784 in impairment
of our digital assets in the year ended December 31, 2022. The intangible asset impairment relates to the impairment on the BizSecure,
Monster and Ixaya acquisitions. The impairment of the digital assets was based on the valuation changes in the digital assets we hold.
In the year ended December 31, 2021, the impairment of the intangible assets related to the Monster goodwill.
General
and Administrative
General
and administrative expenses for the year ended December 31, 2022 were $7,919,753 compared with $4,761,175 for the year ended December
31, 2021. The increase in general and administrative expenses of $3,158,578 is related to the operations of Ixaya of ($220,000), advertising
expenses ($140,000), travel ($235,000), general office expenses (approximately $225,000), insurance (approximately $48,000), amortization
and depreciation expenses ($500,000), penalties ($700,000) and the addition of management and employees to grow our business (approximately
$1,050,000). The general and administrative expenses related to the year ended December 31, 2021 related to mostly operating expenses
to complete the merger with Tesoro and the startup of the HUMBL Marketplace and Pay divisions.
There
were no significant operations prior to the completion of the merger in February 2021. We expect our general and administrative expenses
to decline in the next 12 months, unless we acquire other businesses that will add expenses.
Other
Income (Expense)
In
the year ended December 31, 2022 we incurred $3,756,975 in other expenses, compared to $4,929,381 in other expenses in the year ended
December 31, 2021, a decrease of $1,172,406. The other expenses relate to amortization of discounts of $1,672,940 and $838,941, respectively
for the 2022 and 2021 periods, as well as interest expense of $1,570,754 and $932,632, respectively. gain on sale of digital assets of
$297,895 and $47,875, and in 2021 we incurred a $3,300,000 charge for a beneficial conversion feature on a convertible note payable and
in 2022 we had a loss on sale of assets of $57,318, and a loss on conversion of convertible notes payable of $753,858. We expect to incur
additional other income (expense) in the next 12 months related to our debt.
Net
Loss from Continuing Operations
Net
loss from operations from continuing operations for the year ended December 31, 2022 was ($44,949,270) as compared to a net loss of ($33,193,643)
for the year ended December 31, 2021. The $11,755,627 increase in the net loss was due to the changes noted herein.
Segment
Reporting
We
follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard requires
that companies disclose operating segments based on the manner in which management disaggregates in making operating decisions.
For
2021, we established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations for
the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, we simplified our business model to segment
their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the consumer division.
Less
than 3-4% of our sales are from outside of North America, therefore we have determined that segment reporting by geographic location
was not necessary. In the future, we will continue to monitor their activity by region to determine if it is feasible to report segment
information by location.
The
following represents segment reporting for continuing operations only:
| Year Ended December 31, 2022 | |
Consumer | | |
Commercial | | |
Total | |
| Segmented operating revenues | |
$ | 2,464,817 | | |
$ | 303,717 | | |
$ | 2,768,534 | |
| Cost of revenues | |
| 1,303,547 | | |
| 98,111 | | |
| 1,401,658 | |
| Gross profit | |
| 1,161,270 | | |
| 205,606 | | |
| 1,366,876 | |
| Total operating expenses plus provision for income taxes net of depreciation, amortization and impairment | |
| 28,029,498 | | |
| 1,841,342 | | |
| 29,870,840 | |
| Depreciation, amortization and impairment | |
| 4,651,728 | | |
| 8,036,603 | | |
| 12,688,331 | |
| Other expenses (income) | |
| 3,784,680 | | |
| (27,705 | ) | |
| 3,756,975 | |
| (Loss) from continuing operations | |
$ | (35,304,636 | ) | |
$ | (9,644,634 | ) | |
$ | (44,949,270 | ) |
| | |
| | | |
| | | |
| | |
| Segmented assets as of December 31, 2022 | |
| | | |
| | | |
| | |
| Property and equipment, net | |
$ | 24,485 | | |
$ | - | | |
$ | 24,485 | |
| Intangible assets | |
$ | 261,713 | | |
$ | 541,667 | | |
$ | 803,380 | |
| Intangible assets - digital assets | |
$ | 6,609 | | |
$ | 147,823 | | |
$ | 154,432 | |
| Capital expenditures | |
$ | 13,572 | | |
$ | - | | |
$ | 13,572 | |
| Year Ended December 31, 2021 | |
HUMBL
Pay | | |
HUMBL
Marketplace | | |
Total | |
| Segmented operating revenues | |
$ | 15,114 | | |
$ | 1,357,330 | | |
$ | 1,372,444 | |
| Cost of revenues | |
| - | | |
| 855,805 | | |
| 855,805 | |
| Gross profit | |
| 15,114 | | |
| 501,525 | | |
| 516,639 | |
| Total operating expenses plus provision for income taxes net of depreciation, amortization and impairment | |
| 11,201,593 | | |
| 12,074,588 | | |
| 23,276,181 | |
| Depreciation, amortization and impairment | |
| 22,850 | | |
| 5,481,870 | | |
| 5,504,720 | |
| Other (income) expense | |
| 2,155,966 | | |
| 2,773,415 | | |
| 4,929,381 | |
| Income (loss) from operations | |
$ | (13,365,295 | ) | |
$ | (19,828,348 | ) | |
$ | (33,193,643 | ) |
| | |
| | | |
| | | |
| | |
| Segmented assets as of December 31, 2021 | |
| | | |
| | | |
| | |
| Property and equipment, net | |
$ | 14,087 | | |
$ | 342,360 | | |
$ | 356,447 | |
| Intangible assets, net | |
$ | - | | |
$ | 2,695 | | |
$ | 2,695 | |
| Goodwill | |
$ | - | | |
$ | 3,177,954 | | |
$ | 3,177,954 | |
| Capital expenditures | |
$ | 14,301 | | |
$ | 353,275 | | |
$ | 367,576 | |
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate
on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable
and accounts payable and capital expenditures.
As
of December 31, 2022, we had $616,950 in cash. Between the revenues generated from our subsidiaries as well as through sales of merchandise,
HUMBL Tickets and NFTs in the HUMBL Marketplace, we continue to fund the development of the HUMBL Wallet. In February 2022 we entered
into a purchase agreement with BizSecure that coincided with the commencement of HUMBL Blockchain Services. With this acquisition of
BizSecure and Ixaya in March 2022, we are growing our operations in the LatAm region of the world and expect to be able to offer our
array of core products to governmental agencies as well as the private sector not in the United States, but throughout the world. We
have generated a majority of our proceeds from the issuance of debt, the sale of common stock and through the exercise of warrants.
We
had a working capital deficit of $27,408,687 and $20,963,591 as of December 31, 2022 and 2021, respectively. The majority of our current
liabilities are in the form of related party notes. The decrease in working capital is the direct result of these notes as well
as the debt incurred related to the cash necessary to continue the development of our mobile wallet. We believe we have adequate
capital resources to meet its cash requirements during the next 12 months as they continue to grow and develop suitable sources of capital.
A majority of our operating expenses in 2022 (71%) were the result of non-cash charges such as impairment of intangible assets including
goodwill, settlement and stock-based compensation. The actual monthly cash burn of is approximately $977,000 per month at this time and
as our core products come online, this is likely to decrease upon our technology being completed. We have received $1,190,000 in purchases
of common stock and warrants, $2,000,000 in additional warrant exercises and $8,700,000 in related party debt proceeds in 2022, however,
as a result of the operating losses and working capital deficit, management has determined that there is substantial doubt about our
ability to continue as a going concern.
Net
cash used in operating activities was $11,726,995 and $9,928,322 for the years ended December 31, 2022 and 2021, respectively. The $1,798,673
increase in net cash used in operating activities was primarily a result of the non-cash charges impacting our net loss from 2021 to
2022, such as the impairment of intangible assets including goodwill and increases in our stock-based compensation. Additionally, we
increased our accounts payable and accrued expenses by $1,933,910 from 2021 to 2022 and had net cash decreases as a result of changes
in our digital assets of $896,284.
Net
cash used in investing activities was $682,402 for the year ended December 31, 2022 related to purchases of fixed assets of $13,572 and
cash paid, net of amounts received in the acquisition of Ixaya of $148,675, cash paid in the acquisition of BM Authentics of $110,000,
purchases of a non-fungible token of $406,040 and domain names of $275,020 as well as proceeds received from the sale of fixed assets
of $270,905. In the year ended December 31, 2021 we incurred investing activities of $237,182 related to $367,576 for purchases of fixed
assets, $127,377 in cash received in the acquisition of Tickeri, and $3,017 in cash received in the acquisition of Monster Creative.
Cash
provided by financing activities was $9,853,244 and $11,617,628 for the years ended December 31, 2022 and 2021, respectively. Cash was
provided through proceeds from sales of membership interests in HUMBL LLC in 2021 of $10,000, proceeds from the issuance of common stock
for cash for $1,000,000, proceeds from the issuance of convertible notes of $6,700,000, and repayment of notes payable of $51,600. In
2022, we raised $2,000,000 from the exercise of warrants and proceeds from related party notes in the amount of $8,700,000, and a contribution
of capital of $406,040 (as well as non-cash contribution of capital of $500,000) by our CEO as well as repayments of notes payable, related
party notes, amounts due to seller and bank loans of $2,600,296 and the purchase of treasury shares of $50,000 that was subsequently
retired.
Since
the date of the reverse merger in December 2020 we have financed our operations through sales of common and preferred stock and the issuance
of debt.
Off-Balance
Sheet Arrangements
As
December 31, 2022 and 2021, we had no off-balance sheet arrangements.
Critical
Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results
could differ from those estimates.
Inventory
Inventory
is valued at the lower of cost or net realizable value, with cost determined using the first-in first-out method. The carrying value
of inventory is evaluated periodically for excess quantities and obsolescence. Management evaluates quantities on hand and physical condition
as these characteristics may be impacted by anticipated customer demand for current products. The allowance is adjusted based on such
evaluation, with a corresponding provision included in cost of sales.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires us to disclose estimated fair values for its financial instruments. Fair value estimates, methods,
and assumptions are set forth below for our financial instruments: The carrying amount of cash, accounts receivable, prepaid and other
current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair value because of the
short-term maturity of those instruments. We do not utilize derivative instruments.
Revenue
Recognition
We
account for a contract with a customer that is within the scope of this topic only when the five steps of revenue recognition
under ASC 606 are met. They are evaluated and further supported by applicable guidance in ASC 606.
We
account for revenues based on the verticals in which they were earned, the three principal verticals being (1) HUMBL Wallet, (2)
HUMBL Marketplace, and (3) HBS – Commercial division. See “Revenue Recognition” in Note 2 of our Financial Statements.
Recent Developments
Elimination of Digital Assets
We have eliminated all digital assets from our
platform. We no longer carry any digital assets or NFTs on our balance sheet, nor do we offer any purchase, sale, or swap of digital
assets or NFTS through our product lines. Further, we no longer provide third party referrals to Wyre, or similar, for the custody of
digital assets or yield programs.
We have also eliminated non-digital wallet and
web platform services. We no longer plan to service the United States Air Force contract from our commercial division through our acquisition
of BizSecure.
Elimination of Subsidiaries
We are focusing on organic revenues through
our wallet and web platform and have spun out several of our subsidiaries in an effort to reduce burn rate and debt loads. We anticipate
that this will change our consumer revenue mix in the near-term, with a focus on long-term customer ownership.
OUR
BUSINESS
Our Company
HUMBL, Inc. (“we,” “us,”
“our,” “HUMBL,” or the “Company”) is a is a digital wallet and web platform company. Our products
are designed to help consumers, business and government clients use technology in ways that improve the speed, cost and transparency
of digital commerce. HUMBL is built on fully verified profiles (KYC / KYB), helping eliminate the fake profiles, bots, and merchandise
that have plagued larger marketplace and social media platforms.
Operations
We are organized into two divisions: a) HUMBL
– Consumer division, and b) HUMBL – Commercial division (HBS). Through these two divisions, we offer our core products and
services of a) digital wallet and b) web platform.
HUMBL – A Digital Commerce Platform
HUMBL delivers a digital wallet and web platform
as our core services. HUMBL provides customers with the ability to connect with consumers and merchants that have all been fully verified,
eliminating fake profiles, ratings, and reviews.
| 1. | HUMBL
Wallet |
| 2. | HUMBL.com
– Web Platform |
| 3. | HUMBL
Commercial Services |
HUMBL Wallet
The HUMBL Wallet is a 4.9 star application that
is available for download on major app stores. The HUMBL Wallet is the centerpiece of the consumer experience on the HUMBL platform.
The HUMBL Wallet consolidates a variety of services for customers in one place and helps us to verify customers and merchants.
| - | Search
Engine |
| - | Social
Media |
| - | Marketplace |
| - | Digital
Payments |
The HUMBL Wallet is self-custodied by the individual;
ensuring that the user has full control over their online identity, digital assets and private keys.
The HUMBL Wallet is equipped with 2-factor authentication;
as well as biometric security features, which are handled by the handset and its manufacturer. We do not store or have access to any
biometric information related to our verified users.
The HUMBL Wallet uses SumSub, a third-party service
provider, to perform Know-Your-Customer / Know-Your-Business (“KYC/KYB”) authentication. This ensures that real people, profiles,
and products are being offered on the HUMBL Platform.
The HUMBL Wallet does not capture or store consumers’
information on our servers, except for their corresponding name, wallet address and email address for basic communications with the verified
user. We do not resell our customers data.
The HUMBL Wallet is available in over 130 countries
and is not available in any OFAC Countries. The HUMBL Wallet no longer allows customers to buy, sell or swap digital assets.
HUMBL
Web Platform
The
HUMBL Search Engine is available via the HUMBL Wallet and the HUMBL web platform. The HUMBL Search Engine allows customers to search
for articles, news, images, videos and more. The search engine also serves as a discovery layer for consumers to search for verified
merchandise and tickets.
Primary
- HUMBL is now the Official Technology Platform of the Arena Football League (AFL) through the 2028 season, and will be offering AFL
tickets for sale, along with other major arena ticketing partners such as Ticketmaster and Seat Geek.
Secondary
- HUMBL Tickets offers secondary (resale) tickets to thousands of live events across North America. HUMBL Tickets inventory listings
and ticket fulfillment are provided by Ticket Evolution and we earn a commission for each sale through our website.
The
ticketing content provided on HUMBL Tickets spans across major live music, sports, festivals, and events in multiple countries. HUMBL
Tickets advertises its services primarily across social media, including its own HUMBL Social platform.
The
HUMBL Marketplace was designed to pair authenticated buyers and sellers in verified, digital commerce. The HUMBL Marketplace currently
works with clients such as professional athletes, brands, and marketing and talent agencies to provide sports merchandise ranging from
autographed jerseys, bats, balls, helmets, photos, and more.
The
HUMBL Marketplace mitigates forgeries by pairing physical merchandise with digital certificates of registration. Merchandise is made
available on the HUMBL platform and is verified, registered, and cataloged on the blockchain.
We
are a software platform and do not act as a broker, financial institution, or creditor for digital collectibles. We facilitate transactions
between the buyer and seller in the auction/sale process, but we are not a party to any agreement between the buyer and seller or between
any users.
HUMBL
no longer allows the purchase and sale of NFTs on its marketplace gallery.
HUMBL
Social is one of the world’s first user-verified social media platforms in the world. The social media platform is available via
web browser and the HUMBL Wallet.
The
goal of HUMBL Social is to provide real people, real profiles, and real merchants with a place to connect on the worldwide web. HUMBL
Social supports only verified user profiles, to ensure authenticity of the platform and enhance consumer protection and connections.
In
addition to traditional marketplace listings, HUMBL has also created metaverse stores. Our first metaverse store was created for Major
League Baseball (MLB) player Ke’Bryan Hayes and his father Charlie Hayes, a retired Major League Baseball player. The brand metaverse
store is called the “House of Hayes” and supports the development of an immersive player experience, in which customers can
navigate a simulated environment of historical artwork and current digital collectibles. Custom artwork was provided by Topps “Sports
Artist of the Year” Lauren Taylor, in the form of digital collectibles that rotated on screens throughout the environment. Endorsement
sporting goods brands of Ke’Bryan Hayes, such as Wilson, Franklin, and Old Hickory, also supported product placement and sell-through
environments for products such as authentic baseball bats and gloves. An immersive Wilson Amphitheatre was also created for multimedia
press conferences or media interactions with Ke’Bryan Hayes’ avatar.
HUMBL
- Commercial Division (HBS)
Our
digital wallet and website can also be used as a white label or “Powered by HUMBL” solution for commercial clients.
| - | Government
- HUMBL is one of the first government-approved digital wallets in the State of California.
We are currently in the middle of launching a pilot program with the County of Santa Cruz,
California, that will deliver a digital wallet for Santa Cruz county citizens to help them
interact more effectively with county government in areas of record keeping such as applications,
permits and licensing. |
| - | Stadiums,
Arenas and Leagues - HUMBL is now the “Official Technology Platform” of the Arena
Football League (AFL) through the 2028 season. HUMBL will be providing a digital wallet,
web platform, and ticketing services for all 16 teams of this sports league, alongside other
major ticketing venue providers such as Ticketmaster and Seat Geek, depending on venue agreements. |
Recent
Updates
HUMBL
is strongly focused on: a) digital wallet, b) web platform, c) “Powered by” white label services. As our platform grew, we
wanted to re-focus our priorities and therefore eliminated previous features or offerings from our platform, as follows:
| 1. | Elimination
of Digital Assets |
| - | HUMBL
no longer carries any digital assets or NFTs on its balance sheet. |
| - | HUMBL
no longer offers any purchase, sale or swaps of digital assets or NFTs through its product
lines. |
| - | HUMBL
no longer provides third party referrals to Wyre, or similar, for the custody of digital
assets or yield programs. |
| 2. | Elimination
of Non-Digital Wallet and Web Platform Services |
| - | HUMBL
no longer plans to service the United States Air Force contract from its commercial division
through the acquisition of BizSecure, as it is prioritizing the digital wallet and web platform. |
Corporate
Strategy
Our
objective is to provide more seamless digital pairing experiences for consumers and merchants in the global economy. The key elements
of our growth strategy are:
| |
● |
innovate
and advance our platform; |
| |
|
|
| |
● |
drive
growth by acquiring new customers; |
| |
|
|
| |
●
|
drive
increased usage within our existing customer base; |
| |
|
|
| |
● |
expand
our global footprint; |
| |
|
|
| |
● |
expand
data sharing across our global ecosystem; |
| |
|
|
| |
● |
grow
and invest in our partner network; |
| |
|
|
| |
● |
expand
our sales capabilities; and |
| |
|
|
| |
● |
develop
additional revenue streams. |
Significant
Vendor Relationships
HUMBL
currently utilizes SumSub to provide KYC/KYB
and user verification for our HUMBL Wallet and HUMBL Social platforms. We also utilize Stripe to support credit card payment processing.
We also work with Ticket Evolution on our secondary ticketing marketplace.
HUMBL
previously had agreements with Wyre, Inc. to support
our payment processing, and Very Good Security (VGS), to encrypt certain payment information, but have since terminated such agreements
since our platform no longer provides such digital asset services to customers.
Competition
Each
of our principal verticals is highly competitive. We currently face substantial competition from other service providers that
offer digital wallets, search engines, ticketing, online marketplaces, social media platforms, and e-commerce websites.
We compete primarily on the basis of availability of authentication, verified products, verified profiles, technology services and
pricing.
HUMBL
Wallet competes with Coinbase and Square. The HUMBL Search Engine competes with Google and Microsoft. HUMBL Tickets competes with
SeatGeek and Ticketmaster. The HUMBL Marketplace competes with eBay. HUMBL Social competes with Twitter and Instagram.
HUMBL Metaverse Stores competes with traditional ecommerce stores.
Employees
and Human Capital
As
of the date of this Offering Circular, we have ten full time employees. None of our employees or personnel is represented by a labor
union, and we consider our employee/personnel relations to be good. Competition for qualified personnel in our industry is intense, particularly
for software development and other technical staff. Our human capital resources objectives include, as applicable, identifying, recruiting,
retaining, incentivizing, and integrating our existing and new employees, advisors, and consultants.
Transfer
Agent
Pacific
Stock Transfer Company, located at 6725 Via Austi Pkwy., #300, Las Vegas, Nevada 89119 and telephone number of (702) 361-3033
is the registrar and transfer agent for our common stock.
Our
Facilities
We
currently rent an office located at 600 B Street, Suite 300, San Diego, California 92101 at a monthly cost of $15,858.92 (“Company
Headquarters”). The lease for our Company Headquarters expires on July 31, 2023. Following expiration of the lease, we plan to
enter into a new lease for a smaller space. We do not own any real property.
Our
Intellectual Property
HUMBL owns, or has applied for, the trademarks
for HUMBL, HUMBL Wallet, HUMBL Marketplace, and HUMBL Tickets.
Legal
Proceedings
From
time-to-time, we may be involved in litigation or be subject to claims arising out of our operations or content appearing on our websites
in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe
that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome,
litigation can have an adverse impact on our Company because of defense and settlement costs, diversion of management resources and other
factors.
On
May 19, 2022, we were named as a defendant in a putative shareholder derivative class action lawsuit filed in the United States District
Court for the Southern District of California styled Matt Pasquinelli and Bryan Paysen v. HUMBL, LLC, Brian Foote, Jeffrey Hinshaw
and George Sharp, Case No. 22CV0723 AJB BLM. The complaint alleges federal securities law violations by the Company, including false
or misleading statements regarding our business and operations, that the HUMBL Pay App did not have the functionality that it promised
to investors and that several international business partnerships had a low chance of contributing material revenues to our bottom line,
and sales of unregistered securities through our BLOCK Exchange Traded Index products, which plaintiffs allege caused a decline in the
market value of our shares of common stock. Plaintiffs seek unspecified monetary damages. On October 27, 2022, through our attorneys,
we filed a motion to dismiss the complaint for failure to state a claim, which is presently pending for resolution before the court.
We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims. On July 7, 2023, the United
States District Court for the Southern District of California granted our Motion to Transfer Venue and transferred the case to the District
Court of Delaware.
On
July 14, 2022, we were named as ae defendant in a putative shareholder derivative class action lawsuit filed in the Delaware Chancery
Court styled Mike Armstrong, derivatively on behalf of HUMBL, Inc. v. Brian Foote, Jeffrey Hinshaw, George Sharp, Michele Rivera,
and William B. Hoagland (Case No. 2022-0620). This case alleges the same claims as the Pasquinelli litigation described above and
also seeks unspecified monetary damages. The case is currently stayed by agreement of the parties. We intend to vigorously defend the
actions of the defendants and contest what we believe are baseless claims.
History
and Development of the Company
We
were formed under the name Ponca Acquisition Corporation in Nevada on May 3, 2000, as a “blank check” development stage company
that indicated that our business plan was to engage in a merger or acquisition with an unidentified company or companies. Following a
series of name changes and changes in the focus of our business, on November 18, 2008, we filed Form 15 with the SEC to terminate our
registration with the SEC.
On
March 12, 2009, we redomiciled to Oklahoma and on March 16, 2009, changed our name from IWT Tesoro Corporation to Tesoro Distributors,
Inc. Tesoro Enterprises, Inc., an Oklahoma corporation, was incorporated on November 12, 2009, as a subsidiary of Tesoro Distributors,
Inc. On March 11, 2010, we changed our name to Tesoro Enterprises, Inc. and received a new symbol of “TSNP” following FINRA
review of our name and symbol change request.
Effective
November 4, 2020, Henry J. Boucher, then President, CEO, and sole member and Chairman of the Board of Directors, on the one hand, and
Brian Foote, on the other hand, entered into a Stock Purchase Agreement pursuant to which Henry J. Boucher sold his controlling interest
of 7,000,000 shares of Series A preferred stock to Brian Foote in return for Brian Foote assigning a $40,000 promissory note from HUMBL
LLC to Henry J. Boucher. Our Board of Directors, following the change of control, appointed Brian Foote, Jeff Hinshaw, and Michele Rivera
to be the members of the Board following the resignation of Henry J. Boucher as our sole director.
On
November 30, 2020, we changed our domicile to Delaware. On December 3, 2020, we merged with HUMBL LLC to conduct the business of HUMBL
LLC through a reverse merger. Under the terms of the merger, the members of HUMBL LLC exchanged their membership interests for 552,029
shares of our Series B Preferred Stock.
On
December 23, 2020, we filed a Certificate of Amendment to our Certificate of Incorporation (“Amended Certificate”) to effect
a 1:4 reverse split, change our name to HUMBL, Inc., increase our authorized common stock to 7,450,000,000 shares, reduce our authorized
number of “blank check” preferred stock from 25 million to 10 million, and designate a Series B and Series C Preferred Stock.
On
February 26, 2021, FINRA announced the change of our name from Tesoro Enterprise, Inc. to HUMBL, Inc. and the change of our trading symbol
from “TSNP” to “HMBL,” effective March 26, 2021.
Recent
Acquisitions
BM
Authentics
On
November 2, 2022, we entered into an Asset Purchase Agreement with Brian Meltzer and Robin Burns pursuant to which we purchased from
the seller the assets of BM Authentics, a sports merchandise and memorabilia business, for 90,000,000 shares of restricted common stock
and $110,000. We believe the acquisition of the assets of BM Authentics will help further efforts related to the authentication physical
goods on the blockchain. HUMBL plans to pair physical merchandise, alongside HUMBL technologies such as the HUMBL wallet, search engine,
tickets and NFTs, to deliver an integrated digital experience for customers. Brian Meltzer was hired by us to run the HUMBL Marketplace
product line.
Recent
Financings and Material Agreements
Settlement
Agreement
On
November 15, 2022 we entered into a Settlement Agreement and Mutual Release of Claims (the “Release Agreement”) with Forwardly,
Inc. (“Forwardly”) under which we agreed to pay Forwardly $2,200,000 in five equal monthly payments of $440,000 commencing
November 15, 2022 and ending March 15, 2023, which payment schedule was modified to accelerate the January and February 2023 payments
to December 31, 2022 and extend the $440,000 final March 15, 2023 payment to June 15, 2023. The payment is being made in connection with
a warrant (the “Warrant”) that Forwardly purchased from us for $200,000 in 2020 that provided for the purchase of up to 125
million shares of our common stock of which Forwardly purchased 10 million shares for $2,000,000 in 2021. Forwardly retained the 10 million
shares under the Warrant in lieu of interest on the $2,000,000 it paid to exercise that number of shares of our common stock under the
Warrant. The Warrant will be cancelled upon payment of the final payment.
Sartorii,
LLC Line of Credit and Notes
On
November 15, 2022, we entered into a Line of Credit Agreement with Sartorii, LLC (“Sartorii”) under which Sartorii agreed
to lend up to $2,200,000 in principal amount through a series of draws not to exceed $440,000 per month and bearing annual interest of
5%. Each draw is documented and added to the outstanding balance of a promissory note (the “Note”) with principal and interest
due two years from the date of the draw. The Note may be prepaid by HUMBL without any penalty and is unsecured. HUMBL has drawn down
the entire $2,200,000 under the line of credit.
On
March 23, 2023, we issued a Promissory Note to Sartorii in the original principal amount of $250,000. The note is not convertible, bears
interest at 6% per annum, and is due on March 23, 2024.
On
July 3, 2023, we issued a Promissory Note to Sartorii in the original principal amount of $200,000. The note is not convertible, bears
interest at 6% per annum, and is due on July 3, 2024.
Tickeri
Settlement and Divestiture
On
January 31, 2023, we entered into a Settlement Agreement (the “Settlement Agreement”) with Javier Gonzalez (“Javier”)
and Juan Luis Gonzalez (“Juan”). Under the terms of the Settlement Agreement, Tickeri, Inc. was transferred back to Javier
and Juan, free of any encumbrances and including all of Tickeri’s intellectual property, since we were in default of the promissory
notes for $5,000,000 to each of them with a maturity date of December 3, 2022 (the “Notes”) owed to Javier and Juan as a
portion of the consideration paid by us under the agreement to acquire Tickeri. Javier and Juan received 4,672,897 shares of our common
stock owed to them under the acquisition agreement. Under the terms of the Settlement Agreement, the Notes were cancelled, and the parties
agreed to a mutual release of claims. As a result of this settlement, we have reclassified the assets, and liabilities of Tickeri as
held for sale, and the operations as discontinued operations as of and for the year ended December 31, 2022 and 2021.
GS
Convertible Redeemable Note
On
December 8, 2022, we issued an 8% Redeemable Convertible Promissory Note in the original principal amount of $220,000 to GS Capital Partners,
LLC. The purchase price for the note was $207,500. The note bears interest at 8% and is due on September 8, 2023. The note is convertible
at $0.012 per share. Upon the occurrence of an event of default under the note, the note would become convertible at 70% of lowest trade
price in the previous 15 trading days. The note also has a most favored nations provision with respect to conversion terms.
GHS
Equity Financing Agreement
On
December 12, 2022, we entered into an Equity Financing Agreement (“EFA”) and a Registration Rights Agreement (“Rights
Agreement”) with GHS Investments, LLC (“GHS”). Pursuant to the EFA, HUMBL has the right, subject to certain conditions,
to sell up to $20,000,000 in shares of its common stock to GHS. Pursuant to the Rights Agreement, HUMBL agreed to file a registration
statement to register the common stock issuable under the EFA. Following the registration of the securities under the EFA, HUMBL has
the right to cause GHS to purchase its common stock at 80% of the average of the three lowest closing trade prices in the previous 10
trading days by submitting a put notice to GHS. HUMBL may choose the dollar amount of each put notice; provided, however, the maximum
dollar amount of any put cannot exceed 200% of HUMBL’s average daily trading volume in the previous 10 trading days. In addition,
the amount of the put notice must not be less than $10,000 or greater than $500,000. HUMBL may only deliver one put notice to GHS in
any given ten trading day period. Following an uplist to Nasdaq, NYSE American, or an equivalent national exchange, the conversion rate
would increase from 80% to 90%. The amount of HUMBL shares owned by GHS cannot exceed 4.99% of the issue and outstanding shares of HUMBL
common stock following the purchase by GHS of HUMBL shares under a put notice.
Efrat
Convertible Redeemable Note
On
January 25, 2023, we issued an 8% Redeemable Convertible Promissory Note to Efrat Investments, LLC. The purchase price for the note was
$129,750. The note bears interest at 8% and is due on September 8, 2023. The note is convertible at $0.0092 per share. Upon the occurrence
of an event of default under the note, the note would become convertible at 70% of lowest trade price in the 15 trading days preceding
the conversion. The note also has a most favored nations provision with respect to conversion terms.
1800
Diagonal Notes
On
February 8, 2023, we issued a Promissory Note in the original principal amount of $58,800 to 1800 Diagonal Lending LLC (“1800 Diagonal”).
The purchase price for the note was $52,500. The note is due on February 8, 2024. A one-time interest charge of 12% was applied upon
issuance of the note. Beginning on March 30, 2023, we are required to make monthly payments of $6,585.60 until the note is paid in full.
The note is not convertible unless an event of default occurs. Upon the occurrence of an event of default, the note would become convertible
at 75% multiplied by the lowest trade price in the 10 trading days preceding the conversion.
On
February 8, 2023, we issued a Convertible Promissory Note in the original principal amount of $77,500 to 1800 Diagonal. The purchase
price for the note was $77,500. The note is due on February 8, 2024 and bears interest at the rate of 9% per annum. The note is convertible
at 70% of lowest trade price in the 20 trading days preceding the conversion.
On
March 6, 2023, we issued a Convertible Promissory Note in the original principal amount of $59,250 to 1800 Diagonal. The purchase price
for the note was $59,250. The note is due on March 6, 2024 and bears interest at the rate of 9% per annum. The note is convertible at
70% of lowest trade price in the 20 trading days preceding the conversion.
Mammoth
Convertible Promissory Note
On
February 23, 2023, we issued a Convertible Promissory Note in the original principal amount of up to $1,100,000 to Mammoth Corporation.
The note is due on November 23, 2023. Only one tranche of $100,000 has been funded under the note. A one-time interest charge of $10,000
was added to the outstanding balance upon the funding of the first tranche. The note is convertible at 70% of the lowest closing bid
price during the 20 trading days preceding the conversion.
LB
Mining Convertible Promissory Note
On
March 31, 2023, we issued a Convertible Promissory Note in the original principal amount of $150,000 to LB Mining, LLC. The note is due
on March 31, 2024. A one-time interest charge of $12,500 and an original issue discount of $12,500 were included in the original principal
balance upon issuance. The note is convertible at a fixed conversion price of $0.008. After six months, the investor has the right to
redeem all or any portion of the note by submitting a redemption notice to us. We then have the option to repay the requested redemption
amount in cash or stock. If we elect to pay in stock, the conversion price is 70% multiplied by the lowest closing trade price in the
prior twenty trading days.
North
Falls Investments Convertible Promissory Note
On
April 28, 2023, we issued a Convertible Promissory Note in the original principal amount of $60,000 to North Falls Investments, LLC.
The note is due on April 28, 2024. A one-time interest charge of $5,000 and an original issue discount of $5,000 were included in the
original principal balance upon issuance. The note is convertible at a fixed conversion price of $0.008. After six months, the investor
has the right to redeem all or any portion of the note by submitting a redemption notice to us. We then have the option to repay the
requested redemption amount in cash or stock. If we elect to pay in stock, the conversion price is 70% multiplied by the lowest closing
trade price in the prior twenty trading days.
Pacific
Lion Convertible Promissory Note
On
May 10, 2023, we issued a convertible promissory note in the amount of up to $800,000 to Pacific Lion. The amount of the initial
tranche funded under the note was $100,000. The lender has the right at its option to fund up to an additional $700,000 under the note.
The note bears interest at 6% per annum and is due on May 10, 2024. Upon completion of an uplisting to a senior stock exchange, the note
will automatically convert into common stock at 80% of the uplisting offering price. In the event an uplisting does not occur by the
maturity date or upon an event of default, the note will become convertible at 80% of the average of the closing trade prices during
the five trading days preceding the date of conversion. The principal amount of the note may be prepaid at any time without penalty.
In addition to the note, we also issued a Warrant to Purchase Shares of Common Stock to Pacific Lion on May 10, 2023. The warrant
is exercisable for 500,000 shares for a period of five years at $0.10 per share. In the event that an uplisting to a senior stock exchange
does not occur within nine months of the issuance date, the warrant will automatically be cancelled.
Note
and Warrant Financing
Beginning
on May 15, 2023 and ending on May 17, 2023, we entered into Securities Purchase Agreements with five different investors (the “Purchase
Agreements”). Pursuant to the Purchase Agreements, we sold 125,000,000 shares of our common stock (the “Shares”) and
warrants to purchase 125,000,000 shares of our common stock (the “Warrants”) for a total purchase price of $275,000.00. The
Warrants are exercisable for a period of five years, have a cashless exercise provision and have an exercise price of $0.005 per share.
Pursuant to the Purchase Agreement, we agreed to register the Shares in this Registration Statement.
Monster
Divestiture
On
June 30, 2023, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with Phantom Power, LLC (“Phantom
Power”). Pursuant to the Purchase Agreement, we sold 100% of our membership interest in Monster Creative, LLC (“Membership
Interest”) to Phantom Power and issued to Phantom Power a Warrant to Purchase Shares of Common Stock (“Warrant”). In
consideration for the purchase of the Membership Interest and Warrant, Phantom Power cancelled the Promissory Note issued to it by us
on June 21, 2021 with an original principal balance of $435,000 and reduced the balance of the Convertible Promissory Note issued to
it by us on June 21, 2021 with an original principal balance of $6,525,000 by $1,000,000. The outstanding balance of the Promissory Note
immediately prior to cancelation was approximately $338,000 and the balance of the Convertible Promissory Note immediately following
the balance reduction was approximately $2,300,000. The Warrant is exercisable for five years at an exercise price of $0.05 and contains
a cashless exercise provision.
Arena
Football League Technology Agreement
On
July 15, 2023, we entered into a Technology Services Agreement (the “AFL Agreement”) with Arena Football League Management,
LLC (“AFL”). Under the terms of the AFL Agreement, we will serve as the official technology ticketing platform for all AFL
events. We will receive a service fee of $5.00 that will increase by $1.00 each year through 2028 (plus the credit card fee charged in
connection with the transaction by the credit card company) from which it will pay AFL $1.00 on all tickets sold and processed exclusively
through the HUMBL Tickets platform. The service fee received by HUMBL from AFL for any venues that do not accept HUMBL Tickets as the
exclusive provider will be reduced to $2.00 in 2024, $3.00 in 2025, $4.00 in 2026, $4.50 in 2027 and $5.00 in 2028.
In
exchange, we agreed to issue 45,000,000 shares of our common stock to AFL in three equal annual tranches in 2024 through 2026. Further,
we agreed to issue an additional (a) 15,000,0000 shares of common stock, contingent on AFL reaching a minimum of $30 million in 2024
tickets sales; and (b) up to 25,000,000 shares of common stock, contingent on certain benchmarks of HUMBL Wallet downloads in 2024.
Settlement
Agreement with BizSecure
On
July 14, 2023, we entered into a Settlement Agreement and Mutual Release with BizSecure, Alfonso Arana, Alfonso Rodriguez-Arana, and
Clement Danish to resolve matters arising under the Asset Purchase Agreement dated February 12, 2022 between us and BizSecure. Under
the terms of the Settlement Agreement, we agreed to issue 127,000,000 shares of common stock to Bizsecure, subject to adjustment if the
value of our common stock falls below $0.0030. In addition, we agreed to will register the Shares with the Commission by September 12,
2023 and if we fail to do so, we agreed to pay BizSecure the cash equivalent of the public market value of the Shares, but in all cases
no less than $0.0030 per Share. We also agreed to transfer ownership of and title to the Vibe Board Pro 75 to BizSecure, along with a
mutual release of claims.
Available
Information
Our
website address is www.humbl.com. Information found on, or accessible through, our website is not a part of, and is not incorporated
into, this Offering Statement. We file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make
available on our website at www.humbl.com, free of charge, copies of these reports and other information as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC.
MANAGEMENT
Directors
and Executive Officers
Set
forth below are the names, ages and positions of our directors and executive officers as of the date of this Offering Circular.
| Name |
|
Age |
|
Position
with the Company |
| Brian
Foote |
|
44 |
|
President,
Chief Executive Officer, and Chairman of the Board |
| Jeffrey
Hinshaw |
|
36 |
|
Chief
Operating Officer, Chief Financial Officer, and Director |
| Peter
Schulte |
|
65 |
|
Director |
Biographical
Information
Directors
and Executive Officers
The
following is a summary of certain biographical information concerning our current directors and our executive officers.
Brian
Foote, President, Chief Executive Officer, and Chairman of the Board of Directors
Brian
Foote has been our Chairman, President and Chief Executive Officer since November 24, 2020. Immediately prior to co-founding our predecessor
entity HUMBL LLC in May 2019 (“HUMBL LLC”), Mr. Foote worked as a Strategic Consultant across a variety of projects at Epson
from January 2011 to May 2019 including omnichannel marketing, sales and product launch strategies. From March 2005 to February 2011,
Mr. Foote worked as a Senior VP of Sales and Marketing at The Wilkinson Group, a consulting group specializing in events and sponsorships.
Mr. Foote has over 20 years of experience in sales, marketing and technology. He received his B.A. from the University of California
at Los Angeles, his certifications in blockchain and social media from the Massachusetts Institute of Technology and is a graduate of
the Yale Global Executive Leadership Program (Y-GELP). Brian has been featured on CNBC, Fox Business, and Forbes and has served as a
speaker at global conferences such as the World Blockchain Summit. We believe that the broad business experience of Mr. Foote, including
his experience with the daily operations of companies as well as with the challenges of growing companies, makes him qualified to be
a member of our Board of Directors.
Jeffrey
Hinshaw, Chief Operating Officer, Chief Financial Officer, and Director
Jeffrey
Hinshaw has served as our Chief Operating Officer, Chief Financial Officer, Corporate Secretary and a member of our Board of Directors
since November 24, 2020. Immediately prior to co-founding HUMBL LLC in May 2019, Mr. Hinshaw worked as an adjunct faculty member at San
Diego State University. From July 2017 to November 2017, Mr. Hinshaw worked as a business analyst at Sempra Energy. From February 2015
to November 2018, Mr. Hinshaw worked as a strategic advisor to Balance Tracking Systems. From August 2012 to May 2014, Mr. Hinshaw worked
as a graduate researcher in biomechanics at San Diego State University. We believe that this varied experience makes him qualified to
be a member of our Board of Directors.
Peter
Schulte, Director
Peter
Schulte has served as a member of our Board of Directors since September 24, 2021. Mr. Schulte holds the position of Managing Partner
and Co-founder of private equity firm CM Equity Partners. His past experience includes public and private debt and equity financing and
M&A at Salomon Brothers Inc. and large systems marketing at IBM’s Data Processing Division. Mr. Schulte has also established
two successful publicly traded companies: ICF International and ATS Corporation. Mr. Schulte currently serves as a member of the Board
of Directors at Black ICE Holdings, Citizant, Inc., and JANUS Research Group, Inc. among others. Mr. Schulte is a graduate of Harvard
College (AB) and also holds a Master’s degree in Public and Private Management (MPPM) from Yale University. We believe that Mr.
Schulte’s public company and capital market experience makes him qualified to be a member of our Board of Directors.
Family
Relationships
There
are no family relationships between any of our directors or executive officers.
Board
Composition
Our
board of directors consists of three directors, one of whom is independent. Our directors serve for one-year terms and until their successors
are duly elected and qualified. There is no cumulative voting in the election of directors. Consequently, at each annual meeting, the
successors to each of our directors will be elected by a plurality of the votes cast at that meeting.
When
considering whether directors have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy
its oversight responsibilities effectively in light of our business and structure, the Board of Directors focuses primarily on the information
discussed in each of the directors’ individual biographies as set forth above. With regard to Mr. Foote, the Board considered their
day-to-day operational leadership of our Company and in-depth knowledge of our business and experience in corporate management that will
assist our corporate governance.
Director
Independence
We
are a “controlled company” under the NYSE American rules (“NYSE Rules”) and are not required to have a majority
of our board of directors consist of “independent directors,” as defined under the NYSE Rules.
We
use the NYSE Rules’ definition of “independence” to make this determination. The NYSE Rules provide that an “independent
director” is a person other than an executive officer or employee of the company or any other individual having a relationship
with which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The rules provide that a director cannot be considered independent if:
| |
● |
the
director is, or at any time during the past three years was, an employee of the company, or an immediate family member has been an
executive officer of the company; |
| |
● |
the
director has received, or has an immediate family who is an executive officer of the company has received, any compensation from
the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination
(subject to certain exemptions, including, among other things, compensation received for board or board committee service, pension
plan payments, or deferred compensation for prior service not contingent on continued service); |
| |
● |
the
director or an immediate family member of the director is, or has been within the last three years, employed as an executive officer
of an entity where any of the present executive officers of the company served on the compensation committee of such other entity;
or |
| |
● |
the
director or an immediate family member of the director is a current executive officer of an organization that has made to or received
from the company payments for which, in any of the last three fiscal years, exceeds the greater of 2% of such other company’s
consolidated gross revenues or $1 million (subject to certain exceptions, including charitable contributions). |
Under
such definitions, our board of directors has undertaken a review of the independence of each director and will review the independence
of any new directors based on information provided by each director concerning his background, employment, and affiliations, in order
to make a determination of independence. Our board of directors has determined that there is one independent director on our board of
directors.
Role
of our Board of Directors in Risk Oversight
One
of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors administers
this oversight function directly, or will have committees, such as the audit committee, compensation committee and the nominating and
corporate governance committee, support the board of directors by addressing risks specific to its respective areas of oversight. In
particular, our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management
takes to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management
is undertaken. The audit committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance
of our internal audit function. Our compensation committee assesses and monitors whether any of our compensation policies and programs
has the potential to encourage excessive risk-taking. Our nominating and corporate governance committee provides oversight with respect
to corporate governance and ethical conduct and will monitor the effectiveness of our corporate governance guidelines, including whether
such guidelines are successful in preventing illegal or improper liability-creating conduct.
Committees
of our Board of Directors
Audit
Committee
Our
audit committee consists of Peter Schulte and Jeffrey Hinshaw. The Board has determined that Mr. Schulte is financially literate and
qualifies as an independent director under the NYSE Rules. Mr. Schulte will be the chairman of our audit committee and he qualifies as
an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.
Our
audit committee has adopted a written audit committee charter, viewable at https://humbl.com/auditcommittee, that provides that the functions
of our audit committee include, among other things:
| |
● |
selecting
a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; |
| |
|
|
| |
● |
helping
to ensure the independence and performance of the independent registered public accounting firm; |
| |
|
|
| |
● |
discussing
the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the
independent accountants, our interim and year-end operating results; |
| |
|
|
| |
● |
developing
procedures for employees to submit concerns anonymously about questionable accounting or audit matters; |
| |
|
|
| |
● |
reviewing
our policies on risk assessment and risk management; |
| |
● |
reviewing
and approving related party transactions; |
| |
|
|
| |
● |
obtaining
and reviewing a report by the independent registered public accounting firm, at least annually, that describes our internal quality-control
procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law;
and |
| |
|
|
| |
● |
approving
(or, as permitted, pre-approving) all audit and all permissible non-audit services, other than de minimis non-audit services, to
be performed by the independent registered public accounting firm. |
Compensation
Committee
Our
compensation committee is comprised of Peter Schulte and Brian Foote. Our board has determined that Mr. Schulte qualifies as an independent
director under the NYSE Rules and a “non-employee director” for purposes of Section 16b-3 under the Exchange Act and does
not have a material relationship with us that would affect his ability to be independent from management in connection with the duties
of a compensation committee member. Mr. Schulte will be the chairman of our compensation committee.
Our
compensation committee has adopted a written compensation committee charter, viewable at https://humbl.com/compensationcommittee, that
provides that the functions of our compensation committee include, among other things:
| |
● |
reviewing
and approving, or recommending to our board of directors for approval, the compensation of our executive officers and any compensatory
arrangement with our executive officers; |
| |
|
|
| |
● |
reviewing
and recommending to our board of directors for approval the compensation of our directors and any changes to their compensation; |
| |
|
|
| |
● |
reviewing
and approving, or recommending to our board of directors for approval, and administering incentive compensation and equity incentive
plans; and |
| |
|
|
| |
● |
reviewing
and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy. |
Nominating
and Corporate Governance Committee
Our
corporate governance committee is comprised of Peter Schulte and Jeffrey Hinshaw. Our board has determined that Mr. Schulte qualifies
as an independent director under the NYSE Rules. Mr. Schulte is the chairman of our nominating and corporate governance committee.
Our
nominating and corporate governance committee will have adopted a written nominating and corporate governance committee charter, viewable
at https://humbl.com/nominatingandgovernance, that provides that the functions of our nominating and corporate governance committee include,
among other things:
| |
● |
identifying,
evaluating, and selecting, or making recommendations to our board of directors regarding, nominees for election to our board of directors
and its committees; |
| |
|
|
| |
● |
overseeing
the evaluation and the performance of our board of directors and of individual directors; |
| |
|
|
| |
● |
considering
and making recommendations to our board of directors regarding the composition of our board of directors and its committees; |
| |
|
|
| |
● |
overseeing
our corporate governance practices; |
| |
● |
contributing
to succession planning; and |
| |
|
|
| |
● |
developing
and making recommendations to our board of directors regarding corporate governance guidelines and matters. |
Code
of Business Conduct and Ethics
We
have adopted a written code of ethics that applies to all of our directors, officers, and employees in accordance with the rules of OTC
Markets and the SEC. We will post a copy of our code of ethics on our website, and intend to post amendments to this code, or any waivers
of its requirements, as well.
We
intend to disclose future amendments to such code, or any waivers of its requirements, applicable to any principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions or our directors on
our website identified above.
Limitations
on Liabilities and Indemnification of Directors and Officers
HUMBL
has had a directors’ and officers’ liability insurance policy in place since September 7, 2021. Our officers and directors
have indemnification rights under applicable laws, and our certificate of incorporation and bylaws. (See “Description of Capital
Stock—Limitations on Liability and Indemnification of Directors and Officers.”)
Director
Compensation
Our
directors have compensation arrangements. (See “Executive and Director Compensation.”)
Conflicts
of Interest
We
comply with applicable state law with respect to transactions (including business opportunities) involving potential conflicts. Applicable
state corporate law requires that all transactions involving our Company and any director or executive officer (or other entities with
which they are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our
Board of Directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically
fair to us. More particularly, our policy is to have any related party transaction (i.e., transactions involving a director, an
officer or an affiliate of our Company) be approved solely by a majority of the disinterested independent directors serving on the Board
of Directors. We expect to have at least three independent directors serving on the Board of Directors and intend to maintain a Board
of Directors consisting of a majority of independent directors.
EXECUTIVE
AND DIRECTOR COMPENSATION
Compensation
Discussion and Analysis
Compensation
Philosophy
This
section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers and
what we believe are the most important factors relevant to an analysis of these policies and decisions. This section also describes the
material elements of compensation awarded to, earned by or paid to each of our named executive officers as of December 31, 2022 and 2021.
Our four “named executive officers” for 2022 were Brian Foote, Jeff Hinshaw, Michele Rivera, and Javier Gonzalez. As of the
date of this Offering Circular, Ms. Rivera and Mr. Gonzalez are no longer employed by us. The compensation of our other current executive
officers is based on individual terms approved by our board of directors.
Our
compensation committee oversees these compensation policies and, together with our board of directors, periodically evaluates the need
for revisions to ensure our compensation program is competitive with the companies with which we compete for executive talent.
Objectives
and Philosophy of Our Executive Compensation Program
The
primary objectives of the board of directors in designing our executive compensation program are to:
| |
● |
attract,
retain and motivate experienced and talented executives; |
| |
|
|
| |
● |
ensure
executive compensation is aligned with our corporate strategies, research and development programs and business goals; |
| |
|
|
| |
● |
recognize
the individual contributions of executives while fostering a shared commitment among executives by aligning their individual goals
with our corporate goals; |
| |
|
|
| |
● |
promote
the achievement of key strategic, development and operational performance measures by linking compensation to the achievement of
measurable corporate and individual performance goals; and |
| |
|
|
| |
● |
align
the interests of our executives with our stockholders by rewarding performance that leads to the creation of stockholder value. |
Our
board of directors and compensation committee have the responsibility of evaluating our executive compensation program with the goal
of setting and maintaining compensation at levels that are justifiable based on each executive’s level of experience, performance,
and responsibility and that the board believes are competitive with those of other companies in our industry and our region that compete
with us for executive talent. In addition, our executive compensation program will tie a substantial portion of each executive’s
overall compensation to key strategic, financial, and operational goals. We expect to provide a portion of our executive compensation
in the form of stock options and restricted stock that vest over time, which we believe helps to retain our executives and aligns their
interests with those of our stockholders by allowing them to participate in the longer-term success of our Company as reflected in stock
price appreciation.
Use
of Compensation Consultants and Market Benchmarking
For
purposes of determining total compensation and the primary components of compensation for our executive officers in 2022, we did not
retain the services of a compensation consultant or use survey information or compensation data to engage in benchmarking. In the future,
we expect that our compensation committee will consider publicly available compensation data for national and regional companies in the
laser cleaning industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation.
Even if we retain the services of an independent compensation consultant to provide additional comparative data on executive compensation
practices in our industry and to advise on our executive compensation program generally, our board of directors and compensation committee
will ultimately make their own decisions about these matters.
Our
annual cash bonus program is based upon the achievement of specified annual corporate and individual goals that will be established in
advance by our board of directors or compensation committee. Our annual cash bonus program emphasizes pay-for-performance and is intended
to closely align executive compensation with achievement of specified operating results as the amount is calculated on the basis of percentage
of corporate goals achieved. The performance goals established by our compensation committee is based on the business strategy of the
Company and the objective of building stockholder value. There are three steps to determine if and the extent to which an annual cash
bonus is payable to a named executive officer. First, at the beginning of the year, our compensation committee will determine the target
annual cash incentive award for the named executive officer based on a percentage of the officer’s annual base salary for that
year. Second, the compensation committee establishes the specific performance goals, including both corporate and individual objectives,
that must be met for the officer to receive the award. Third, shortly after the end of the year, the compensation committee will determine
the extent to which these performance goals were met and the amount of the award. Our compensation committee works with our chief executive
officer to develop corporate and individual goals that they believe can be reasonably achieved with hard work over the course of the
year and will target total cash compensation, consisting of base salaries and target annual cash bonuses.
Stock-Based
Awards
Our
equity award program is the primary vehicle for offering long-term incentives to our executives. While we do not have any equity ownership
guidelines for our executives, we believe that equity grants provide our executives with a strong link to our long-term performance,
create an ownership culture and help to align the interests of our executives and our stockholders. In addition, the vesting feature
of our equity awards contributes to executive retention by providing an incentive for our executives to remain in our employ during the
vesting period. Currently, our executives are eligible to participate in our 2021 Stock Option Plan. Our employees and executives are
eligible to receive stock-based awards pursuant to our 2021 Stock Option Plan. Under our 2021 Stock Option Plan, executives are eligible
to receive grants of stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock-based
equity awards at the discretion of our board of directors.
Our
employee equity awards are typically in the form of stock options. Because our executives profit from stock options only if our stock
price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives for our executives
to achieve increases in the value of our stock over time. While we currently expect to continue to use stock options as the primary form
of equity awards that we grant, we may in the future use alternative forms of equity awards, such as restricted stock and restricted
stock units. To date, we have generally used equity awards to compensate our executive officers in the form of initial grants in connection
with the commencement of employment. In the future, we also generally plan to grant equity awards on an annual basis to our executive
officers. We may also make additional discretionary grants, typically in connection with the promotion of an employee, to reward an employee,
for retention purposes or in other circumstances recommended by management.
In
general, the equity awards that we expect to grant to our executives will vest with respect to 25% of the shares on the first anniversary
of the grant date and with respect to the remaining shares in approximately equal quarterly installments through the fourth anniversary
of the grant date. Vesting ceases upon termination of employment and exercise rights cease shortly after termination of employment. Prior
to the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such option, including
voting rights or the right to receive dividends or dividend equivalents.
We
will grant, stock options with exercise prices that are set at no less than the fair value of shares of our common stock on the date
of grant as determined by our board of directors.
Benefits
and Other Compensation
We
believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified
personnel. We expect to maintain broad-based benefits that are provided to all employees, including health and dental insurance, life,
and disability insurance, and a 401(k) plan. All of our executives will be eligible to participate in all of our employee benefit plans,
in each case on the same basis as other employees.
In
certain circumstances, we may award cash signing bonuses or may reimburse relocation expenses when executives first join us. Whether
a signing bonus is paid or relocation expenses are reimbursed, and the amount of either such benefit, is determined by our board of directors
on a case-by-case basis based on the specific hiring circumstances and the recommendation of our chief executive officer.
Severance
and Change in Control Benefits
We
anticipate that we will enter into or amend certain employment agreements with certain of our executives to entitle them to specified
benefits in the event of the termination of their employment under specified circumstances, including termination following a change
in control of our Company.
We
believe providing these benefits helps us compete for executive talent. Based on the substantial business experience of the members of
our board of directors, we believe that our severance and change in control benefits are generally in line with severance packages offered
to executives by companies at comparable stages of development in our industry and related industries.
Risk
Considerations in Our Compensation Program
Our
board of directors is evaluating the philosophy and standards on which our compensation plans will be implemented across our Company.
It is our belief that our compensation programs do not, and in the future will not, encourage inappropriate actions or risk taking by
our executive officers. We do not believe that any risks arising from our employee compensation policies and practices are reasonably
likely to have a material adverse effect on our Company. In addition, we do not believe that the mix and design of the components of
our executive compensation program will encourage management to assume excessive risks. We believe that our current business process
and planning cycle fosters the behaviors and controls that would mitigate the potential for adverse risk caused by the action of our
executives. We believe that the following aspects of our executive compensation program that we plan to implement will mitigate the potential
for adverse risk caused by the action of our executives:
| |
● |
annual
establishment of corporate and individual objectives for our performance-based cash bonus programs for our executive officers, which
we expect to be consistent with our annual operating and strategic plans, designed to achieve the proper risk/reward balance and
not require excessive risk taking to achieve; |
| |
|
|
| |
● |
the
mix between fixed and variable, annual and long-term and cash and equity compensation, which we expect to be designed to encourage
strategies and actions that balance the Company’s short-term and long-term best interests; and |
| |
|
|
| |
● |
equity
incentive awards that vest over a period of time, which we believe will encourage executives to take a long-term view of our business. |
Tax
and Accounting Considerations
Section
162(m) of the Internal Revenue Code of 1986, as amended, or the Code, generally disallows a tax deduction for compensation in excess
of $1,000,000 per person paid to a publicly traded company’s chief executive officer and three other most highly paid officers,
other than the chief financial officer. Qualifying performance-based compensation is not subject to the deduction limitation if specified
requirements are met. We will periodically review the potential consequences of Section 162(m), however, the board of directors may,
in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such
payments are appropriate to attract and retain executive talent and are in the best interests of our stockholders.
We
account for equity compensation paid to our employees in accordance with Financial Accounting Standards Board, or FASB, Accounting Standard
Codification Topic 718, Compensation—Stock Compensation, or ASC 718, which requires us to measure and recognize compensation
expense in our financial statements for all share-based payments based on an estimate of their fair value over the service period of
the award. We record cash compensation as an expense at the time the obligation is accrued.
Executive
and Director Compensation
Summary
Compensation
The
compensation for our executive officers and directors for the year ended December 31, 2022 and 2021, is as follows:
| Name and Principal Position | |
Year | | |
Salary ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
All Other Compensation ($) | | |
Total | |
| Brian
Foote, President, CEO, and | |
2022 | | |
$ | 1 | | |
| - | | |
| - | | |
| - | | |
$ | 1 | |
| Chairman of the Board | |
2021 | | |
$ | 1 | | |
| - | | |
| - | | |
| - | | |
| 1 | |
| Jeffrey Hinshaw, COO,
CFO, | |
2022 | | |
$ | 120,000 | | |
| - | | |
| - | | |
| - | | |
$ | 120,000 | |
| Secretary, and Director | |
2021 | | |
$ | 90,000 | | |
| - | | |
| - | | |
| - | | |
| 90,000 | |
| Michele
Rivera, Former VP, Global | |
2022 | | |
$ | 90,000 | | |
| - | | |
| - | | |
| - | | |
$ | 90,000 | |
| Partnerships and Director(1) | |
2021 | | |
$ | 90,000 | | |
| - | | |
| - | | |
| - | | |
| 90,000 | |
| Peter
Schulte, Director | |
2022 | | |
$ | - | | |
| - | | |
| - | | |
| - | | |
$ | - | |
| | |
2021 | | |
$ | - | | |
| 250,000 | | |
| - | | |
| - | | |
$ | 250,000 | |
| William B. Hoagland, Former
| |
2022 | | |
$ | - | | |
| - | | |
| - | | |
| - | | |
$ | - | |
| Director(2) | |
2021 | | |
$ | 25,000 | | |
| 146,340 | | |
| - | | |
| - | | |
| 171,340 | |
| Javier Gonzalez, Former
Chief | |
2022 | | |
$ | 150,000 | | |
| - | | |
| - | | |
| - | | |
$ | 150,000 | |
| Technology Officer(3) | |
2021 | | |
$ | 150,000 | | |
| - | | |
| - | | |
| - | | |
| 150,000 | |
| |
(1) |
Ms.
Rivera resigned from all positions on June 9, 2023. |
| |
(2) |
Mr.
Hoagland resigned from the Board on September 14, 2022. |
| |
(3) |
Mr.
Gonzalez was terminated as CTO on January 6, 2023. |
Employment
and Advisory Agreements
On
July 13, 2021, we entered into a new employment agreement with Brian Foote, our Chairman, President, and CEO; Jeffrey Hinshaw, our CFO,
COO, and Corporate Secretary. The employment agreements are all in the same form and provide that Mr. Foote will receive a salary of
$1 and Mr. Hinshaw will receive a salary of $90,000 a year. In 2022, Mr. Hinshaw subsequently received a raise to $120,000.
Each
of the above employment agreements provides for termination by us upon the death or disability (defined as three aggregate months of
incapacity during any 365-consecutive day period) or upon conviction of a felony crime of moral turpitude or a material breach of his
or her obligations to us. In the event the employment agreement is terminated by us without cause or the employee resigns for
good reason, the terminated employee will be entitled to compensation for the balance of the term.
Each
executive also entered into a confidentiality and invention assignment agreement in conjunction with his or her employment agreement
which contains covenants prohibiting him or her from disclosure of confidential information regarding our Company at any time.
Equity
Compensation Plan Information
On
July 21, 2021, our Board of Directors and stockholders adopted our 2021 Stock Incentive Plan (the “2021 Stock Option Plan”).
The purpose of the 2021 Stock Option Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors
and employees whose services are considered valuable, to encourage a sense of proprietorship, and to stimulate an active interest of
these persons in our development and financial success. Under the 2021 Stock Option Plan, we are authorized to issue up to 20,000,000
shares of Common Stock, including incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards.
Administration.
The 2021 Stock Option Plan is administered by the Board of Directors or the committee or committees as may be appointed by the Board
of Directors from time to time (the “Administrator”). The Administrator determines the persons who are to receive awards,
the types of awards to be granted, the number of shares subject to each such award and the terms and conditions of such awards. The Administrator
also has the authority to interpret the provisions of the 2021 Stock Option Plan and of any awards granted there under and to modify
awards granted under the 2021 Stock Option Plan. The Administrator may not, however, reduce the price of options or stock appreciation
rights issued under the 2021 Stock Option Plan without prior approval of our shareholders.
Eligibility.
The 2021 Stock Option Plan provides that awards may be granted to employees, officers, directors and consultants or of any parent, subsidiary
or other affiliate as the Administrator may determine. A person may be granted more than one award under the 2021 Stock Option Plan.
Shares
that are subject to issuance upon exercise of an option under the 2021 Stock Option Plan but cease to be subject to such option for any
reason (other than exercise of such option), and shares that are subject to an award granted under the 2021 Stock Option Plan but are
forfeited or repurchased by us at the original issue price, or that are subject to an award that terminates without shares being issued,
will again be available for grant and issuance under the 2021 Stock Option Plan.
Terms
of Options and Stock Appreciation Rights. The Administrator determines many of the terms and conditions of each option and SAR granted
under the 2021 Stock Option Plan, including whether the option is to be an incentive stock option or a non-qualified stock option, whether
the SAR is a related SAR or a freestanding SAR, the number of shares subject to each option or SAR, and the exercise price of the option
and the periods during which the option or SAR may be exercised. Each option and SAR is evidenced by a grant agreement in such form as
the Administrator approves and is subject to the following conditions (as described in further detail in the 2021 Stock Option Plan):
(a)
Vesting and Exercisability: Options, restricted shares and SARs become vested and exercisable, as applicable, within such periods,
or upon such events, as determined by the Administrator in its discretion and as set forth in the related grant agreement. The term of
each option is also set by the Administrator. However, a related SAR will be exercisable at the time or times, and only to the extent,
that the option is exercisable and will not be transferable except to the extent that the option is transferable. A freestanding SAR
will be exercisable as determined by the Administrator but in no event after 10 years from the date of grant.
(b)
Exercise Price: Each grant agreement states the related option exercise price, which, in the case of SARs, may not be less than
100% of the fair market value of our shares of common stock on the date of the grant. The exercise price of an incentive stock
option granted to a 10% stockholder may not be less than 110% of the fair market value of shares of our common stock on the date of grant.
(c)
Method of Exercise: The option exercise price is typically payable in cash, common stock or a combination of cash of common stock,
as determined by the Administrator, but may also be payable, at the discretion of the Administrator, in a number of other forms of consideration.
(d)
Recapitalization; Change of Control: The number of shares subject to any award, and the number of shares issuable under the 2021
Stock Option Plan, are subject to proportionate adjustment in the event of a stock dividend, spin-off, split-up, recapitalization, merger,
consolidation, business combination or exchange of shares and the like. Except as otherwise provided in any written agreement between
the participant and us in effect when a change in control occurs, in the event an acquiring company does not assume plan awards (i) all
outstanding options and SARs shall become fully vested and exercisable; (ii) for performance-based awards, all performance goals or performance
criteria shall be deemed achieved at target levels and all other terms and conditions met, with award payout prorated for the portion
of the performance period completed as of the change in control and payment to occur within 45 days of the change in control; (iii) all
restrictions and conditional applicable to any restricted stock award shall lapse; (iv) all restrictions and conditions applicable to
any restricted stock units shall lapse and payment shall be made within 45 days of the change in control; and (v) all other awards shall
be delivered or paid within 45 days of the change in control.
(e)
Other Provisions: The option grant and exercise agreements authorized under the 2021 Stock Option Plan, which may be different
for each option, may contain such other provisions as the Administrator deems advisable, including without limitation, (i) restrictions
upon the exercise of the option and (ii) a right of repurchase in favor of us to repurchase unvested shares held by an optionee upon
termination of the optionee’s employment at the original purchase price.
Amendment
and Termination of the 2021 Stock Option Plan. The Administrator, to the extent permitted by law, and with respect to any shares
at the time not subject to awards, may suspend or discontinue the 2021 Stock Option Plan or amend the 2021 Stock Option Plan in any respect;
provided that the Administrator may not, without approval of the stockholders, amend the 2021 Stock Option Plan in a manner that requires
stockholder approval.
Grants
of Plan-Based Awards in 2022
There
were no grants of plan-based awards to our directors or named executive officers during the fiscal years ended December 31, 2021
and as of December 31, 2022.
Outstanding
Equity Awards at December 31, 2022
There
were no outstanding equity awards held by our directors or named executive officers as of December 31, 2022.
2022
Director Compensation
We
currently do not have a formal non-employee director compensation policy. However, in the event we have non-employee directors we intend
to reimburse them for their reasonable expenses incurred in connection with attending our board of directors and committee meetings,
and we may in the future grant stock options and pay cash compensation to those non-employee directors.
Limitation
of Liability and Indemnification
Our
certificate of incorporation provides that we are authorized to provide indemnification and advancement of expenses to our directors,
officers and other agents to the fullest extent permitted by Delaware General Corporation Law.
In
addition, our certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent
permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or to our stockholders
for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the
liability of any of our directors for:
| |
● |
any
breach of the director’s duty of loyalty to the corporation or its stockholders; |
| |
● |
any
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| |
● |
unlawful
payments of dividends or unlawful stock repurchases or redemptions; or |
| |
● |
any
transaction from which the director derived an improper personal benefit. |
Any
amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission
or claim that occurred or arose prior to such amendment or repeal. If the Delaware General Corporation Law is amended to provide for
further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further
limited to the greatest extent permitted by the Delaware General Corporation Law.
Our
certificate of incorporation also provides that we must indemnify our directors and officers and we must advance expenses, including
attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We
maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based
on acts or omissions in their capacities as directors or officers.
Indemnification
of Directors and Executive Officers
Section
145 of the Delaware General Corporation Law provides for, under certain circumstances, the indemnification of our officers, directors,
employees and agents against liabilities that they may incur in such capacities. Below is a summary of the circumstances in which such
indemnification is provided.
In
general, the statute provides that any director, officer, employee or agent of a corporation may be indemnified against expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in a proceeding (including
any civil, criminal, administrative or investigative proceeding) to which the individual was a party by reason of such status. Such indemnity
may be provided if the indemnified person’s actions resulting in the liabilities: (i) were taken in good faith; (ii) were reasonably
believed to have been in or not opposed to our best interests; and (iii) with respect to any criminal action, such person had no reasonable
cause to believe the actions were unlawful. Unless ordered by a court, indemnification generally may be awarded only after a determination
of independent members of the Board of Directors or a committee thereof, by independent legal counsel or by vote of the stockholders
that the applicable standard of conduct was met by the individual to be indemnified.
The
statutory provisions further provide that to the extent a director, officer, employee or agent is wholly successful on the merits or
otherwise in defense of any proceeding to which he or she was a party, he or she is entitled to receive indemnification against expenses,
including attorneys’ fees, actually and reasonably incurred in connection with the proceeding.
Indemnification
in connection with a proceeding by us or in our right in which the director, officer, employee or agent is successful is permitted only
with respect to expenses, including attorneys’ fees actually and reasonably incurred in connection with the defense. In such actions,
the person to be indemnified must have acted in good faith, in a manner believed to have been in our best interests and must not have
been adjudged liable to us, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability, in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expense which the Court of Chancery or such other court shall deem proper. Indemnification
is otherwise prohibited in connection with a proceeding brought on our behalf in which a director is adjudged liable to us, or in connection
with any proceeding charging improper personal benefit to the director in which the director is adjudged liable for receipt of an improper
personal benefit.
Delaware
law authorizes us to reimburse or pay reasonable expenses incurred by a director, officer, employee or agent in connection with a proceeding
in advance of a final disposition of the matter. Such advances of expenses are permitted if the person furnishes to us a written agreement
to repay such advances if it is determined that he or she is not entitled to be indemnified by us.
The
statutory section cited above further specifies that any provisions for indemnification of or advances for expenses does not exclude
other rights under our certificate of incorporation, by-laws, resolutions of our stockholders or disinterested directors, or otherwise.
These indemnification provisions continue for a person who has ceased to be a director, officer, employee or agent of the corporation
and inure to the benefit of the heirs, executors and administrators of such persons.
The
statutory provision cited above also grants us the power to purchase and maintain insurance policies that protect any director, officer,
employee or agent against any liability asserted against or incurred by him or her in such capacity arising out of his or her status
as such. Such policies may provide for indemnification whether or not the corporation would otherwise have the power to provide for it.
At
present, we do not maintain directors’ and officers’ liability insurance in order to limit the exposure to liability for
indemnification of directors and officers, including liabilities under the Securities Act; however, we are in the process of obtaining
such insurance.
Disclosure
of Commission Position on Indemnification for Securities Act Liabilities
Insofar
as indemnification for liabilities under the Securities Act of 1933 (the “Securities Act”) may be permitted to directors,
officers or persons controlling us pursuant to the above provisions, we have been informed that, in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such issue.
Director
or Officer Involvement in Certain Legal Proceedings
Our
directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past
ten years.
Compensation
Committee Interlocks and Insider Participation
None
of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors
of any other entity that has one or more officers serving as a member of our board of directors.
Director
Independence
We
have one member of our board of directors who is independent as defined under NYSE Rules. There are no family relationships among any
of our directors or executive officers.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since
February 22, 2022, we have entered into six loan transactions with Sartorii, LLC (“Sartorii”), an entity owned by our CEO
Brian Foote’s parents, as follows:
On
February 22, 20223, we issued a Promissory Note to Sartorii in the original principal amount of $3,000,000. The note is not convertible,
bears interest at 4% per annum, and is due on February 22, 2025. This note was subsequently sold to another investor. $1,825,000 of the
outstanding balance has been repaid through the issuance of common stock.
On
March 30, 2022, we issued a Promissory Note to Sartorii in the original principal amount of $1,500,000. The note is not convertible,
bears interest at 4% per annum, and is due on March 30, 2025. $350,000 of the outstanding balance of this note has been repaid through
the issuance of common stock.
On
July 6, 2022, we issued a Promissory Note to Sartorii in the original principal amount of $2,000,000. The note is not convertible, bears
interest at 5%, and is due on July 26, 2025.
On
November 15, 2022, we entered into a Line of Credit Agreement with Sartorii under which Sartorii agreed to lend up to $2,200,000 in principal
amount through a series of draws not to exceed $440,000 per month and bearing annual interest of 5%. Each draw is documented and added
to the outstanding balance of a promissory note (the “Note”) with principal and interest due two years from the date of the
draw. The Note may be prepaid by HUMBL without any penalty and is unsecured. HUMBL has drawn down the entire $2,200,000 under the line
of credit.
On
March 23, 2023, we issued a Promissory Note to Sartorii in the original principal amount of $250,000. The note is not convertible, bears
interest at 6% per annum, and is due on March 23, 2024.
On
July 3, 2023, we issued a Promissory Note to Sartorii in the original principal amount of $200,000. The note is not convertible, bears
interest at 6% per annum, and is due on July 3, 2024.
As
of the date hereof, other than as noted above, no payments have been made on any of the Sartorii notes. All transactions with Sartorii
were made at arm’s length and approved by the disinterested directors.
Policies
and Procedures for Transactions with Related Persons
All
future related party transactions will be voted upon by the disinterested board of directors. The audit committee of the board of directors
is responsible for evaluating each related party transaction and making a recommendation to the disinterested members of the board of
directors as to whether the transaction at issue is fair, reasonable and within our policy and whether it should be ratified and approved.
The audit committee, in making its recommendation, will consider various factors, including the benefit of the transaction to us, the
terms of the transaction and whether they are at arm’s-length and in the ordinary course of our business, the direct or indirect
nature of the related person’s interest in the transaction, the size and expected term of the transaction and other facts and circumstances
that bear on the materiality of the related party transaction under applicable law and listing standards. The audit committee will review,
at least annually, a summary of our transactions with our directors and officers and with firms that employ our directors, as well as
any other related person transactions.
PRINCIPAL
STOCKHOLDERS
Immediately
prior to the completion of this Offering, there are 3,303,378,809 shares of our common stock outstanding as of the date of this Offering
Circular. The following table sets forth the beneficial ownership of our common stock immediately prior to and immediately after the
completion of this Offering (assuming that we raise the Maximum Offering) by:
| |
● |
each
of our directors; |
| |
● |
each
of our named executive officers; |
| |
● |
all
of our directors and executive officers as a group; and |
| |
● |
each
person known by us to be the beneficial owner of 5% or more of our outstanding common stock. |
The
percentage ownership information after the Offering assumes the issuance of shares of common stock for the Maximum Offering amount in
this Offering.
We
have determined beneficial ownership in accordance with the rules of the Commission. These rules generally attribute beneficial ownership
of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the
rules include shares of common stock issuable pursuant to the exercise of stock options and warrants that are either immediately exercisable
or exercisable on or before the date which is 60 days after the date of this Offering Circular. These shares are deemed to be outstanding
and beneficially owned by the person holding those options and warrants for the purpose of computing the percentage ownership of that
person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise
indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to applicable community property laws.
| | |
Amount and Nature of Beneficial Ownership | |
| Name and Address of Beneficial Owner (1) | |
Shares Owned
Immediately
Prior to this
Offering | | |
Percentage
Immediately
Prior to this
Offering | | |
Shares
Owned
Immediately
After this
Offering | | |
Percentage
Immediately
After this
Offering | |
| | |
| | |
| | |
| | |
| |
| Directors and Named Executive Officers: | |
| | | |
| | | |
| | | |
| | |
| Brian Foote, President, CEO, and Chairman | |
| 11,894,304 | | |
| * | | |
| 11,894,304 | | |
| * | |
| | |
| | | |
| | | |
| | | |
| | |
| Jeffrey Hinshaw, COO, CFO, and Director | |
| 100,060,000 | | |
| * | | |
| 100,060,000 | | |
| * | |
| | |
| | | |
| | | |
| | | |
| | |
| Peter Schulte, Director | |
| 287,422 | | |
| * | | |
| 287,422 | | |
| * | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| All directors and executive officers as a group (four persons) | |
| 142,701,726 | | |
| * | | |
| 142,701,726 | | |
| * | |
*Less
than 1%.
| |
(1) |
The
address for all of the officers and directors is 600 B Street, Suite 300, San Diego, California 92101. |
In
determining the voting shares of our securities, we have prepared the following table, which includes our other designated series of
preferred stock, including Series A and Series B. Each share of our Series A Preferred stock is entitled to 1,000 votes per share and
share of our Series B Preferred stock is entitled to 10,000 votes per share. Though our executive officers and directors have a minimal
number of shares of common stock, they still exert voting control over us, by and through their ownership of the Series A and Series
B Preferred Stock.
Name and Address of
Beneficial Owner (1) | |
Class
of
Securities (2) | |
Number of Shares | | |
Percentage of Class | | |
Percentage
of Voting
Shares Immediately
Prior to this
Offering | | |
Percentage
of Voting
Shares
Immediately
After to this
Offering | |
| | |
| |
| | |
| | |
| | |
| |
| Directors and Named Executive Officers: | |
| |
| | | |
| | | |
| | | |
| | |
| Brian Foote, President, CEO, and Chairman | |
Common | |
| 11,894,304 | | |
| * | | |
| * | | |
| * | |
| | |
Series A | |
| 7,000,000 | | |
| 100 | % | |
| 53.16 | % | |
| [ ] | |
| | |
Series B | |
| 198,421 | | |
| 46.63 | % | |
| 15.07 | % | |
| [ ] | |
| Jeffrey Hinshaw, COO, CFO, and Director | |
| |
| 100,060,000 | | |
| 5.23 | % | |
| * | | |
| * | |
| | |
| |
| 30,263 | | |
| 7.11 | % | |
| 3.06 | % | |
| [ ] | |
| Peter Schulte, Director | |
| |
| 287,422 | | |
| * | | |
| * | | |
| * | |
| | |
| |
| | | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | | |
| | |
| All directors and executive officers as a group (four persons) | |
Common | |
| 142,701,726 | | |
| * | | |
| | | |
| * | |
| | |
Series A | |
| 7,000,000 | | |
| 100 | % | |
| 53.16 | % | |
| | |
| | |
Series B | |
| 254,347 | | |
| 59 | % | |
| 19.32 | % | |
| | |
*Less
than 1%.
| |
(1) |
The
address for all of the officers and directors is 600 B Street, Suite 300, San Diego, California 92101. |
| |
(2) |
Each
share of common stock entitles the holder to one vote. Each share of our Series A Preferred stock is entitled to 1,000 votes per
share and share of our Series B Preferred stock is entitled to 10,000 votes per share. |
MARKET
PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
information
Our
common stock is dealer quoted on the OTC Markets OTC Pink with the ticker symbol “HMBL”. As of the date of this Offering
Circular, there were [ ] stockholders of record of our common stock. The actual number of holders of our common stock is greater than
the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers
or other nominees. The number of holders of record presented here also does not include stockholders whose shares may be held in trust
by other entities.
The
following table sets forth, for the periods indicated, the high and low closing sales prices of our common stock for fiscal years ended
December 31, 2022 and 2021, and for the first three months of fiscal year 2023:
| 2023 | |
High | | |
Low | |
| Quarter Ended June 30 | |
$ | .0085 | | |
$ | 0.0023 | |
| Quarter Ended March 31 | |
$ | 0.0219 | | |
$ | 0.0058 | |
| 2022 | |
High | | |
Low | |
| Quarter Ended December 31 | |
$ | 0.0318 | | |
$ | 0.0081 | |
| Quarter Ended September 30 | |
$ | 0.1145 | | |
$ | 0.0246 | |
| Quarter Ended June 30 | |
$ | 0.146 | | |
$ | 0.045 | |
| Quarter Ended March 31 | |
$ | 0.0365 | | |
$ | 0.087 | |
| | |
| | | |
| | |
| 2021 | |
| High | | |
| Low | |
| Quarter Ended December 31 | |
$ | 0.823 | | |
$ | 0.212 | |
| Quarter Ended September 30 | |
$ | 1.19 | | |
$ | 0.652 | |
| Quarter Ended June 30 | |
$ | 3.85 | | |
$ | 0.75 | |
| Quarter Ended March 31 | |
$ | 7.72 | | |
$ | 0.5648 | |
Transfer
Agent
Pacific
Stock Transfer Company, located at 6725 Via Austi Pkwy., #300, Las Vegas, Nevada 89119 and telephone number of (702) 361-3033
is the registrar and transfer agent for our common stock.
Dividends
We
have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to increase
our working capital and do not anticipate paying any cash dividends in the foreseeable future.
DESCRIPTION
OF CAPITAL STOCK
General
HUMBL,
Inc. was incorporated in the state of Oklahoma on November 12, 2009. We were redomiciled on November
30, 2020 in the state of Delaware. Our authorized capital stock consists of 7,450,000,000 shares of common stock, par value of
$0.00001, and 10,000,000 shares of preferred stock, par value of $0.00001, 7,000,000 of which are designated as Series A Preferred Stock
and 570,000 of which are designated as Series B Preferred Stock.
Common
Stock
Immediately
prior to this Offering, there are 3,303,378,809 shares of our common stock outstanding. Upon the completion of this Offering, assuming
we raise the Maximum Offering amount, as a result of the issuance of [ ] shares of common stock in this Offering, there will be [ ] shares
of our common stock issued and outstanding.
Each
holder of our common stock is entitled to one vote per each share on all matters to be voted upon by the common shareholders, and there
are no cumulative voting rights. Subject to applicable law and the rights, if any, of the holders of outstanding shares of any series
of preferred stock we may designate and issue in the future, holders of our common stock shall be entitled to vote on all matters on
which shareholders generally are entitled to vote. Subject to the rights, if any, of the holders of outstanding shares of any series
of preferred stock we may designate and issue in the future, holders of our common stock will be entitled to receive ratably the dividends,
if any, as may be declared from time to time by our board of directors out of funds legally available for that purpose. If there is a
liquidation, dissolution or winding up of the, subject to the rights, if any, of the holders of outstanding shares of any series of preferred
stock we may designate and issue in the future, holders of our common stock would be entitled to ratable distribution of our assets remaining
after the payment in full of our liabilities.
Under
the terms of our governing documents, the holders of our common stock have no preemptive or conversion rights or other subscription rights,
and there are no redemption or sinking fund provisions applicable to the common stock. All currently outstanding shares of our common
stock are fully paid and non-assessable. The rights of the holders of our common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Preferred
Stock
Our
Articles of Incorporation authorize our board of directors to establish one or more series of preferred stock. Unless required by law
or any stock exchange, the authorized but unissued shares of preferred stock will be available for issuance without further action by
our shareholders. Our board of directors is authorized to divide the preferred stock into series and, with respect to each series, to
fix and determine the designation, terms, preferences, limitations, and relative rights thereof, including dividend rights, dividend
rates, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions and the number
of shares constituting the series. Without shareholder approval, we could issue preferred stock that could impede or discourage an acquisition
attempt or other transaction that some, or a majority, of our shareholders may believe is in their best interests or in which they may
receive a premium for their common stock over the market price of the common stock.
Series
A Preferred Stock
As
of the date of this Offering Circular, there are 7,000,000 shares of Series A Preferred Stock issued and outstanding, all of which are
beneficially owned by our Brian Foote, our President and CEO.
Dividends.
Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
There are no conversion rights.
Redemption.
Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the
Series A Certificate of Designation as the time at which as a third party not affiliated with us or any holders of the Series A Preferred
Stock shall have acquired, in one or a series of related transactions, equity securities representing more than 50% of the outstanding
voting securities), we will have the option to redeem all or a portion of the outstanding Series A Preferred Stock in cash at a price
per share of Series A Preferred Stock equal to 100% of the liquidation value.
Voting
Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of 1,000 votes for every share of Series A Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive out of the assets, whether capital or surplus, an amount equal to the liquidation value of the Series
A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if our assets are insufficient
to pay in full such amounts, then the entire assets to be distributed to the holders of the Series A Preferred Stock shall be ratably
distributed among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon
were paid in full.
Series
B Preferred Stock
As
of the date of this Offering Circular, we have 392,090 shares of Series B Preferred Stock issued and outstanding, a majority of which
are beneficially owned by our executive officers.
Dividends.
Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at
our office or any transfer agent for such stock, into 10,000 fully paid and nonassessable shares of common stock subject to adjustment
for any stock split or distribution of securities or subdivision of the outstanding shares of common stock. The Series B Preferred Stock
is subject to the following restrictions on conversion: (a) no conversions from June 1, 2023 to September 30, 2023; (b) a maximum of
500 Series B shares may be converted per month from October 2023 through June 2024; and (c) a maximum of 1,000 Series B shares may be
converted per month from July 2024 through December 2024.
Redemption.
Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the
Series B Certificate of Designation as the time at which as a third party not affiliated with us or any holders of the Series B Preferred
Stock shall have acquired, in one or a series of related transactions, equity securities representing more than 50% of the outstanding
voting securities), we, at our option, will have the right to redeem all or a portion of the outstanding Series B Preferred Stock in
cash at a price per share of Series B Preferred Stock equal to 100% of the liquidation value.
Voting
Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of 10,000 votes for every share of Series B Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be
entitled to receive out of the assets, whether capital or surplus, an amount equal to the liquidation value of the Series B Preferred
Stock before any distribution or payment shall be made to the holders of any junior securities, and if our assets are insufficient to
pay in full such amounts, then the entire assets to be distributed to the holders of the Series B Preferred Stock shall be ratably distributed
among the holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were
paid in full.
Stock
Options
On
July 21, 2021, we established the HUMBL, Inc. 2021 Stock Option Plan (the “2021 Stock Option Plan”) for a total issuance
not to exceed 20,000,000 shares of common stock. The purpose of the 2021 Stock Option Plan is to promote our long-term growth and profitability
by (i) providing key people with incentives to improve stockholder value and to contribute to our growth and financial success, and (ii)
enabling us to attract, retain and reward the best-available persons.
The
2021 Stock Option Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and
nonqualified stock options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance
Awards, other stock-based awards, or any combination of the foregoing.
The
following represents a summary of the option for the years ended December 31, 2022 and 2021:
| | |
Year Ended December 31, 2022 | | |
Year Ended December 31, 2021 | |
| | |
Number | | |
Weighted
Average
Exercise
Price | | |
Number | | |
Weighted
Average
Exercise
Price | |
| Beginning balance | |
| 630,000 | | |
$ | 0.70 | | |
| - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| 8,660,000 | | |
| 0.0983 | | |
| 630,000 | | |
| 0.70 | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited | |
| (5,285,000 | ) | |
| - | | |
| - | | |
| - | |
| Expired | |
| - | | |
| - | | |
| - | | |
| - | |
| Ending balance | |
| 4,005,000 | | |
$ | 0.1501 | | |
| 630,000 | | |
$ | 0.70 | |
| Intrinsic value of options | |
$ | - | | |
| | | |
$ | - | | |
| | |
| Weighted Average Remaining Contractual Life (Years) | |
| 9.36 | | |
| | | |
| 9.82 | | |
| | |
As
of December 31, 2022, 2,255,000 options are vested.
For
the years ended December 31, 2022 and 2021, we incurred stock-based compensation expense of $436,467 and $24,500, respectively for the
options in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the Black-Scholes
calculation using the assumptions reflected in the chart below for the service-based grants.
Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated
using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:
| | |
Year Ended
December 31, 2022 | | |
Year Ended
December 31, 2021 | |
| Expected term | |
| 10 | | |
| 2-10 | |
| Expected volatility | |
| 120 | % | |
| 182-409 | % |
| Expected dividend yield | |
| - | | |
| - | |
| Risk-free interest rate | |
| 2.74 | % | |
| 0.10-0.58 | % |
Warrants
The
following represents a summary of the warrants for the years ended December 31, 2022 and 2021:
| |
|
Year
Ended December 31, 2022 |
|
|
Year
Ended December 31, 2021 |
|
| |
|
Number |
|
|
Weighted
Average
Exercise
Price |
|
|
Number |
|
|
Weighted
Average
Exercise
Price
|
|
| Beginning
balance |
|
|
283,650,000 |
|
|
$ |
0.32627 |
|
|
|
262,725,000 |
|
|
$ |
0.23875 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Granted |
|
|
151,176,470 |
|
|
|
0.02486 |
|
|
|
40,925,000 |
|
|
|
0.82643 |
|
| Exercised |
|
|
(10,000,000 |
) |
|
|
0.20 |
|
|
|
(20,000,000 |
) |
|
|
0.20 |
|
| Forfeited |
|
|
(77,366,666 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Expired |
|
|
(225,000 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Ending
balance |
|
|
347,234,804 |
|
|
$ |
0.26265 |
|
|
|
283,650,000 |
|
|
$ |
0.32627 |
|
| Intrinsic
value of warrants |
|
$ |
- |
|
|
|
|
|
|
$ |
18,400,000 |
|
|
|
|
|
| Weighted
Average Remaining Contractual Life (Years) |
|
|
1.57 |
|
|
|
|
|
|
|
2.19 |
|
|
|
|
|
As
of December 31, 2022, 347,234,804 warrants are vested.
For
the years ended December 31, 2022 and 2021, we incurred stock-based compensation expense of $7,162,889 and $3,765,364, respectively for
the warrants in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the Black-Scholes
calculation using the assumptions reflected in the chart below for both the service-based grants and the performance-based grants.
As
of December 31, 2022, there remains unrecognized stock-based compensation expense related to these warrants of $12,968,574 comprising
of service-based grants through June 30, 2026.
Between
May 15, 2023 and May 17, 2023, to five different investors we issued warrants to purchase a total of 125,000,000 shares of common stock.
The warrants exercisable for a period of five years, have a cashless exercise provision and have an exercise price of $0.005 per share.
Restricted
Stock Units (RSUs)
On
February 12, 2022, we granted 26,800,000 RSUs in the acquisition of the asserts of BizSecure that was recorded as contingent consideration.
These RSUs commenced vesting on April 1, 2022.
| | |
Year Ended December 31, 2022 | | |
Year Ended December 31, 2021 | |
| | |
Number | | |
Weighted
Average
Exercise
Price | | |
Number | | |
Weighted
Average
Exercise
Price | |
| Beginning balance | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| 26,800,000 | | |
| 0.1689 | | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited | |
| (10,050,000 | ) | |
| - | | |
| - | | |
| - | |
| Vested | |
| - | | |
| - | | |
| - | | |
| - | |
| Ending balance | |
| 16,750,000 | | |
$ | 0.1689 | | |
| - | | |
$ | - | |
On
December 30, 2022, we negotiated a settlement with BizSecure of all claims resulting from our inability to timely register the 13,200,000
shares of common stock issued February 12, 2022 and 10,050,000 RSUs that vested during 2022. As a result, the 13,200,000 shares of common
stock and the 10,050,000 RSUs were rescinded, effective December 30, 2022. The remaining 16,750,000 RSUs continue to vest in accordance
with the original terms and we will continue the process to register the RSUs for resale and re-negotiate the terms of the shares of
common stock to be issued to BizSecure. There is no requirement for us to cease using the intellectual property received in the February
12, 2022 transaction.
For
the years ended December 31, 2022 and 2021, we amortized $1,697,445 and $0, of the contingent consideration to additional paid in capital,
respectively for the RSUs.
Anti-Takeover
Provisions
Delaware
Law
We
are subject to Section 203 of the Delaware General Corporation Law. This provision generally prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder for a period of three years following the date the stockholder became an
interested stockholder, unless:
| |
- |
prior
to such date, the board of directors approved either the business combination or the transaction that resulted in the stockholder
becoming an interested stockholder; |
| |
- |
upon
consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock
plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or |
| |
- |
on
or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual meeting or
special meeting of stockholders and not by written consent, by the affirmative vote of at least 662/3% of the outstanding
voting stock that is not owned by the interested stockholder. |
Section
203 defines a business combination to include:
| |
- |
any
merger or consolidation involving the corporation and the interested stockholder; |
| |
- |
any
sale, transfer, pledge, or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; |
| |
- |
subject
to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; |
| |
- |
any
transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder; or |
| |
- |
the
receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided
by or through the corporation. |
In
general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding
voting stock of a corporation, or an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting
stock of a corporation at any time within three years prior to the time of determination of interested stockholder status; and any entity
or person affiliated with or controlling or controlled by such entity or person.
These
statutory provisions could delay or frustrate the removal of incumbent directors or a change in control of our Company. They could also
discourage, impede, or prevent a merger, tender offer, or proxy contest, even if such event would be favorable to the interests of stockholders.
Authorized
but Unissued Shares
Our
authorized but unissued shares of common stock will be available for future issuance without your approval. We may use additional shares
for a variety of purposes, including future offerings to raise additional capital, to fund acquisitions and as employee compensation.
The existence of authorized but unissued shares of common stock could render it more difficult or discourage an attempt to obtain control
of us by means of a proxy contest, tender offer, merger or otherwise.
PLAN
OF DISTRIBUTION
Broker
of Record and Placement Agent Services
We
have engaged [ ] (the “Placement Agent”) to act as our exclusive placement agent and broker-dealer of record for this Offering.
In connection with this Offering, we are paying the Placement Agent a one-time consulting fee of $[ ]; a one-time advance payment of
$[ ] for due diligence expenses; and [ ]% of the gross proceeds of the Offering. The Placement Agent may add other broker-dealers as
co-placement agents to assist with the Offering or assign its role as placement agent and broker-dealer of record to another broker-dealer.
Investment
Limitations
Generally,
no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income
or net worth (please see below on how to calculate your net worth). Different rules apply to accredited investors and non-natural persons.
Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)I
of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
Because
this is a Tier 2, Regulation A Offering, most investors must comply with the 10% limitation on investment in the Offering. The only investor
in this Offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under
the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited
Investor:
| |
(i) |
You
are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with
your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in
the current year; |
| |
(ii) |
You
are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase
the securities; |
| |
(iii) |
You
are an executive officer or general partner of the issuer or a director, executive officer, or general partner of the general partner
of the issuer; |
| |
(iv) |
You
are a holder in good standing of the General Securities Representative license (Series 7), the Private Securities Offerings Representative
license (Series 82), and the Licensed Investment Adviser Representative (Series 65), each as issued by FINRA; |
| |
(v) |
You
are a corporation, limited liability company, partnership or are an organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, a corporation or similar business trust or a partnership, not formed for the specific purpose of acquiring
our securities, with total assets in excess of $5,000,000; |
| |
(vi) |
You
are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered
pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered
under the Investment Company Act of 1940 (the “Investment Company Act”), or a business development company as defined
in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development
company as defined in the Investment Advisers Act of 1940; |
| |
(vii) |
You
are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor; |
| |
(viii) |
You
are a trust with total assets in excess of $5,000,000, your purchase of our securities is directed by a person who either alone or
with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience
in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were
not formed for the specific purpose of investing in our securities; |
| |
(ix) |
You
are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000; |
| |
(x) |
You
are a Commission or state-registered investment adviser or a federally exempt reporting adviser; |
| |
(xi) |
You
are a Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act; |
| |
(xii) |
You
are an entity not listed above that that owns “investments,” in excess of $5 million and that was not formed for the
specific purpose of investing in the securities offered; or |
| |
(xiii) |
You
are an Investor certifies that (A) it is a “family office” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers
Act of 1940 (i) with at least $5 million in assets under management, (ii) not formed for the specific purpose of acquiring the securities
offered and (iii) whose investment is directed by a person who has such knowledge and experience in financial and business matters
that such family office is capable of evaluating the merits and risks of the prospective investment or (B) that it is a “family
client” as defined in Rule 202(a)(11)(G)-1, of a family office meeting the criteria specified above. |
Offering
Period and Expiration Date
This
Offering will start on the date this Offering Circular is declared qualified by the Commission. We expect to commence the sale of the
securities as of the date on which the Offering Statement of which this Offering Circular is a part is declared qualified by the Commission.
The Offering will terminate at the earlier of: (1) the date at which the Maximum Offering has been sold; (2) the date which is one year
after this Offering being qualified by the Commission; or (3) the date on which this Offering is earlier terminated by us in our sole
discretion (the “Termination Date”).
Procedures
for Subscribing
You
will be able to make an investment in our common stock through an online investment platform. If you decide to subscribe for our securities
offered in this Offering, you should:
| |
1. |
Carefully
read this Offering Circular, and any current supplement, as well as any documents described in the Offering Circular and attached
hereto or which you have requested. Consult with your tax, legal and financial advisors to determine whether an investment in our
common stock is suitable for you. |
| |
|
|
| |
2. |
Review
the Subscription Agreement and execute the completed Subscription Agreement via electronic signature. |
| |
|
|
| |
3. |
Before
or after a Subscription Agreement is signed, an integrated online payment portal will facilitate your transfer of funds by ACH, direct
payment or by credit card (credit card investment may result in incurrence of third-party fees and charges, interest obligations
which will lower your expected investment returns and could exceed your actual returns) in an amount equal to the purchase price
of your shares (as set out on the front page of your Subscription Agreement) into an escrow account with that will not yield interest
for investors. The Escrow Agent will hold such subscription funds in escrow until such time as your Subscription Agreement is either
accepted or rejected by us and, if accepted, such further time until you are issued the shares for which you subscribed. |
| |
|
|
| |
4. |
We
and the Placement Agent will review the completed subscription documentation. You may be asked to provide additional information.
We or the Placement Agent will contact you directly, if required. We reserve the right to reject any subscriptions, in whole or in
part, for any or no reason, and to withdraw the Offering at any time prior to Closing Date. |
| |
|
|
| |
5. |
Once
the review is complete, we or the Placement Agent will inform you whether or not your application to subscribe for our shares is
approved or denied and if approved, the number of shares for which you are entitled to subscribe. If your subscription is rejected
in whole or in part, then your subscription payments (being the entire amount if your application is rejected in whole or the payments
associated with those subscriptions rejected in part) will be refunded, without interest or deduction. We will accept subscriptions
on a first-come, first served basis subject to the right to reject or reduce subscriptions. |
| |
|
|
| |
6. |
If
all or a part of your subscription is approved, then the number of shares you are entitled to subscribe will be issued to you upon
the Closing. Simultaneously with the issuance of your shares, the subscription monies held by the Escrow Agent in escrow on your
behalf will be transferred to us. |
By
executing the Subscription Agreement, you agree to be bound by the terms of the Subscription Agreement. We and the Placement Agent will
rely on the information you provide in the Subscription Agreement and the supplemental information you provide in order for the Placement
Agent to verify that you are qualified to invest in this offering. If any information about your status changes prior to you being issued
shares, please notify us or the Placement Agent immediately using the contact details set out in the Subscription Agreement.
Any
potential investor will have ample time to review the Subscription Agreement, along with their counsel, prior to making any final investment
decision. We shall only deliver such Subscription Agreement upon request after a potential investor has had ample opportunity to review
this Offering Circular.
Right
to Reject Subscriptions. After we receive your complete, executed Subscription Agreement and the funds required under the Subscription
Agreement have been transferred to the escrow account, we have the right to review and accept or reject your subscription in whole or
in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest
or deduction.
Acceptance
of Subscriptions. Upon our acceptance of a Subscription Agreement, we will countersign the Subscription Agreement and issue the shares
subscribed at closing provided, however, that we reserve the right to reject any subscription, in whole or in part, for any reason or
for no reason. Once you submit the Subscription Agreement and it is accepted, you may not revoke or change your subscription or request
your subscription funds. All accepted Subscription Agreements are irrevocable.
Under
Rule 251 of Regulation A, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which
do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year
end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income
or net worth (please see below on how to calculate your net worth).
NOTE:
For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation
must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount
equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may
be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase
of the securities.
In
order to purchase the securities and prior to the acceptance of any funds from an investor, an investor will be required to represent,
to our satisfaction, that he or she is either an Accredited Investor or is in compliance with the 10% of net worth or annual income limitation
on investment in this Offering.
Closings
If,
on the Initial Closing Date, we have sold less than the Maximum Offering, then we may hold one or more additional closings for additional
sales (each an “Additional Closing”) until the Termination Date. We will consider various factors in determining the timing
of any Additional Closings, including but not limited to the amount of proceeds received at the Initial Closing, any Additional Closings
that have already been held, and indications of interest shown by any additional prospective investors.
From
the date of qualification until the Initial Closing Date, and thereafter pending any Additional Closings on subsequent closing dates
(“Additional Closing Dates,” and with the Initial Closing Date, a “Closing Date”) the proceeds from the Offering
will be kept in an escrow account. Upon the Initial Closing Date and upon each Additional Closing, if any, the proceeds therefrom will
be distributed to us and the associated securities will be issued to the investors therein. If the Initial Closing never occurs, the
proceeds from the Offering will be promptly returned to investors, without deduction or interest.
Escrow
Account
[ ] (or its assignee, “Escrow Agent”), will act as escrow agent for the Offering. The Escrow Agent is [ ] (hereinafter (“Escrow
Agent”) The fee due to the Escrow Agent for this Offering is $[ ].
Prior
to the date the Commission issues a qualification for the sale of the shares of common stock pursuant to this Offering Circular, the
escrow agent shall establish a non-interest-bearing account” (the “Escrow Account”). The Escrow Account shall be a
segregated deposit account at the bank. The Escrow Account maintained by the escrow agent shall be terminated in whole or in part on
the earliest to occur of: (a) the Closing of the Offering, (b) the date which is one year after this Offering being qualified by the
Commission, or (c) the date on which this Offering is earlier terminated by us, in our sole discretion. The foregoing sentence describes
the escrow period the “Escrow Period.” During the Escrow Period, the parties agree that (i) the Escrow Account and escrowed
funds will be held for the benefit of investors, and that (ii) we are not entitled to any funds received into escrow, and that no amount
deposited into the Escrow Account shall become our property or any other entity, or be subject to any debts, liens or encumbrances of
any kind of any other entity, until we have triggered closing of such funds. In the event the escrow agent does not receive written instructions
from us to release funds from the Escrow Account on or prior to termination of the Escrow Period, the Escrow Agent shall terminate the
escrow and make a full and prompt return of funds so that refunds are made to each investor in the exact amount received from said investor,
without deduction, penalty or expense to investor.
The
Escrow Agent shall process all escrowed amounts for collection through the banking system and shall maintain an accounting of each deposit
posted to its ledger, which also sets forth, among other things, each investor’s name and address, the quantity of shares of common
stock purchased, and the amount paid.
If
any Subscription Agreement for the purchase of shares of common stock is rejected by us, in our sole discretion, then the Subscription
Agreement and the escrowed amounts for such investor shall be promptly returned to the rejected investor by the Escrow Agent.
We
shall be obligated to reimburse Escrow Agent for all fees, costs and expenses incurred or that become due in connection with the Escrow
Agreement or the Escrow Account, including reasonable attorney’s fees.
The
Escrow Agent, in no way endorses the merits of the Offering or of the securities.
No
Minimum Offering Amount
There
is no minimum Offering amount in this Offering and we may close on any funds that we receive. Potential investors should be aware that
there can be no assurance that any other funds will be invested in this Offering other than their own funds.
No
Selling Security Holders
No
securities are being sold for the account of security holders; all net proceeds of this Offering will go to us.
Transfer
Agent and Registrar
Pacific
Stock Transfer Company, located at 6725 Via Austi Pkwy., #300, Las Vegas, Nevada 89119 and telephone number of (702) 361-3033
is the registrar and transfer agent for our common stock.
CERTAIN
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The
following is a summary of certain material United States federal income tax consequences to you of the acquisition, ownership, and disposition
of shares of our common stock offered pursuant to this Offering Circular. This discussion is not a complete analysis of all of the potential
United States federal income tax consequences relating thereto, and, except as otherwise specifically provided herein, it does not address
any estate and gift tax consequences or any tax consequences arising under any state, local or foreign tax laws, or any other United
States federal tax laws. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published
rulings and administrative pronouncements of the Internal Revenue Service (the “IRS”), all as in effect as of the date of
this Offering Circular. These authorities may change, possibly retroactively, resulting in United States federal income tax consequences
different from those discussed below. No ruling has been or will be sought from the IRS with respect to the matters discussed below,
and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership,
or disposition of the shares of our common stock, or that any such contrary position would not be sustained by a court.
This
discussion is limited to holders who purchase shares of our common stock pursuant to this Offering Circular and who hold the shares of
our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment).
This discussion does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under
the United States federal income tax laws, including, without limitation:
| |
● |
financial
institutions, banks, and thrifts; |
| |
● |
insurance
companies; |
| |
● |
tax-exempt
organizations; |
| |
● |
“S”
corporations, partnerships, or other pass-through entities; |
| |
● |
traders
in securities that elect to mark to market; |
| |
● |
regulated
investment companies and real estate investment trusts; |
| |
● |
broker-dealers
or dealers in securities or currencies; |
| |
● |
United
States expatriates; |
| |
● |
persons
subject to the alternative minimum tax; |
| |
● |
persons
holding our stock as a hedge against currency risks or as a position in a straddle; or |
| |
● |
U.S.
holders (as defined below) whose functional currency is not the United States dollar. |
If
a partnership (or other entity taxed as a partnership for United States federal income tax purposes) holds shares of our common stock,
the tax treatment of a partner in the partnership will depend on the status of the partner, upon the activities of the partnership, and
upon certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships
should consult their tax advisors regarding the specific United States federal income tax consequences to them.
Prospective
investors should consult their tax advisors regarding the particular United States federal income tax consequences to them of acquiring,
owning, and disposing of shares of our common stock, as well as any tax consequences arising under any state, local or foreign tax laws
and any other united states federal tax laws.
For
purposes of this discussion, a “U.S. holder” is any beneficial owner of shares of our common stock who, for United States
federal income tax purposes, is:
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● |
an
individual who is a citizen or resident of the United States; |
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● |
a
corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under
the laws of the United States or of any state or in the District of Columbia; |
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an
estate the income of which is subject to United States federal income taxation regardless of its source; or |
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● |
a
trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust, or if the trust has a valid election in place to be
treated as a United States person. |
A
“non-U.S. holder” is any beneficial owner of our common stock that is neither a “U.S. holder” nor an entity treated
as a partnership for United States federal income tax purposes.
Taxation
of U.S. Holders
Distributions
on Shares of Our Common Stock. If we make cash or other property distributions on shares of our common stock, such distributions
generally will constitute dividends for United States federal income tax purposes to the extent of our current and accumulated earnings
and profits, as determined under United States federal income tax principles. Subject to certain limitations, these distributions may
be eligible for the dividends-received deduction in the case of U.S. holders that are corporations. Dividends paid to non-corporate U.S.
holders generally will qualify for taxation at special rates as “qualified dividends” if such U.S. holder meets certain holding
period and other applicable requirements. The special rate will not, however, apply to dividends received to the extent that the U.S.
holder elects to treat dividends as “investment income,” which may be offset by investment expense.
Amounts
not treated as dividends for United States federal income tax purposes will constitute a return of capital and will first be applied
against and reduce a U.S. holder’s tax basis in the shares of our common stock, but not below zero. Distributions in excess of
our current and accumulated earnings and profits and in excess of a U.S. holder’s tax basis in its shares of our common stock will
be taxable as capital gain realized on the sale or other disposition of the shares of our common stock and will be treated as described
under “—Sales or Other Taxable Dispositions of Shares of Our Common Stock” below.
Sale
or Other Taxable Dispositions of Shares of Our Common Stock. If a U.S. holder sells or disposes of shares of our common stock,
such U.S. holder generally will recognize gain or loss for United States federal income tax purposes in an amount equal to the difference
between the amount of cash and the fair market value of any property received on the sale or other disposition and the U.S. holder’s
adjusted basis in the shares of our common stock for United States federal income tax purposes. This gain or loss generally will be long-term
capital gain or loss if the U.S. holder has held the shares of our common stock for more than one year. The deductibility of capital
losses is subject to limitations.
Backup
Withholding and Information Reporting. Information reporting will generally apply to U.S. holders with respect to payments of
dividends on shares of our common stock and to certain payments of proceeds on the sale or other disposition of shares of our common
stock. Certain U.S. holders may be subject to U.S. backup withholding on payments of dividends on shares of our common stock and certain
payments of proceeds on the sale or other disposition of shares of our common stock unless the beneficial owner of shares of our common
stock furnishes the payor or its agent with a taxpayer identification number, certified under penalties of perjury, and certain other
information, or otherwise establishes, in the manner prescribed by law, an exemption from backup withholding.
U.S.
backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a credit against
a U.S. holder’s United States federal income tax liability, which may entitle the U.S. holder to a refund, provided the U.S. holder
timely furnishes the required information to the IRS.
Medicare
Tax. A U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt
from such tax, will be subject to an additional tax on the lesser of (1) the U.S. person’s “net investment income”
for the relevant taxable year and (2) the excess of the U.S. person’s modified adjusted gross income for the taxable year over
a certain threshold. Net investment income generally includes dividends, and net gains from the disposition of common stock, unless such
income or gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists
of certain passive or trading activities). A U.S. holder that is an individual, estate or trust should consult its tax advisor regarding
the applicability of the Medicare tax to its income and gains in respect of its investment in our common stock.
Taxation
of Non-U.S. Holders
Distributions
on Shares of Our Common Stock. Distributions that are treated as dividends (see “Taxation of U.S. Holders—Distributions
on Shares of Our Common Stock”) generally will be subject to United States federal withholding tax at a rate of 30% of the gross
amount of the dividends, or such lower rate specified by an applicable income tax treaty. If we cannot determine at the time a distribution
is made whether or not the distribution will exceed current and accumulated earnings and profits (and therefore whether the distribution
will be treated as a dividend), we intend to withhold from the distribution at the rate applicable to dividends. A non-U.S. holder may
seek a refund from the IRS of any amounts withheld if it is subsequently determined that the distribution was, in fact, in excess of
our current and accumulated earnings and profits. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish to
us or our paying agent a valid IRS Form W-8BEN (or applicable successor form) certifying such non-U.S. holder’s qualification for
the reduced rate. This certification must be provided to us or our paying agent prior to the payment of dividends and must be updated
as required by law. Non-U.S. holders that do not timely provide us or our paying agent with the required certification, but that qualify
for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the
IRS.
If
a non-U.S. holder holds shares of our common stock in connection with the conduct of a trade or business in the United States, and dividends
paid on the shares of our common stock are effectively connected with such non-U.S. holder’s United States trade or business (and
if required by an applicable income tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United
States), the non-U.S. holder will be exempt from United States federal withholding tax. To claim the exemption, the non-U.S. holder must
generally furnish to us or our paying agent a properly executed IRS Form W-8ECI (or applicable successor form).
Any
dividends paid on shares of our common stock that are effectively connected with a non-U.S. holder’s United States trade or business
(and if required by an applicable income tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the
United States) generally will be subject to United States federal income tax on a net income basis at the regular graduated United States
federal income tax rates in much the same manner as if such non-U.S. holder were a resident of the United States. A non-U.S. holder that
is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable
income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Non-U.S. holders
should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.
Distributions
that we determine are in excess of our current and accumulated earnings and profits and that are in excess of a non-U.S. holder’s
tax basis in its shares of our common stock will be treated as gain from the sale of common stock as described under “—Sales
or Other Taxable Dispositions of Shares of Our Common Stock” below.
Sales
or Other Taxable Dispositions of Shares of Our Common Stock. Subject to the discussion of backup withholding and withholding
tax relating to foreign accounts below, a non-U.S. holder generally will not be subject to United States federal income tax for gain
recognized on a sale or other disposition of common stock unless one of the following conditions is satisfied:
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the
gain is effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and, if an income tax
treaty applies, is attributable to a permanent establishment maintained in the United States by such non-U.S. holder). The non-U.S.
holder will, unless an applicable treaty provides otherwise, be taxed on its net gain derived from the sale or other disposition
under regular graduated United States federal income tax rates. Effectively connected gains realized by a corporate non-U.S. holder
may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or a lower rate
as may be specified by an applicable income tax treaty; |
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in
the case of a non-U.S. holder who is an individual and holds the common stock as a capital asset, the holder is present in the United
States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions exist. Such gain will
be subject to United States federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty),
but may be offset by United States source capital losses (even though the individual is not considered a resident of the United States);
or |
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● |
our
common stock constitutes a USRPI within the meaning FIRPTA by reason of our status as a USRPHC for United States federal income tax
purposes. |
With
respect to the third bullet point above, because of our holdings of United States real property interests, we believe that we are a USRPHC
for United States federal income tax purposes. Because the determination of whether we are a USRPHC depends on the fair market value
of our United States real property interests relative to the fair market value of our other trade or business assets and any foreign
real property interests, it is possible that we may not remain a USRPHC in the future. As a USRPHC, if a class of our stock is regularly
traded on an established securities market, such stock will be treated as a USRPI only with respect to a non-U.S. holder that actually
or constructively holds more than 5% of such class of stock at any time during the shorter of the five-year period preceding the date
of disposition or the holder’s holding period for such stock. We anticipate that our common stock will be regularly traded on an
established securities market following this Offering. However, no assurance can be given in this regard and no assurance can be given
that our common stock will remain regularly traded in the future. If gain on the sale or other taxable disposition of shares of our common
stock were subject to taxation under FIRPTA as a sale of a USRPI, the non-U.S. holder would be subject to regular United States federal
income tax with respect to such gain in the same manner as a taxable U.S. holder (subject to any applicable alternative minimum tax and
a special alternative minimum tax in the case of nonresident alien individuals). In addition, if the sale or other taxable disposition
of shares of our common stock is subject to tax under FIRPTA, the purchaser of the stock would be required to withhold and remit to the
IRS 10% of the purchase price unless an exception applies. A non-U.S. holder also will be required to file a United States federal income
tax return for any taxable year in which it realizes a gain from the disposition of our common stock that is subject to United States
federal income tax.
Non-U.S.
holders should consult their tax advisors concerning the consequences of selling or otherwise disposing of shares of our common stock.
Backup
Withholding Tax and Information Reporting. We must report annually to each non-U.S. holder of shares of our common stock and
to the IRS the amount of payments on the shares of our common stock paid to such non-U.S. holder and the amount of any tax withheld with
respect to those payments. These information reporting requirements apply even if no withholding was required because the payments were
effectively connected with the non-U.S. holder’s conduct of a United States trade or business, or withholding was reduced or eliminated
by an applicable income tax treaty. This information also may be made available under a specific treaty or agreement with the tax authorities
in the country in which the non-U.S. holder resides or is established. Backup withholding, however, generally will not apply to distribution
payments to a non-U.S. holder of shares of our common stock provided the non-U.S. holder furnishes to us or our paying agent the required
certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN or IRS Form W-8ECI, or certain other requirements
are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason
to know, that the holder is a U.S. person that is not an exempt recipient.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit
against a non-U.S. holder’s United States federal income tax liability, provided the required information is timely furnished to
the IRS.
Additional
Withholding Tax Relating to Foreign Accounts. The Foreign Account Tax Compliance Act (“FATCA”) provides that a 30%
withholding tax will be imposed on certain payments (including dividends as well as gross proceeds from sales of stock giving rise to
such dividends) made to a foreign financial institution (as specifically defined in the Code) and certain other foreign entities if such
entity fails to satisfy certain new disclosure and reporting rules. FATCA generally requires that (i) in the case of a foreign financial
institution, the entity identifies and provides information in respect of financial accounts with such entity held (directly or indirectly)
by U.S. persons and U.S.-owned foreign entities and (ii) in the case of a foreign non-financial institution, the entity identifies and
provides information in respect of substantial U.S. owners of such entity. If the payee is a foreign financial institution and is subject
to the diligence and reporting requirements in clause (i) above, it must enter into an agreement with the U.S. Treasury requiring, among
other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain
information about such accounts, and withhold 30% on payments to non-compliant foreign financial institutions and certain other account
holders.
LEGAL
MATTERS
Certain
legal matters in connection with this Offering, including the validity of the shares of our common stock offered hereby, will be passed
upon for us by FitzGerald Kreditor Bolduc & Risbrough LLP, Irvine, California.
EXPERTS
Our
consolidated financial statements as of and for the years ended December 31, 2022 and 2021, included in this Offering Circular have been
so included in reliance on the report of BF Borgers CPA PC, an independent registered public accounting firm, given upon the authority
of such firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the Commission an Offering Statement on Form 1-A under Regulation A, with respect to the shares of our common stock being
offered by this Offering Circular. This Offering Circular, which constitutes part of that Offering Statement, does not contain all of
the information set forth in the Offering Statement or the exhibits and schedules which are part of the Offering Statement. Some items
included in the Offering Statement are omitted from the Offering Circular in accordance with the rules and regulations of the Commission.
For further information with respect to us and the common stock offered in this Offering Circular, we refer you to the Offering Statement
and the accompanying exhibits.
A
copy of the Offering Statement and the accompanying exhibits and any other document we file may be inspected without charge at the public
reference facilities maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549, and copies of all or any part of the
Offering Statement may be obtained from this office upon the payment of the fees prescribed by the Commission. The public may obtain
information on the operation of the public reference facilities in Washington, D.C. by calling the Commission at 1-800-SEC-0330. Our
filings with the Commission are available to the public from the Commission’s website at www.sec.gov.
Upon
the completion of this Offering, we will be subject to certain information and periodic reporting requirements under Regulation A. In
accordance therewith, we will file current reports, semi-annual reports, annual reports, and other information with the Commission. All
documents filed with the Commission are available for inspection and copying at the public reference room and website of the Commission
referred to above. We maintain a website at www.humbl.com. You may access our reports and other information free of charge at this website
as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Commission. The information
contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this Offering Circular.
PART
F/S
HUMBL,
INC. AND SUBSIDIARIES
Index
to Consolidated Financial Statements
Report
of Independent Registered Public Accounting Firm
To
the shareholders and the board of directors of HUMBL, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of HUMBL, Inc. as of December 31, 2022 and 2021, the related statements of
operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the United States.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In
addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/S/
BF Borgers CPA PC
BF
Borgers CPA PC (PCAOB ID 5041)
We
have served as the Company’s auditor since 2021
Lakewood,
CO
April
5, 2023
HUMBL,
INC
CONSOLIDATED BALANCE SHEETS (IN US$)
DECEMBER 31, 2022 AND 2021
| | |
DECEMBER 31, | | |
DECEMBER 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| ASSETS | |
| | | |
| | |
| | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash | |
$ | 616,950 | | |
$ | 3,173,103 | |
| Assets related to user cryptocurrencies safeguarding obligation | |
| 665,738 | | |
| - | |
| Accounts receivable | |
| 298,248 | | |
| 273,491 | |
| Inventory, net | |
| 1,038,816 | | |
| - | |
| Intangible assets - digital assets, current portion | |
| 6,609 | | |
| 2,695 | |
| Prepaid expenses and other current assets | |
| 29,476 | | |
| 57,693 | |
| Current assets of discontinued operations | |