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As
filed with the Securities and Exchange Commission on April 27,
2022
Registration
Statement No. 333-261403
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
Amendment
No. 4 to
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
HUMBL, INC.
(Exact
name of Registrant as specified in its charter)
Delaware |
|
5500 |
|
91-2048019 |
(State or
other jurisdiction
of incorporation or organization) |
|
(Primary
Standard Industrial
Classification Code Number) |
|
(I.R.S.
Employer
Identification No.) |
600 B Street
Suite 300
San Diego,
California
92101
(786)
738-9012
(Address,
including zip code, and telephone number, including area code, of
registrant’s principal executive offices)
Brian
Foote, CEO
600 B
Street
Suite 300
San
Diego, California 92101
(786)
738-9012
(Name,
address, including zip code, and telephone number, including area
code, of agent for service)
Copies
to:
Ernest M.
Stern, Esq.
Culhane Meadows PLLC
1701
Pennsylvania Avenue,
N.W.
Suite 200
Washington, D.C.
20006
(301)
910-2030
Approximate Date of
Proposed Sale to the Public: As soon as practicable after the
effective date of this registration statement.
If any of
the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. ☐
If this Form
is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
☐
If this Form
is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same offering. ☐
If this Form
is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same offering. ☐
Indicate by
check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
|
|
|
|
Non-accelerated filer |
☒ |
Smaller
reporting company |
☒ |
|
|
|
|
|
|
Emerging
growth company |
☒ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided to Section 7(a)(2)(B) of the Securities Act.
CALCULATION OF
REGISTRATION FEE
Title of each Class of
Securities to be Registered
|
|
Shares to be
Registered(1)
|
|
|
Proposed Maximum
Aggregate Offering
Price Per Share |
|
|
Maximum Aggregate
Offering Price(2)
|
|
|
Amount of
Registration Fee
|
|
Shares of Common Stock, par
value $0.00001 |
|
|
100,657,466 |
|
|
$ |
0.11 |
|
|
|
11,072,321 |
|
|
|
1,026.40 |
|
Shares of Common Stock issuable upon
exercise of warrants |
|
|
114,275,000 |
|
|
$ |
0.11 |
|
|
|
12,570,250 |
|
|
|
1,165.26 |
|
Shares of Common
Stock issuable upon conversion of Series B Preferred Stock |
|
|
77,450,000 |
|
|
$ |
0.11 |
|
|
|
8,519,500 |
|
|
|
789.76 |
|
Shares of Common
Stock issuable upon conversion of convertible notes |
|
|
77,000,000 |
|
|
$ |
0.11 |
|
|
|
8,470,000 |
|
|
|
785.17 |
|
Total number of securities to be registered |
|
|
369,382,466 |
|
|
$ |
0.11 |
|
|
|
40,632,071 |
|
|
|
3,766.59 |
|
|
(1) |
Pursuant to
Rule 416 under the Securities Act, this registration statement
shall be deemed to cover additional securities (i) to be offered or
issued in connection with any provision of any securities purported
to be registered hereby pursuant to terms which provide for a
change in the amount of securities being offered or issued to
prevent dilution resulting from stock splits, stock dividends, or
similar transactions and (ii) of the same class as the securities
covered by this registration statement issued or issuable prior to
completion of the distribution of the securities covered by this
registration statement as a result of a split of, or a stock
dividend on, the registered securities.
|
|
|
|
|
(2) |
Estimated
solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) promulgated under
the Securities Act of 1933, as amended. |
This
registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such
date as the commission, acting pursuant to said Section 8(a), may
determine.
The
information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and we are
not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED April 27, 2022
Prospectus
369,382,466 Shares of Common Stock
HUMBL,
Inc.
This
prospectus covers 369,382,466 shares of our common stock that may
be offered for resale or otherwise disposed of by the selling
stockholders listed on the Selling Stockholder table on page 27
(the “Selling Stockholders”).
We
will not receive any proceeds from the sale or other disposition of
the securities by the Selling Stockholders. However, we may receive
up to approximately $37,162,500 in gross proceeds upon the cash
exercise of the warrants by the Selling Stockholders. We will use
such proceeds, if and when received, for acquisitions and working
capital.
We are an “emerging growth company” under the federal securities
laws and will be subject to reduced public company reporting
requirements as set forth on page 9 of this prospectus. Our common
stock is quoted under the symbol “HMBL” on the OTCQB (“OTCQB”). On
April 25, 2022, the last reported sale price of our common stock
was $0.11.
Investing
in our securities involves a high degree of risk. See “Risk
Factors” beginning on page 13 in this prospectus for a
discussion of information that should be considered in connection
with an investment in our securities.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date of this prospectus is April 27, 2022
ADDITIONAL
INFORMATION
You should
rely only on the information contained or incorporated by reference
in this prospectus and in any accompanying prospectus supplement.
No one has been authorized to provide you with different
information. The shares are not being offered in any jurisdiction
where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of such
documents.
TABLE OF
CONTENTS
Trademarks
This
prospectus contains references to our trademarks and service marks
and to those belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this prospectus may
appear without the ® or TM symbols, but such references are not
intended to indicate, in any way, that we will not assert, to the
fullest extent possible under applicable law, our rights or the
rights of the applicable licensor to these trademarks and trade
names. We do not intend our use or display of other companies’
trade names, trademarks or service marks to imply a relationship
with, or endorsement or sponsorship of us by any other
companies.
PROSPECTUS SUMMARY
The
following summary highlights information contained elsewhere in
this prospectus. This summary may not contain all of the
information that may be important to you. You should read this
entire prospectus carefully, including the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our historical financial
statements and related notes included elsewhere in this prospectus.
In this prospectus, unless otherwise noted, the terms “the
Company,” “HUMBL”, “we,” “us,” and “our” refer to HUMBL,
Inc.
The
Company
Overview
HUMBL is a
Web 3, digital commerce platform that was built to connect
consumers, freelancers and merchants in the digital economy. HUMBL
provides simple tools and packaging for complex new technologies
such as blockchain, in the same way that previous cycles of
e-commerce and the cloud were more simply packaged by companies
such as Facebook, Apple, Amazon and Netflix over the past several
decades.
Our goal is
to provide ready built tools and platforms for consumers and
merchants to seamlessly participate in the digital economy. HUMBL
is built on a patent-pending decentralized technology stack that
utilizes both core and partner technologies, to provide faster
connections to the digital economy and each other.
We have
three interconnected product verticals:
● HUMBL Pay
– A mobile app that allows peers, consumers and merchants to
connect in the digital economy.
● HUMBL
Marketplace – A mobile marketplace that allows consumers and
merchants to connect more seamlessly in the digital
economy.
● HUMBL
Financial – Financial products and services, targeted for
simplified investing on the blockchain.
HUMBL Pay
We are
developing a mobile application that allows customers to migrate to
digital forms of payment, along with services such as maps, ratings
and reviews. We are also working rapidly to integrate the use of
search, discovery, peer-to-peer cash and ticketing around the world
as these services migrate into digital and blockchain-based
modalities. The mobile application is designed to provide
functionality to the following groups:
●
Individuals - Consumers who want to discover, pay, rate and review
experiences digitally versus paper bills and hardware point-of-sale
(“POS”);
●
Freelancers - Service providers and gig workers that want to get
paid from anywhere they work vs. paper bills and hardware POS;
and
● Merchants
– Primarily brick and mortar vendors that want to get paid
digitally vs. paper bills and hardware POS.
HUMBL Marketplace
Through
our online marketplace, we are developing the capability for
merchants to list a wide range of physical products, that, when
appropriate, incorporate the benefits of blockchain. HUMBL is
working on technologies to provides merchants with the ability to
list and sell goods with greater levels of authentication, to
improve the merchant’s ability to trade, track and receive payment
for their products.
Through
our online marketplace we also allow for the listing of
non-fungible tokens (NFTs). NFTsallow entities and
individuals such as athletes, celebrities, agencies, artists and
companies to monetize their digital images, multimedia content and
catalogues on the blockchain. HUMBL provides a marketplace for
artists and athletes to connect online in the sale of digital
collectibles to fans and collectors and provides a rigorous set of
terms and conditions that govern what can and cannot be listed on
the marketplace. We currently review all listings to screen for
graphic content, potential intellectual property rights violations,
and potential securities law violations. The NFT marketplace is
operated through a third-party marketplace plug-in (OpenSea),
electronic wallet extensions (such as MetaMask), and the Ethereum
blockchain. Users participate in the NFT marketplace by linking
their digital wallets to our platform and engaging (e.g., buying,
selling, bidding) with the NFTs listed on our platform. The
services provided by HUMBL are administrative. HUMBL is a platform
and does not act as a broker, financial institution, or creditor.
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.
We
receive revenue from the NFT marketplace in two ways. First, for
some clients HUMBL provides design services to help artists,
athletes and entertainers create NFTs to be sold to their fans. In
these circumstances HUMBL typically receives a flat fee for
providing such services that is paid out of the sales price of the
NFT. The size of the fee depends on the scope and complexity of the
design services provided. Second, HUMBL receives a transaction fee
each time an NFT sells on the NFT marketplace.
The NFT marketplace allows creators to mint NFTs using their own
intellectual property and list those NFTs for sale (primary sales)
on the marketplace. The NFT marketplace also allows for NFTs to be
resold (secondary sales) on the platform, but currently only NFTs
that were originally minted on the Company’s NFT Marketplace or are
otherwise approved by the Company may be listed for secondary sales
on the Marketplace. The Company does not otherwise support or
influence the market for the resale of NFTs sold on its platform.
Other than requiring creators to attest they own the IP used to
create their NFTs and monitoring for obvious copyright violations,
the Company does not enforce any rights related to the primary or
secondary sales of NFTs. Payment transactions for the purchase and
sale of NFTs are made through the use of smart contracts on the
Ethereum blockchain. The Company does not handle separate,
off-chain payments for NFTs. Tracking and payment of resale royalty
fees are accomplished automatically through the use of smart
contracts. The Company is not responsible for distributing or
managing resale royalty fees.
We have policies and procedures to analyze whether each NFT listed
on our platform could be deemed to be a “security” under applicable
laws. Our policies and procedures do not constitute a legal
standard, but rather represent our company-developed model, which
permits us to make a risk-based assessment regarding the likelihood
that a particular NFT could be deemed a “security” under applicable
laws. Our employees responsible for making such determinations have
received training regarding the indicia of a “security” and work
together with legal counsel to make a determination with respect to
each NFT proposed to be listed on platform. NFTs that do not pass
the screening process are refused listing on our platform.
In
September 2021, we launched HUMBL Tickets, initially focused on the
offering of secondary (resale) tickets to thousands of live events
across North America. The inventory listings and ticket fulfilment
are provided by Ticket Evolution and we earn a commission for each
sale. In addition to HUMBL’s subsidiary Tickeri, we will continue
to work with clients to merge the realms of NFTs, event tickets and
blockchain authentication.
HUMBL Financial
We developed
HUMBL Financial to package step-function technologies such as
blockchain into “several clicks” for the customer. With the total
value of digital assets in excess of $1 trillion, there is
increased conviction that investment markets will need to migrate
to more digital forms of asset tokenization. This will create
opportunities for a new generation of market participants and
provide access to markets that have been historically reserved for
high-net-worth individuals.
In 2021, HUMBL Financial created BLOCK ETX products to simplify
digital asset investing for customers and institutions seeking
exposure to a new, 24/7 digital asset class. We have launched this
product in 100 countries outside the United States. HUMBL Financial
has developed proprietary, multi-factor blockchain indexes, trading
algorithms and financial services for the new digital asset trading
markets to accommodate index, active and thematic investment
strategies. BLOCK ETXs are completely non-custodial,
algorithmically driven software services that allow customers to
purchase and hold digital assets in pre-set allocations through
their own digital asset exchange accounts. BLOCK ETXs are
compatible for United States customers who have accounts with
Coinbase Pro, Bittrex US or Binance US and for non-US customers who
have accounts with Bittrex Global. BLOCK ETXs were served first on
the desktop and web version of the HUMBL platform, with the goal of
future applications inside the HUMBL mobile application. HUMBL
Financial is open to the licensing of the BLOCK ETXs to
institutions and exchanges. HUMBL Financial also plans to offer
trusted, third-party financial services in areas such as payments,
investments, credit card services and lending across the HUMBL
platform over time.
In February 2022, the Company elected to suspend offering the BLOCK
ETX products pending further legal analysis regarding how to offer
the BLOCK ETXs in a fully compliant manner with the evolving laws
and regulatory treatment of such novel products. In accordance with
ASC 205-20-50-1(a), the timing of the disposal was February 28,
2022. The Company met the criteria for the BLOCK ETX operations to
be classified as held for sale at that time.
Organizational
History
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 its
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, we entered into a Stock Purchase Agreement with
Henry J. Boucher, then President, CEO and Chairman of the Board of
Directors, and Brian Foote under which Henry J. Boucher sold his
controlling interest in the Company in the form of 7,000,000 shares
of the Company’s 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.
Recent
Acquisitions
On June 3,
2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock
transaction totaling $20,000,000 following which Tickeri became a
subsidiary of HUMBL. Tickeri is a leading ticketing, live events
and box office SaaS platform featuring Latin events and artists
throughout the United States, Latin America, and the Caribbean
corridor. The purchase price for the stock purchase was $20,000,000
of which we must pay $10,000,000 in our common stock and
$10,000,000 was paid through two promissory notes. The shares had a
deemed value equal to the volume weighted average price per share
of HUMBL common stock on the OTC Markets for the ten consecutive
trading days ending with the complete trading day ending two
trading days prior to the closing. We issued the two shareholders
of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of
our common stock each. We also issued to each of Juan and Javier
Gonzalez a secured promissory note in the face amount of
$5,000,000. The promissory notes are due and payable on or before
December 31, 2022, bear interest at the rate of 5% per annum and
are secured by the equity interests of Tickeri. In the event of an
uncured default by HUMBL under the promissory note, Juan and Javier
have the right to recover the ownership of Tickeri and re-commence
the business and operations of Tickeri free and clear of any claims
or encumbrances by HUMBL. We intend to limit the integration of
Tickeri’s assets with our assets until the promissory notes are
paid in full. We agreed to register on Form S-1 within three months
from the closing the shares issued to Juan and Javier Gonzalez and
have the registration statement declared effective within six
months of the closing date. Following the closing, Juan Gonzalez
and Javier Gonzalez entered into employment agreements having a
term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL,
respectively
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. Monster was founded by Doug
Brandt and Kevin Childress. Monster will collaborate with HUMBL in
the production of NFTs and other digital content. The purchase
price for all of the membership interests in Monster was paid
through the issuance of one convertible note and one
non-convertible note to each of Doug Brandt and Kevin Childress in
the aggregate principal amount of $8,000,000. The convertible notes
were issued to Doug Brandt (through an entity owned by him) and
Kevin Childress in the aggregate principal amount of $7,500,000.
The notes convert at the holder’s election at $1.20 per share, bear
interest at 5% per annum and are due in 18 months from issuance. We
also issued non-convertible notes to Doug Brandt and Kevin
Childress in the aggregate amount of $500,000. These notes bear
interest at the rate of 5% per annum and are due on April 1, 2022.
Doug Brandt and Kevin Childress each entered into employment
agreements with Monster having a term of three years. Doug Brandt
was appointed as the CEO of Monster and Kevin Childress was
appointed as its President and Creative Director.
On February 12, 2022, the Company entered into an asset purchase
agreement with BizSecure, Inc. (“BizSecure”). The Company acquired
certain assets of BizSecure including tradenames, trademarks and
logos; the Self Sovereign Identity Wallet; digital files,
technology, specification sheets, product design information, code,
algorithms; and customer contracts. The Company entered into
employment agreements with two BizSecure employees, Alfonso
Rodriguez-Arana and Clement Danish, as part of the agreement. Mr.
Rodriguez-Arana’s salary with the Company is $150,000 per year and
Mr. Danish’s salary with the Company is $125,000 per year. The
Company issued 13,200,000 common shares and 26,800,000 restricted
stock units that vest quarterly commencing April 1, 2022 for a
period of two years. The shares and restricted stock units had a
value of $6,756,000 at the time of the transaction. The Company
accounted for this transaction as an asset purchase and not a
business combination under ASC 805.
On March 3, 2022, we acquired Ixaya Business SA de CV (“Ixaya”) in
exchange for 8,962,306 shares of our common stock and $150,000 in
cash. Ixaya is Mexico-based firm that develops software and IT
solutions across various industries. The acquisition gives HUMBL
access to Ixaya team of software developers as well as their suite
of existing products. Ixaya will continue to operate as a
standalone business servicing Latin American customers. Ixaya is
not considered a significant subsidiary under Regulation S-X Rule
1-02(w).
Recent
Financings and Material Agreements
Aurea
Group
On
March 15, 2021 we entered into a Securities Purchase Agreement with
HUMBL CL SpA (“HUMBL CL”), an affiliate of Aurea Group Ventures
(“Aurea Group”), a Chilean multi-family office, under which Aurea
Group purchased shares of our common stock in return for exclusive
country rights to Chile of our HUMBL products for a purchase price
of up to $7,500,000.
Under the terms of the Securities Purchase Agreement, HUMBL CL
agreed to purchase 437,500 shares of our common stock for
$1,000,000. The payment for these shares was due on or before March
30, 2021 but as a result of restrictions imposed due to COVID-19
was paid in two tranches of $500,000 each on April 5, 2021 and
April 6, 2021. In addition, HUMBL CL also received the right to
purchase 1,562,500 shares of HUMBL common stock for $6,500,000 by
December 31, 2021 and to receive a 35% equity interest in a Chilean
subsidiary HUMBL intends to form to conduct its operations in
Chile.
The Securities Purchase Agreement provides that if HUMBL CL
exercises its right to purchase the subsidiary interest, it will
receive 35% of the profits from operations of the HUMBL family of
products in Chile. In addition, HUMBL CL also received a right of
first refusal with respect to regional or country rights sales in
Latin America.
On January 3, 2022, we entered into a Settlement Agreement with
HUMBL CL whereby HUMBL agreed to issue HUMBL CL 4,000,000 shares of
common stock and HUMBL CL agreed to waive its right to purchase the
Latin America territory rights.
We are still working with Aurea Group on Latin American business
development opportunities for our products in key verticals such
as: banking, merchant and financial services, real estate,
hospitality, tourism, sports, festivals, entertainment and
ticketing services in the region.
Brighton
Capital Partners, LLC
On April 14,
2021 we received bridge financing in the form of a loan in the
principal amount of $3,300,000 from Brighton Capital Partners, LLC
(“Brighton Capital”) for which we issued them a convertible
promissory note due 15 months after April 14, 2021. The note bears
interest at 10% per annum and is convertible at Brighton Capital’s
election at a fixed price of $3.15 per share.
Under
the terms of the note, Brighton Capital has a right of redemption
commencing on the earlier of the effective date of this
Registration Statement and the 12-month anniversary of the note, to
cause us to redeem all or any portion of the note in cash or shares
of our common stock, at our election. Any redemption with shares of
our common stock shall be at the “market price” which is defined as
80% of our lowest closing trade price for the 10 consecutive
trading days prior to the date on which the market price is
measured. The Company and Brighton Capital also entered into an
Equity Financing Agreement for the purchase of up to $50,000,000 of
the Company’s common stock by Brighton Capital. The Company and
Brighton Capital agreed to terminate the Equity Financing Agreement
on October 26, 2021. The Company has agreed to pay a termination
fee of 4,500,000 shares of its common stock to Brighton
Capital.
Next
Generation Wealth Management LLC
On May 13,
2021, we entered into a Securities Purchase Agreement with Next
Generation Wealth Management LLC (“Next Generation”) under which we
received a loan of $382,500 for which we issued a convertible note
to Next Generation. in the principal amount of $382,500 bearing
interest at 8% per annum with a maturity date 22 months from the
date of the note. The note is convertible into shares of our common
stock at $1.00 per share. The note is subject to customary default
provisions. Under the terms of the Securities Purchase Agreement,
we also issued a warrant to allow Next Generation to purchase
750,000 shares of our common stock during a two-year period ending
May 13, 2023 at an exercise price of $1.00 per share. On June 24,
2021, the note was split into two separate notes and warrants and
assigned to The Strider Lir Trust and Scottish Isles Investing,
LLC, the notes being in the principal amount of $336,600 and
$45,900, respectively, and two separate warrants to purchase
660,000 and 90,000 shares of our common stock,
respectively.
Maize and
Gray, LLC
On
May 13, 2021, we entered into a Securities Purchase Agreement with
Maize and Gray LLC (“Maize”) under which we received a loan of
$402,750 for which we issued a convertible note to Maize in the
principal amount of $402,750 bearing interest at 8% per annum with
a maturity date 22 months from the date of the note. The note is
convertible into shares of our common stock at $1.00 per share. The
note is subject to customary default provisions. Under the terms of
the Securities Purchase Agreement, we also issued a warrant to
allow Maize to purchase 825,000 shares of our common stock during a
two-year period ending May 13, 2023 at an exercise price of $1.00
per share. Maize and Gray, LLC subsequently changed its name to 9G
Investments, LLC.
Archura
Capital Pty Ltd
On May 17,
2021, we entered into a Securities Purchase Agreement with Archura
Capital Pty Ltd (“Archura”) under which we received a loan in the
amount of $1,020,000 for which we issued a convertible note in the
principal amount of $1,020,000 bearing interest at 8% per annum
with a maturity date 22 months from the date of the note. The note
is convertible into shares of our common stock at $1.00 per share.
The note is subject to customary default provisions.
KWP 50,
LLC
On May 19,
2021, we entered into a Securities Purchase Agreement with KWP 50,
LLC (“KWP 50”) under which we received a loan of $497,250 for which
we issued a convertible note to KWP 50 in the principal amount of
$497,250 bearing interest at 8% per annum with a maturity date 22
months from the date of the note. The note is convertible into
shares of our common stock at $1.00 per share. The note is subject
to customary default provisions. The note may not be prepaid unless
the lender consents or there is a change of control of the Company.
Under the terms of the Securities Purchase Agreement, we also
issued a warrant to allow KWP 50 to purchase 975,000 shares of our
common stock during a two-year period ending May 19, 2023 at an
exercise price of $1.00 per share.
North
Falls Investments, L.P
On May 19,
2021, we entered into a Securities Purchase Agreement with North
Falls Investments, L.P. (“North Falls”) under which we received a
loan of $153,000 for which we issued a convertible note to North
Falls in the principal amount of $153,000 bearing interest at 8%
per annum with a maturity date 22 months from the date of the note.
The note is convertible into shares of our common stock at $1.00
per share. The note is subject to customary default provisions. The
note may not be prepaid unless the lender consents or there is a
change of control of the Company. Under the terms of the Securities
Purchase Agreement, we also issued a warrant to allow North Falls
to purchase 300,000 shares of our common stock during a two-year
period ending May 19, 2023 at an exercise price of $1.00 per
share.
CMP76,
LLC
On May 19,
2021, we entered into a Securities Purchase Agreement with CMP76,
LLC (“CMP76”) under which we received a loan of $76,500 for which
we issued a convertible note to CMP76 in the principal amount of
$76,500 bearing interest at 8% per annum with a maturity date 22
months from the date of the note. The note is convertible into
shares of our common stock at $1.00 per share. The note is subject
to customary default provisions. The note may not be prepaid unless
the lender consents or there is a change of control of the Company.
Under the terms of the Securities Purchase Agreement, we also
issued a warrant to allow CMP76 to purchase 150,000 shares of our
common stock during a two-year period ending May 19, 2023 at an
exercise price of $1.00 per share.
Murtaugh
Group LLC
On June 21,
2021, we entered into a Securities Purchase Agreement with Murtaugh
Group LLC (“Murtaugh”) under which we received a loan of $382,500
for which we issued a convertible note to Murtaugh in the principal
amount of $82,500 bearing interest at 8% per annum with a maturity
date 22 months from the date of the note. The note is convertible
into shares of our common stock at $1.00 per share. The note is
subject to customary default provisions. The note may not be
prepaid unless the lender consents or there is a change of control
of the Company. Under the terms of the Securities Purchase
Agreement, we also issued a warrant to allow Murtaugh to purchase
750,000 shares of our common stock during a two-year period ending
June 21, 2023 at an exercise price of $1.00 per share.
Infinity
Block Investments, LLC
On June 21,
2021, we entered into a Securities Purchase Agreement with Infinity
Block Investments LLC (“Infinity”) under which we received a loan
of $382,500 for which we issued a convertible note to Infinity in
the principal amount of $382,500 bearing interest at 8% per annum
with a maturity date 22 months from the date of the note. The note
is convertible into shares of our common stock at $1.00 per share.
The note is subject to customary default provisions. The note may
not be prepaid unless the lender consents or there is a change of
control of the Company. Under the terms of the Securities Purchase
Agreement, we also issued a warrant to allow Infinity to purchase
750,000 shares of our common stock during a two-year period ending
June 21, 2023 at an exercise price of $1.00 per share.
Hahanakai,
LLC
On August
30, 2021, we entered into a Securities Purchase Agreement with
Hahanakai, LLC (“Hahanakai”) under which we received a loan of
$153,000 for which we issued a convertible note to Hahanakai in the
principal amount of $153,000 bearing interest at 8% per annum with
a maturity date 22 months from the date of the note. The note is
convertible into shares of our common stock at $0.90 per share. The
note is subject to customary default provisions. The note may not
be prepaid unless the lender consents or there is a change of
control of the Company. Under the terms of the Securities Purchase
Agreement, we also issued a warrant to allow Hahanakai to purchase
375,000 shares of our common stock during a two-year period ending
August 30, 2023 at an exercise price of $0.90 per share.
Joy Corbin
On November 12, 2021, we entered into a Securities Purchase
Agreement with Joy Corbin (“Ms. Corbin”) under which we received a
loan of $306,000 for which we issued a convertible note to Ms.
Corbin in the principal amount of $306,000 bearing interest at 8%
per annum with a maturity date 22 months from the date of the note.
The note is convertible into shares of our common stock at $0.60
per share. The note is subject to customary default provisions. The
note may not be prepaid unless the lender consents or there is a
change of control of the Company. Under the terms of the Securities
Purchase Agreement, we also issued a warrant to allow Ms. Corbin to
purchase 1,000,000 shares of our common stock during a two-year
period ending November 12, 2023 at an exercise price of $0.60 per
share.
Sartorii, LLC
On February 22, 2022, the Company
entered into a promissory note with Sartorii, LLC (“Sartorii”) in
the principal amount of $3,000,000. The promissory note bears
interest at the annual interest rate of four percent (4%) and
matures on February 22, 2025. On March 30, 2022, the Company
entered into a second promissory note with Sartorii in the
principal amount of $1,500,000. The promissory note bears interest
at the annual interest rate of four percent (4%) and matures on
March 30, 2025. Sartorii is managed by a related party.
Red Rock
Development Group, LLC; Hard Rock Suite Purchase
On
July 29, 2021, we entered into a Development Services Agreement
with Red Rock Development Group, LLC (“Red Rock”). We intend to
purchase and/or develop a portfolio of real estate assets and then
potentially tokenize the interest in the portfolio. We have engaged
Red Rock to advise us with respect to that process. As part of the
foregoing strategy, we purchased a suite at the Hard Rock Hotel in
San Diego, California. HUMBL is the owner of this suite and entered
into a long-term rental agreement with the hotel to manage the
property. HUMBL has use of the suite for 28 calendar days a year
and will receive their proportionate income for the other days the
suite is being used. We issued 10,000,000 shares of our common
stock to Red Rock as payment for its services.
Note Exchange
On March 28, 2022, HUMBL entered into exchange agreements with
various noteholders. Pursuant to such agreements, HUMBL exchanged
promissory notes representing $3,176,804.61 in outstanding debt
obligations for 37,374,172 shares of common stock. The note
exchanges were effective as of March 31, 2022.
Name
Change
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 that became effective March 26,
2021.
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.
Implications of Being
an Emerging Growth Company
As a company
with less than $1.0 billion in revenue during our most recently
completed fiscal year, we qualify as an “emerging growth company”
as defined in Section 2(a) of the Securities Act of 1933, as
amended, which we refer to as the Securities Act, as modified by
the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
As an emerging growth company, we may take advantage of specified
reduced disclosure and other requirements that are otherwise
applicable, in general, to public companies that are not emerging
growth companies. These provisions include:
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Reduced
disclosure about our executive compensation
arrangements; |
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● |
No
non-binding shareholder advisory votes on executive compensation or
golden parachute arrangements; |
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● |
Exemption
from the auditor attestation requirement in the assessment of our
internal control over financial reporting; and |
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● |
Reduced
disclosure of financial information in this prospectus, limited to
two years of audited financial information and two years of
selected financial information. |
As a smaller
reporting company, each of the foregoing exemptions is currently
available to us. We may take advantage of these exemptions for up
to five years or such earlier time that we are no longer an
emerging growth company. We would cease to be an emerging growth
company if we have more than $1.0 billion in annual revenues as of
the end of a fiscal year, if we are deemed to be a
large-accelerated filer under the rules of the Securities and
Exchange Commission, or if we issue more than $1.0 billion of non-
convertible debt over a three-year-period.
The JOBS Act
permits an emerging growth company to take advantage of an extended
transition period to comply with new or revised accounting
standards applicable to public companies. We have elected the
extended transition period for complying with new or revised
accounting standards pursuant to Section 107(b) of the Act until
the earlier of the date we (i) are no longer an emerging growth
company or (ii) affirmatively and irrevocably opt out of the
extended transition period provided in the JOBS Act. As a result,
our financial statements may not be comparable to companies that
comply with new or revised accounting pronouncements as of public
company effective dates.
Corporate
Information
We were
formed under the name Ponca Acquisition Corporation in Nevada on
May 3, 2000, as a “blank check” development stage company We were
incorporated in the State of Nevada on May 3, 2000. Our principal
executive office is located at 600 B Street, Suite 300, San Diego,
California 92101, and our telephone number is (786) 738-9012. Our
internet website is www.humblpay,com,. The
information on, or that can be accessed through, our website is not
part of this prospectus, and you should not rely on any such
information in making the decision whether to purchase our common
stock.
The
Offering
Common Stock
to be Sold |
|
Up to
369,382,466 shares of our common stock including (i) up to
77,000,000 shares underlying convertible notes we have issued to
various persons, (ii) up to 114,275,000 shares of our common stock
underlying warrants we have issued to various persons; (iii)
77,450,000 shares of our common stock underlying Series B Preferred
Stock we have issued to individuals; and (iv) 100,657,466 shares of
our common stock issued in connection with certain acquisition and
financing activity. We will not receive any proceeds from the sale
of common stock by the Selling Stockholders but will receive up to
$37,162,500 upon exercise of warrants by the Selling
Stockholders. |
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Common Stock
Outstanding |
|
1,429,214,389
as of
April 25, 2022 |
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Use of
Proceeds |
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This
is a resale prospectus to register shares of the Selling
Stockholders but we may receive up to approximately $37,162,500 in
gross proceeds upon the cash exercise of the warrants by the
Selling Stockholders. |
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We intend to
use the net proceeds from the exercise of warrants by the Selling
Stockholders for (i) potential mergers and acquisitions, (ii)
technology costs, (iii) general working capital and (iv) debt
repayment. The expected uses of the net proceeds from the sale of
the offered shares represents our intentions based upon our current
plans and business conditions. The precise uses, amounts and timing
of the application of proceeds have yet to be determined by our
management and may differ, in some or all respects, from those
enumerated above. The amounts used for each purpose and timing of
our actual expenditures may also vary significantly depending on
numerous factors. See “Use of Proceeds.” We will not receive any of
the proceeds from the sale or other disposition of the securities
by the Selling Stockholders. See “Use of Proceeds”. |
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Dividend
Policy |
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We have
never declared any cash dividends on our common stock. We currently
intend to retain all available funds and any future earnings for
use in financing the growth of our business and do not anticipate
paying any cash dividends for the foreseeable future. See “Dividend
Policy”. |
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OTC Pink
Symbol |
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HMBL |
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Risk Factors |
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You should
carefully consider the information set forth in this prospectus
and, in particular, the specific factors set forth in the “Risk
Factors” section beginning on page 13 of this prospectus before
deciding whether or not to invest in our common stock. |
Summary
Financial Information
The summary
financial information set forth below is derived from the more
detailed audited consolidated financial statements of the Company
appearing elsewhere in this prospectus. You should read the summary
consolidated financial information below in conjunction with
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our financial statements, including the
notes to such financial statements.
Statement
of Operations Data: |
|
Year
Ended |
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|
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December
31,
2021 |
|
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December
31,
2020 |
|
|
December
31,
2019 |
|
|
|
|
|
|
|
|
|
|
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Revenues,
net |
|
$ |
2,503,388 |
|
|
$ |
- |
|
|
$ |
- |
|
Cost of
Revenues |
|
|
1,104,959 |
|
|
|
- |
|
|
|
- |
|
Gross
Profit |
|
|
1,398,429 |
|
|
|
- |
|
|
|
- |
|
Total
Operating Expenses |
|
|
46,113,325 |
|
|
|
705,724 |
|
|
|
280,742 |
|
Loss from
Operations |
|
|
(44,714,896 |
) |
|
|
(705,724 |
) |
|
|
(280,742 |
) |
Other income
(expense) |
|
|
(4,940,308 |
) |
|
|
(6,739 |
) |
|
|
- |
|
Net (Loss)
Income Before Income Taxes |
|
$ |
(49,655,704 |
) |
|
$ |
(712,463 |
) |
|
$ |
(280,742 |
) |
Basic and
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per
Share |
|
$ |
(0.05 |
) |
|
$ |
(0.0007 |
) |
|
|
N/A |
|
Weighted Average Number
of Shares Outstanding Basic and Diluted |
|
|
942,331,830 |
|
|
|
982,108,478 |
|
|
|
N/A |
|
Balance
Sheet Data: |
|
December
31,
2021 |
|
|
December
31,
2020 |
|
|
December
31,
2019 |
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,493,213 |
|
|
$ |
1,720,979 |
|
|
$ |
4,855 |
|
Other
Current Assets |
|
|
385,655 |
|
|
|
84,591 |
|
|
|
2,395 |
|
Fixed
assets, net of accumulated depreciation |
|
|
356,447 |
|
|
|
- |
|
|
|
- |
|
Goodwill |
|
|
6,531,346 |
|
|
|
- |
|
|
|
- |
|
Total
Assets |
|
$ |
10,766,661 |
|
|
$ |
1,805,570 |
|
|
$ |
7,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt/Convertible and
Non-convertible |
|
$ |
24,761,075 |
|
|
$ |
181,103 |
|
|
$ |
- |
|
Other
Current Liabilities |
|
|
2,464,086 |
|
|
|
63,635 |
|
|
|
83,292 |
|
Preferred
Stock |
|
|
75 |
|
|
|
70 |
|
|
|
- |
|
Common
Stock |
|
|
10,230 |
|
|
|
9,742 |
|
|
|
- |
|
Additional
Paid-In Capital |
|
|
34,182,004 |
|
|
|
2,545,825 |
|
|
|
205,500 |
|
Accumulated
Deficit |
|
|
(50,650,809 |
) |
|
|
(994,805 |
) |
|
|
(281,542 |
) |
Total
Liabilities and Stockholders’ Equity |
|
$ |
10,766,661 |
|
|
$ |
1,805,570 |
|
|
$ |
7,250 |
|
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. Such
forward-looking statements include those that express plans,
anticipation, intent, contingency, goals, targets or future
development and/or otherwise are not statements of historical fact.
These forward-looking statements are based on our current
expectations and projections about future events and they are
subject to risks and uncertainties known and unknown that could
cause actual results and developments to differ materially from
those expressed or implied in such statements.
In some
cases, you can identify forward-looking statements by terminology,
such as “expects”, “anticipates”, “intends”, “estimates”, “plans”,
“potential”, “possible”, “probable”, “believes”, “seeks”, “may”,
“will”, “should”, “vision,” “could” or the negative of such terms
or other similar expressions. Accordingly, these statements involve
estimates, assumptions and uncertainties that could cause actual
results to differ materially from those expressed in them. Any
forward-looking statements are qualified in their entirety by
reference to the factors discussed throughout this
prospectus.
You should
read this prospectus and the documents that we reference herein and
therein and have filed as exhibits to the registration statement,
of which this prospectus is part, completely and with the
understanding that our actual future results may be materially
different from what we expect. You should assume that the
information appearing in this prospectus is accurate as of the date
on the front cover of this prospectus only. Because the risk
factors referred to above could cause actual results or outcomes to
differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue
reliance on any forward-looking statements. These risks and
uncertainties, along with others, are described above under the
heading “Risk Factors” beginning on page 13 of this prospectus.
Further, any forward-looking statement speaks only as of the date
on which it is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events, except as required by law. New
factors emerge from time to time, and it is not possible for us to
predict which factors will arise. In addition, we cannot assess the
impact of each factor 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 qualify all of the information presented in this
prospectus, and particularly our forward-looking statements, by
these cautionary statements.
RISK FACTORS
Investing
in our common stock involves a high degree of risk. Prospective
investors should carefully consider the risks described below,
together with all of the other information included or referred to
in this prospectus, before purchasing shares of our common stock.
There are numerous and varied risks that may prevent us from
achieving our goals. If any of these risks actually occurs, our
business, financial condition or results of operations may be
materially adversely affected. In such case, the trading price of
our common stock could decline and investors in our common stock
could lose all or part of their investment.
Risks
Related to Our Company and Our Business
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 $(50,650,809) as of December 31,
2021 as well as a net loss of $49,656,004 and $713,263 for the
years ended December 31, 2021 and 2020, 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.
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.
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.
Because we do not
have an audit or compensation committee, shareholders will have to
rely on the entire Board of Directors to perform these
functions.
We do not
have an audit or compensation committee comprised of independent
directors. Indeed, we do not have any audit or compensation
committee. These functions are performed by the Board of Directors
as a whole. Thus, there is a potential conflict in that board
members who are also part of management will participate in
discussions concerning management compensation and audit issues
that may affect management decisions.
We
expect to face intense competition, often from companies with
greater resources and experience than we have.
To acquire
qualified companies, we are likely to face competition from
companies that have substantially greater financial, technological,
managerial and research and development resources and experience
than we have. In addition, if we are successful in closing our
acquisition of one or more target companies, these acquired
companies are likely to face competition for their service and
product offerings from large and well-established companies that
have greater marketing and sales experience and capabilities than
we have. If we are unable to compete successfully, we may be unable
to grow, sustain our revenue or be successful in achieving our
business plan.
Current global
financial conditions have been characterized by increased
volatility which could negatively impact our business, prospects,
liquidity and financial condition.
Current
global financial conditions and recent market events have been
characterized by increased volatility and the resulting tightening
of the credit and capital markets has reduced the amount of
available liquidity and overall economic activity. We cannot
guaranty that debt or equity financing, the ability to borrow funds
or cash generated by operations will be available or sufficient to
meet or satisfy our initiatives, objectives or requirements. Our
inability to access sufficient amounts of capital on terms
acceptable to us for our operations will negatively impact our
business, prospects, liquidity and financial condition.
We are
growing the size of our organization, and we may experience
difficulties in managing any growth we may
achieve.
As of
the date of this prospectus, we have 42 full-time 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. Future growth would impose significant
added responsibilities on members of management. Our management may
not be able to accommodate those added responsibilities, and our
failure to do so could prevent us from effectively managing future
growth, if any, and successfully growing our Company.
Our
potential for rapid growth and our entry into new markets make it
difficult for us to evaluate our current and future business
prospects, and we may be unable to effectively manage any growth
associated with these new markets, which may increase the risk of
your investment and could harm our business, financial condition,
results of operations and cash flow.
Our entry
into new markets as we seek to expand globally the adoption of our
software services and seek to acquire complementary businesses may
place a significant strain on our resources and increase demands on
our executive management, personnel and systems, and our
operational, administrative and financial resources may be
inadequate. We may also not be able to effectively manage any
expanded operations or achieve planned growth on a timely or
profitable basis, particularly if the number of customers using our
technology significantly increases or their demands and needs
change as our business expands. If we are unable to manage expanded
operations effectively, we may experience operating inefficiencies,
the quality of our products and services could deteriorate, and our
business and results of operations could be materially adversely
affected.
If we
are unable to develop and maintain our brand and reputation for our
service and product offerings, our business and prospects could be
materially harmed.
Our business
and prospects depend, in part, on developing and then maintaining
and strengthening our brand and reputation in the markets we will
serve and for the companies we acquire. If problems arise with our
future products or services, our brand and reputation could be
diminished. If we fail to develop, promote and maintain our brand
and reputation successfully, our business and prospects could be
materially harmed.
Any
failure to protect our future intellectual property rights could
impair our ability to protect our technology and our
brand.
Our success
depends in part on our ability to enforce our intellectual property
and other proprietary rights of the companies we expect to acquire.
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.
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. For
example, the NFTs on which we have recently focused may prove to be
speculative and not sustain the value they currently have to our
clients. 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.
The
impact of epidemics or pandemics may limit our future business both
from the demand and supply sides. Our sale people may not be able
to effectively engage with customers due to restrictions on travel,
conferences and in-person meetings. Our supply chain may be
impacted by production and distribution delays. Due to these
factors we may limit future operations to reduce expenses until
events support and allow normal business
procedures.
Our current
business, specifically our ticketing vertical, and future acquired
businesses and/or operations both domestic and abroad, and the
businesses of our potential customers could be materially and
adversely affected by the risks, or the public perception of the
risks, related to a pandemic or other health crisis, such as the
outbreak of the novel coronavirus (COVID-19) as well as the
variants.
The growth
of the businesses we acquire may, in part, be reliant on the
willingness of customers to invest in their products and solutions.
The risk, or public perception of the risk, of a pandemic or media
coverage of infectious diseases could cause customers to avoid
purchases which would delay sales of those products and
solutions.
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.
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.
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, Dennis Lee, our Mobile Pay Division Lead, Drew Foster, our
Marketplace Division Lead, Javier Gonzalez, our Chief Technology
Officer, and Michele Rivera, our Vice President, Global
Partnerships. While we have employment agreements with all 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 one or more 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.
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 our mobile
financial services. 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.
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,
including payment services such as Stripe, and Wyre for credit card
verifications and confirmations, 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.
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 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.
If we
do not respond to rapid technological changes, our services could
become obsolete and we could lose customers.
To remain
competitive, we must continue to enhance and improve the
functionality and features of our e-commerce businesses. We may
face material delays in introducing new services, products and
enhancements. If this happens, our customers may forego the use of
our websites and use those of our competitors. If competitors
introduce new products and services using new technologies or if
new industry standards and practices emerge, our existing
technology and systems may become obsolete. Our failure to respond
to technological change or to adequately maintain, upgrade and
develop our computer network and the systems used to process
customers’ orders and payments could harm our business, prospects,
financial condition and results of operations.
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.
We are
subject to payments-related risks.
We accept
payments using a variety of methods, including credit card, and
debit card, credit accounts (including promotional financing), gift
cards, direct debit from a customer’s bank account, consumer
invoicing, physical bank check, and payment upon delivery. For
existing and future payment options we offer to our customers, we
may become subject to additional regulations and compliance
requirements (including obligations to implement enhanced
authentication processes that could result in significant costs and
reduce the ease of use of our payments products), as well as fraud.
For certain payment methods, including credit and debit cards, we
pay interchange and other fees, which may increase over time and
raise our operating costs and lower profitability. We rely on third
parties to provide certain Amazon-branded payment methods and
payment processing services, including the processing of credit
cards, and debit cards., electronic checks, and promotional
financing. In each case, it could disrupt our business if these
companies become unwilling or unable to provide these services to
us. We are also subject to payment card association operating
rules, including data security rules, certification requirements,
and rules governing electronic funds transfers, which could change
or be reinterpreted to make it difficult or impossible for us to
comply. If we fail to comply with these rules or requirements, or
if our data security systems are breached or compromised, we may be
liable for card issuing banks’ costs, subject to fines and higher
transaction fees, and lose our ability to accept credit and debit
card payments from our customers, process electronic funds
transfers, or facilitate other types of online payments, and our
business and operating results could be adversely
affected.
In addition,
we provide regulated services in certain jurisdictions because we
enable customers to keep account balances with us and transfer
money to third parties, and because we provide services to third
parties to facilitate payments on their behalf. In these
jurisdictions, we may be subject to requirements for licensing,
regulatory inspection, bonding and capital maintenance, the use,
handling, and segregation of transferred funds, consumer
disclosures, and authentication. We are also subject to or
voluntarily comply with a number of other laws and regulations
relating to payments, money laundering, international money
transfers, privacy and information security, and electronic fund
transfers. If we were found to be in violation of applicable laws
or regulations, we could be subject to additional requirements and
civil and criminal penalties or forced to cease providing certain
services.
We
could be liable for fraudulent or unlawful activities of
sellers.
The law
relating to the liability of providers of online payment services
is currently unsettled. In addition, governmental agencies could
require changes in the way this business is conducted. Under our
seller programs, we may be unable to prevent sellers from
collecting payments, fraudulently or otherwise, when buyers never
receive the products they ordered or when the products received are
materially different from the sellers’ descriptions. We reimburse
buyers for payments up to certain limits in these situations, and
as our third-party seller sales grow, the cost of this program will
increase and could negatively affect our operating results. We also
may be unable to prevent sellers on our sites or through other
seller sites from selling unlawful goods, selling goods in an
unlawful manner, or violating the proprietary rights of others, and
could face civil or criminal liability for unlawful activities by
our sellers.
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:
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maintaining
enough working capital to run our business; |
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pursuing
growth opportunities, including more rapid expansion; |
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acquiring
complementary businesses and technologies; |
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making
capital improvements to improve our infrastructure; |
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responding
to competitive pressures; |
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complying
with regulatory requirements for advertising or taxation;
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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.
Any
failure to protect our future intellectual property rights could
impair our ability to protect our technology and our
brand.
Our success
depends in part on our ability to enforce our intellectual property
and other proprietary rights of the companies we expect to acquire.
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.
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:
● local
economic and political conditions;
● 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;
●
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;
● business
licensing or certification requirements, such as for imports,
exports, web services, and electronic devices;
●
limitations on the repatriation and investment of funds and foreign
currency exchange restrictions;
● limited
fulfillment and technology infrastructure;
● shorter
payable and longer receivable cycles and the resultant negative
impact on cash flow;
● laws and
regulations regarding privacy, data protection, data security,
network security, consumer protection, payments, advertising, and
restrictions on pricing or discounts;
● lower
levels of use of the Internet;
● lower
levels of consumer spending and fewer opportunities for growth
compared to the United States;
● lower
levels of credit card usage and increased payment risk;
● difficulty
in staffing, developing, and managing foreign operations as a
result of distance, language, and cultural differences;
● 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;
● 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.
The
impact of epidemics or pandemics may limit our future business both
from the demand and supply sides.
Our current
business and future acquired businesses and/or operations both
domestic and abroad, and the businesses of our potential customers
and merchants could be materially and adversely affected by the
risks, or the public perception of the risks, related to a pandemic
or other health crisis, such as the outbreak of the novel
coronavirus (COVID-19).
The growth
of our ticketing business in particular and the businesses we
acquire may, in part, be reliant on the willingness of customers to
invest in their products and solutions. The risk, or public
perception of the risk, of a pandemic or media coverage of
infectious diseases could cause customers to avoid purchases which
would delay sales of those products and solutions.
Whether a particular non-fungible token (NFT) or other crypto
assets is a “security” in any relevant jurisdiction is subject to a
high degree of uncertainty, and if we are unable to properly
characterize an NFT or other crypto asset, we may be subject to
regulatory scrutiny, inquiries, investigations, fines, and other
penalties, which may adversely affect our business, operating
results, and financial condition.
The SEC and its staff have taken the position that certain crypto
assets (which includes NFTs) fall within the definition of a
“security” under the U.S. federal securities laws. The legal test
for determining whether any given crypto asset is a security is a
highly complex, fact-driven analysis that evolves over time, and
the outcome is difficult to predict. The SEC generally does not
provide advance guidance or confirmation on the status of any
particular crypto asset as a security. Furthermore, the SEC’s views
in this area have evolved over time and it is difficult to predict
the direction or timing of any continuing evolution. It is also
possible that a change in the governing administration or the
appointment of new SEC commissioners could substantially impact the
views of the SEC and its staff. For example, Chair Gary Gensler has
repeatedly remarked on the need for further regulatory oversight on
crypto assets, crypto trading, and lending platforms by the SEC.
Public statements by senior officials at the SEC indicate that the
SEC does not intend to take the position that Bitcoin or Ethereum
are securities (in their current form). Bitcoin and Ethereum are
the only crypto assets as to which senior officials at the SEC have
publicly expressed such a view. Moreover, such statements are not
official policy statements by the SEC and reflect only the
speakers’ views, which are not binding on the SEC or any other
agency or court and cannot be generalized to any other crypto
asset. With respect to all other crypto assets, there is currently
no certainty under the applicable legal test that such assets are
not securities, notwithstanding the conclusions we may draw based
on our risk-based assessment regarding the likelihood that a
particular crypto asset could be deemed a “security” under
applicable laws. Similarly, though the SEC’s Strategic Hub for
Innovation and Financial Technology published a framework for
analyzing whether any given crypto asset is a security in April
2019, this framework is also not a rule, regulation or statement of
the SEC and is not binding on the SEC.
Several foreign jurisdictions have taken a broad-based approach to
classifying crypto assets as “securities,” while other foreign
jurisdictions, such as Switzerland, Malta, and Singapore, have
adopted a narrower approach. As a result, certain crypto assets may
be deemed to be a “security” under the laws of some jurisdictions
but not others. Various foreign jurisdictions may, in the future,
adopt additional laws, regulations, or directives that affect the
characterization of crypto assets as “securities.”
The classification of a crypto asset as a security under applicable
law has wide-ranging implications for the regulatory obligations
that flow from the offer and sale of such assets. For example, a
crypto asset that is a security in the United States may generally
only be offered or sold in the United States pursuant to a
registration statement filed with the SEC or in an offering that
qualifies for an exemption from registration. Persons that effect
transactions in crypto assets that are securities in the United
States may be subject to registration with the SEC as a “broker” or
“dealer.” Platforms that bring together purchasers and sellers to
trade crypto assets that are securities in the United States are
generally subject to registration as national securities exchanges,
or must qualify for an exemption, such as by being operated by a
registered broker-dealer as an ATS in compliance with rules for
ATSs. Persons facilitating clearing and settlement of securities
may be subject to registration with the SEC as a clearing agency.
Foreign jurisdictions may have similar licensing, registration, and
qualification requirements.
We have policies and procedures to analyze whether each NFT that we
seek to facilitate listing and sale on our platform could be deemed
to be a “security” under applicable laws. Our policies and
procedures do not constitute a legal standard but rather represent
our company-developed model, which permits us to make a risk-based
assessment regarding the likelihood that a particular NFT could be
deemed a “security” under applicable laws. Regardless of our
conclusions, we could be subject to legal or regulatory action in
the event the SEC, a state or foreign regulatory authority, or a
court were to determine that an NFT listed and sold on our platform
is a “security” under applicable laws. Because our platform is not
registered or licensed with the SEC or foreign authorities as a
broker-dealer, national securities exchange, or ATS (or foreign
equivalents), and we do not seek to register or rely on an
exemption from such registration or license to facilitate the offer
and sale of NFTs on our platform, we only permit listing on our
platform of those NFTs for which we determine there are reasonably
strong arguments to conclude that the NFT is not a security. We
believe that our process reflects a comprehensive and thoughtful
analysis and is reasonably designed to facilitate consistent
application of available legal guidance to crypto assets to
facilitate informed risk-based business judgment. However, we
recognize that the application of securities laws to the specific
facts and circumstances of crypto assets may be complex and subject
to change, and that a listing determination does not guarantee any
conclusion under the U.S. federal securities laws. We expect our
risk assessment policies and procedures to continuously evolve to
take into account case law, facts, and developments in
technology.
There can be no assurances that we will properly characterize any
given NFT as a security or non-security for purposes of determining
whether our platform will allow the listing of such NFT, or that
the SEC, foreign regulatory authority, or a court, if the question
was presented to it, would agree with our assessment. If the SEC,
state or foreign regulatory authority, or a court were to determine
that NFTs offered or sold on our platform are securities, we would
not be able to offer such NFTs until we are able to do so in a
compliant manner. A determination by the SEC, a state or foreign
regulatory authority, or a court that an NFT listed and sold on our
platform was a security may also result in us determining that it
is advisable to remove NFTs from our platform that have similar
characteristics to the NFT that was determined to be a security. In
addition, we could be subject to judicial or administrative
sanctions for failing to offer or sell the NFT in compliance with
the registration requirements, or for acting as a broker, dealer,
or national securities exchange without appropriate registration.
Such an action could result in injunctions, cease and desist
orders, as well as civil monetary penalties, fines, and
disgorgement, criminal liability, and reputational harm. Customers
that purchased such NFTs on our platform and suffered losses could
also seek to rescind a transaction that we facilitated as the basis
that it was conducted in violation of applicable law, which could
subject us to significant liability. We may also be required to
cease facilitating transactions in other similar NFTs, which could
negatively impact our business, operating results, and financial
condition.
We rely on third party platforms to operate our NFT
Marketplace.
We
rely on third-party platforms and software providers such as
MetaMask and OpenSea to operate our NFT marketplace and perform
auctions of NFTs. If we are unable to maintain a good relationship
with such platform providers; if the terms and conditions or
pricing of such platform providers change; if we violate or cannot
comply with the terms and conditions of such platforms; or if any
such platform loses market share or falls out of favor or is
unavailable for a prolonged period of time, access to and use of
our NFT marketplace will suffer.
There are risks associated with operating a marketplace for
NFTs.
The
regulatory regime governing blockchain technologies,
cryptocurrencies, and tokens is uncertain, and new regulations or
policies may materially affect our NFT marketplace and our business
generally. There are risks associated with marketplaces for NFTs
that sell user generated content, including but not limited to,
counterfeit assets, intellectual property violations, unregistered
sales of securities, assets on smart contracts with bugs, and
assets that may become untransferable. These risks could create
liability and have an adverse effect on the Company.
Our sales of NFTs in connection with the services that we
provide to the NFT creators as well as the BLOCK ETX products that
uses an algorithm to control the trading of those digital assets
might be considered securities in which case we may have violated
section 5 of the Securities Act and certain state securities laws
that could allow purchasers of these products the right to rescind
and demand the return of their purchase price equaling
approximately $259,894.
Our sales of both NFTs to purchasers of the NFTs and our BLOCK ETX
products may be considered a public offering in violation of the
federal securities laws. These issuances might also have been in
violation of certain state securities laws. If these issuances were
public offerings under federal securities laws or in violation of
certain state securities laws, purchasers of these products might
be granted the right to rescind the sale of these products and
demand that we return the purchase price of these products. Section
5 of the 1933 Securities Act states that it is unlawful to sell
securities unless a registration statement is effective or an
exemption from registration can be relied upon. Assuming that we
are in violation of Section 5 of the 1933 Act regarding our
offerings of our NFT and BLOCK ETX products on the basis that we
sold unregistered securities, we are in violation of Section 5 of
the Act and Section 12(1) of the 1933 Act would apply. Pursuant to
Section 12(1) of the 1933 Act, the statute of limitations for this
type of claim is one year after the date of the alleged violation
and, if successful, would entitle the purchasers of these products
to rescind their purchase of these products and demand a return to
them of the purchase price of those products. Thus, the limitation
period began to toll as soon as the violation of Section 5 has
occurred, regardless of whether a purchaser of such products was
aware of the violation. In this case, the potential Section 5
violation was the sale by us of unregistered securities from March
2021 to February 18, 2022. The gross purchase price for sale
of all the NFTs through December 31, 2021 was 31.1 ETH
(approximately $97,000 based on the December 2021 price of ETH) and
the total sales of our BLOCK ETX subscriptions to US customers
through February 18, 2022 was $162,894. All ETX subscription fees
for January and February were refunded to customers.
Risks
Related to Our Common Stock
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 Company’s 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.
Investors will
experience dilution of their ownership interests because of the
shares to be sold in this offering and future issuances of
additional shares of our common stock.
You will
incur substantial dilution as a result of this offering. After
giving effect to the sale by our Selling Stockholders.
In the
future, we may issue additional authorized but previously unissued
equity securities, such as we expect to do through this offering,
resulting in the dilution of the ownership interests of our present
stockholders. We may also issue additional shares of common stock
or other securities that are convertible into or exercisable for
common stock in connection with hiring or retaining employees,
future acquisitions, future sales of our securities for capital
raising purposes, or for other business purposes. There can be no
assurance that we will not be required to issue additional shares,
warrants or other convertible securities in the future in
conjunction with any capital raising efforts, including at a price
(or exercise prices) below the price at which shares of our common
stock is currently traded.
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.
Compliance with
the reporting requirements of federal securities laws can be
expensive.
We will
become a fully reporting company upon effectiveness of this
offering and will be subject to the information and reporting
requirements of the Exchange Act and other federal securities laws
and the compliance obligations of the Sarbanes-Oxley Act. The costs
of preparing and filing annual and quarterly reports and other
information with the SEC and furnishing audited reports to
stockholders are substantial.
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 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.
If we
fail to maintain an effective system of internal controls, we may
not be able to accurately report our financial results or detect
fraud. Consequently, investors could lose confidence in our
financial reporting and this may decrease the trading price of our
stock.
We must
maintain effective internal controls to provide reliable financial
reports and detect fraud. We have been assessing our internal
controls to identify areas that need improvement. Failure to
identify and thereafter implement required changes to our internal
controls or any others that we identify as necessary to maintain an
effective system of internal controls, if any, could harm our
operating results and cause investors to lose confidence in our
reported financial information. Any such loss of confidence would
have a negative effect on the trading price of our
stock.
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:
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anticipated variations in our operating results; |
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announcements of
developments by us or our competitors; |
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regulatory
actions regarding our products; |
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announcements by us or
our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments; |
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adoption of
new accounting standards affecting our industry; |
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additions or
departures of key personnel; |
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introduction
of new products by us or our competitors; |
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sales of our
common stock or other securities in the open market;
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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.
Our
common stock is controlled by insiders.
Our officers
and directors beneficially own approximately 80% of our outstanding
shares of common stock through their ownership of Series 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.
We are
an “emerging growth company,” and we cannot be certain if the
reduced reporting requirements applicable to emerging growth
companies will make our common stock less attractive to
investors.
We are an
“emerging growth company” as defined in the Jumpstart Our Business
Startups Act of 2012, as amended, or the JOBS Act, and we intend to
take advantage of some of the exemptions from reporting
requirements that are applicable to other public companies that are
not emerging growth companies, including:
● being
permitted to provide only two years of audited financial
statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”
disclosure;
● not being
required to comply with the auditor attestation requirements in the
assessment of our internal control over financial
reporting;
● not being
required to comply with any requirement that may be adopted by the
Public Company Accounting Oversight Board regarding mandatory audit
firm rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial
statements;
● reduced
disclosure obligations regarding executive compensation;
and
● not being
required to hold a non-binding advisory vote on executive
compensation or obtain stockholder approval of any golden parachute
payments not previously approved.
Further, the
JOBS Act permits an “emerging growth company” such as us to take
advantage of an extended transition time to comply with new or
revised accounting standards as applicable to public companies. We
are choosing to elect the extended transition period for complying
with new or revised accounting standards applicable to public
companies. We have elected the extended transition period for
complying with new or revised accounting standards pursuant to
Section 107(b) of the JOBS Act until the earlier of the date we (i)
are no longer an emerging growth company or (ii) affirmatively and
irrevocably opt out of the extended transition period provided in
the JOBS Act. As a result, our financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
We cannot
predict if investors will find our common stock less attractive
because we will rely on these exemptions. If some investors find
our common stock less attractive as a result, there may be a less
active trading market for our common stock and our stock price may
be more volatile. We may take advantage of these reporting
exemptions until we are no longer an emerging growth company. We
will remain an emerging growth company until the earlier of (1) the
last day of the fiscal year (a) following the fifth anniversary of
the completion of this offering, (b) in which we have total annual
gross revenue of at least $1.07 billion or (c) in which we are
deemed to be a large accelerated filer, which means the market
value of our common stock that is held by non- affiliates exceeds
$700 million as of the prior June 30 and (2) the date on which we
have issued more than $1.0 billion in non-convertible debt during
the prior three-year period.
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 the OTC Pink
Market and are not qualified to be listed on a national securities
exchange, such as NASDAQ. 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.
Because we do not
anticipate paying any cash dividends on our capital stock in the
foreseeable future, capital appreciation, if any, will be your sole
source of gain.
We have
never declared or paid cash dividends on our capital stock. We
currently intend to retain all of our future earnings, if any, to
finance the growth and development of our business. In addition,
the terms of any future debt agreements may preclude us from paying
dividends. As a result, capital appreciation, if any, of our
securities will be your sole source of gain for the foreseeable
future.
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 506,600 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.
USE OF
PROCEEDS
This
prospectus relates to shares of our common stock that may be
offered and sold from time to time by the Selling Stockholders. We
will receive no proceeds from the sale of shares of Common Stock by
the Selling Stockholders in this offering. We may receive proceeds
from warrants exercised by the Selling Stockholders. We may receive
up to $37,162,500 from the exercise of warrants by the Selling
Stockholders. See “Plan of Distribution” elsewhere in this
prospectus for more information.
We expect to
use the net proceeds from the exercise of warrants from the Selling
Stockholders for acquisitions, joint ventures, technology costs and
general corporate purposes.
The
following table illustrates the amount of net proceeds we will
receive on the exercise of warrants by the Selling Stockholders
totaling $37,162,500. It is possible that we may not raise the
entire $37,162,500 through this prospectus. In such case, we will
reallocate our use of proceeds as the Board of Directors deems to
be in the best interests of the Company to effectuate our business
plan. The intended use of proceeds are as follows:
|
|
100% |
|
75% |
|
50% |
|
25% |
Gross
Offering Proceeds |
|
$ |
37,162,500 |
|
|
$ |
27,871,875 |
|
|
$ |
18,581,250 |
|
|
$ |
9,290,625 |
|
Offering
Costs(1) |
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
200,000 |
|
Use of Net
Proceeds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
$ |
16,462,500 |
|
|
$ |
10,671,875 |
|
|
$ |
7,881,250 |
|
|
$ |
3,690,625 |
|
Technology
Costs(2) |
|
$ |
13,000,000 |
|
|
$ |
10,000,000 |
|
|
$ |
7,000,000 |
|
|
$ |
3,500,000 |
|
Working
Capital(3) |
|
$ |
4,000,000 |
|
|
$ |
4,000,000 |
|
|
$ |
2,000,000 |
|
|
$ |
1,100,000 |
|
Debt
Reduction |
|
$ |
3,500,000 |
|
|
$ |
3,000,000 |
|
|
$ |
1,500,000 |
|
|
$ |
800,000 |
|
(1) |
We
expect to spend approximately $200,000 in expenses relating to this
offering, including legal, accounting, travel, printing and other
miscellaneous costs. |
|
|
(2) |
Technology
costs include the costs or hiring additional developers to further
the development of our suite of products. |
|
|
(3) |
We use
working capital to pay for miscellaneous and general operating
expenses, as well as legal and accounting fees. |
The
allocation of the use of proceeds among the categories of
anticipated expenditures represents management’s best estimates
based on the current status of our proposed operations, plans,
investment objectives, capital requirements, and financial
conditions. Future events, including changes in economic or
competitive conditions of our business plan or the completion of
less than the total offering, may cause us to modify the
above-described allocation of proceeds. Our use of proceeds may
vary significantly in the event any of our assumptions prove
inaccurate. We reserve the right to change the allocation of net
proceeds from the offering as unanticipated events or opportunities
arise.
MARKET FOR REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Our common stock as of April 25, 2022 is quoted on the OTCQB under
the symbol HMBL. As of March 31, 2022, there were 369 holders of
record of our common stock.
The last reported sales price of our common stock on the OTCQB on
April 25, 2022 was $0.11 per share.
Dividend
Policy
We have not
declared nor paid any cash dividend on our common stock, and we
currently intend to retain future earnings, if any, to finance the
expansion of our business, and we do not expect to pay any cash
dividends in the foreseeable future. The decision whether to pay
cash dividends on our common stock will be made by our board of
directors, in their discretion, and will depend on our financial
condition, results of operations, capital requirements and other
factors that our board of directors considers
significant.
SELLING
STOCKHOLDERS
This
prospectus relates to the possible resale by the Selling
Stockholders. We do not know how long the selling stockholder will
hold the shares of our common stock before selling them, and we
currently have no agreements, arrangements or understandings with
the Selling Stockholders regarding the sale of any of the shares of
our common stock. See “Plan of Distribution.”
The table below sets forth, to our knowledge, information
concerning the beneficial ownership of shares of our common stock
by the Selling Stockholders as of April 25, 2022. The percentages
of shares owned before and after the offering are based on
1,429,214,389 shares of common stock outstanding and 1,697,939,389
shares of common stock, respectively, which includes the
1,429,214,389 shares of common stock outstanding as of April 25,
2022 and 268,725,000 of the 369,382,466 shares of common stock
offered by this prospectus. Included in the 1,429,214,389 is
100,657,466 shares being offered by this prospectus. The
information in the table below with respect to the Selling
Stockholders has been obtained from the Selling Stockholders.
solely on information supplied to us by the Selling Stockholders
and assumes the sale of all the shares offered hereby. Other than
as described in the footnotes below, the Selling Stockholders have
not, within the past three years, had any position, office or other
material relationship with us or any of our predecessors or
affiliates other than as a holder of our securities, or are
broker-dealers or affiliates of a broker-dealer. Information
concerning the Selling Stockholders may change from time to time
and, if necessary and required, we will amend or supplement this
prospectus accordingly.
Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting or investment power with respect to shares. Unless
otherwise indicated below, to our knowledge, all persons named in
the table have sole voting and investment power with respect to
their shares of common stock. The inclusion of any shares in this
table does not constitute an admission of beneficial ownership for
the person named below.
Selling Stockholder |
|
Number
of Shares of Common Stock Beneficially Owned Prior to
Offering(1)(2)(3) |
|
|
Maximum Number of Shares of Common Stock to be Sold Pursuant to
this Prospectus |
|
|
Number
of Shares of Common Stock Beneficially Owned After
Offering(4)
|
|
|
Percentage
of Common Stock Owned After the
Offering(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juan Luis Gonzalez |
|
|
4,672,897 |
|
|
|
4,672,897 |
|
|
|
- |
|
|
|
* |
|
Javier Gonzalez |
|
|
4,672,897 |
|
|
|
4,672,897 |
|
|
|
- |
|
|
|
* |
|
Forwardly,
Inc.(5) |
|
|
125,000,000 |
|
|
|
62,500,000 |
|
|
|
62,500,000 |
|
|
|
4.0 |
% |
Charger
Corporation(6) |
|
|
114,000,000 |
|
|
|
51,500,000 |
|
|
|
62,500,000 |
|
|
|
4.0 |
% |
Konop
Enterprises, Inc.(7) |
|
|
5,000,000 |
|
|
|
5,000,000 |
|
|
|
- |
|
|
|
* |
|
Adel Wakil |
|
|
4,000,000 |
|
|
|
4,000,000 |
|
|
|
- |
|
|
|
* |
|
Antonio Dutra |
|
|
2,000,000 |
|
|
|
2,000,000 |
|
|
|
- |
|
|
|
* |
|
Kevin Levine |
|
|
1,570,340 |
|
|
|
1,570,340 |
|
|
|
- |
|
|
|
* |
|
Judith Levine |
|
|
1,570,340 |
|
|
|
1,570,340 |
|
|
|
- |
|
|
|
* |
|
Archumbl
Pty Ltd(8) |
|
|
12,500,000 |
|
|
|
12,500,000 |
|
|
|
- |
|
|
|
* |
|
The
Strider Lir Trust(9) |
|
|
4,891,869 |
|
|
|
4,891,869 |
|
|
|
- |
|
|
|
* |
|
Scottish
Isles Investing, LLC(10) |
|
|
668,036 |
|
|
|
668,036 |
|
|
|
- |
|
|
|
* |
|
9G
Investments, LLC(11) |
|
|
6,123,660 |
|
|
|
6,123,660 |
|
|
|
- |
|
|
|
* |
|
KWP
50, LLC(12) |
|
|
7,229,381 |
|
|
|
7,229,381 |
|
|
|
- |
|
|
|
* |
|
North
Falls Investments, L.P.(13) |
|
|
2,224,425 |
|
|
|
2,224,425 |
|
|
|
- |
|
|
|
* |
|
CMP76,
LLC(14) |
|
|
1,112,212 |
|
|
|
1,112,212 |
|
|
|
- |
|
|
|
* |
|
Murtaugh
Group LLC(15) |
|
|
5,528,603 |
|
|
|
5,528,603 |
|
|
|
- |
|
|
|
* |
|
Infinity
Block Investments LLC(16) |
|
|
5,528,603 |
|
|
|
5,528,603 |
|
|
|
- |
|
|
|
* |
|
Hahanakai,
LLC(17) |
|
|
2,258,900 |
|
|
|
2,258,900 |
|
|
|
- |
|
|
|
* |
|
Joy Corbin |
|
|
4,767,801 |
|
|
|
4,767,801 |
|
|
|
- |
|
|
|
* |
|
Archura
Capital Pty Ltd(18) |
|
|
1,020,000 |
|
|
|
1,500,000 |
|
|
|
- |
|
|
|
* |
|
Brighton
Capital Partners, LLC(19) |
|
|
8,547,619 |
|
|
|
80,000,000 |
|
|
|
- |
|
|
|
* |
|
HUMBL
CL SpA(20) |
|
|
4,437,500 |
|
|
|
4,437,500 |
|
|
|
- |
|
|
|
* |
|
George Sharp |
|
|
7,500,000 |
|
|
|
5,000,000 |
|
|
|
- |
|
|
|
* |
|
Red
Rock Development Group, LLC(21) |
|
|
10,000,000 |
|
|
|
10,000,000 |
|
|
|
- |
|
|
|
* |
|
Alan Gunn |
|
|
6,760,000 |
|
|
|
11,830,000 |
|
|
|
- |
|
|
|
* |
|
Michael Temple |
|
|
7,770,000 |
|
|
|
13,140,000 |
|
|
|
- |
|
|
|
* |
|
Webb Ellinger |
|
|
7,770,000 |
|
|
|
13,140,000 |
|
|
|
- |
|
|
|
* |
|
Nancy Angell |
|
|
4,210,000 |
|
|
|
7,390,000 |
|
|
|
- |
|
|
|
* |
|
Zach Stevens |
|
|
7,480,000 |
|
|
|
3,740,000 |
|
|
|
- |
|
|
|
* |
|
Kurt Kimmel |
|
|
1,060,000 |
|
|
|
3,150,000 |
|
|
|
- |
|
|
|
* |
|
Jose Colchao |
|
|
1,970,000 |
|
|
|
3,520,000 |
|
|
|
- |
|
|
|
* |
|
Mark Turner |
|
|
7,480,000 |
|
|
|
3,740,000 |
|
|
|
3,740,000 |
|
|
|
* |
|
Bryce Dixon |
|
|
6,370,242 |
|
|
|
3,185,000 |
|
|
|
3,185,000 |
|
|
|
* |
|
Cyberbeat
Pte Ltd(22) |
|
|
5,310,000 |
|
|
|
2,655,000 |
|
|
|
2,655,000 |
|
|
|
* |
|
Rajan Narayan |
|
|
5,310,000 |
|
|
|
2,655,000 |
|
|
|
2,655,000 |
|
|
|
* |
|
Dinh Thi Thong Hanh |
|
|
5,310,000 |
|
|
|
2,655,000 |
|
|
|
2,655,000 |
|
|
|
* |
|
Roberta Wyn |
|
|
5,840,000 |
|
|
|
2,920,000 |
|
|
|
2,920,000 |
|
|
|
* |
|
HinCamp,
LLC(23) |
|
|
4,820,000 |
|
|
|
2,410,000 |
|
|
|
2,410,000 |
|
|
|
* |
|
Stephanie Nhim |
|
|
1,320,000 |
|
|
|
660,000 |
|
|
|
660,000 |
|
|
|
* |
|
Carmen Baldwin |
|
|
1,320,000 |
|
|
|
660,000 |
|
|
|
660,000 |
|
|
|
* |
|
*Denotes
less than 1%
(1) |
Under
applicable SEC rules, a person is deemed to beneficially own
securities which the person has the right to acquire within 60 days
through the exercise of any option or warrant or through the
conversion of a convertible security. Also under applicable SEC
rules, a person is deemed to be the “beneficial owner” of a
security with regard to which the person directly or indirectly,
has or shares (a) voting power, which includes the power to vote or
direct the voting of the security, or (b) investment power, which
includes the power to dispose, or direct the disposition, of the
security, in each case, irrespective of the person’s economic
interest in the security. Each listed selling stockholder has the
sole investment and voting power with respect to all shares of
Common Stock shown as beneficially owned by such selling
stockholder, except as otherwise indicated in these
footnotes.
|
(2) |
Beneficial
ownership of shares of common stock that could be obtained pursuant
to convertible notes is calculated as the original principal
balance of the note divided by the conversion price. |
|
|
(3) |
Beneficial
ownership of the Series B Preferred Stock is limited by conversion
limitations in our Certificate of Incorporation. For Series B
Preferred shareholders holding greater than 750 shares of Series B
Preferred Stock, for the calendar months of December 2021 and
January 2022, Series B Preferred shareholders shall not have the
right, whether by election, operation of law, or otherwise, to
convert into Common Stock shares of Series B Preferred stock
constituting more than 5% of the total number of Series B Preferred
shares held by them; and for each of the calendar months from
February 2022 to May 2023, the percentage that the Series B
Preferred shareholder may convert is 3% of the total number of
Series B Preferred shares held by them.
|
(4) |
Represents
the amount and percentage of shares in the event all of the
registered securities are sold during the offering.
|
(5) |
George Sharp
is the President and CEO of Forwardly, Inc. and may be deemed to
have voting and investment power over the shares. The address of
Forwardly, Inc. is 3535 Executive Terminal Drive, Henderson, Nevada
89052. |
|
|
(6) |
Louis Sapi
is the President of Charger Corporation and may be deemed to have
voting and investment power over the shares. The address of Charger
Corporation is 5025 Orbitor Drive, Building 4, Suite 400,
Mississaugua, Ontario L4W 4YS, Canada. |
|
|
(7) |
Thad Konop
is the President of Konop Enterprises Inc. and may be deemed to
have voting and investment power over the shares. The address of
Konop Enterprises Inc. is 39 Mountainview Avenue, Toronto, Ontario
M6P 2L5, Canada. |
(8) |
Alev Dover
is the Director of Archumbl Pty Ltd and may be deemed to have
voting and investment power over the shares. The address of Archura
Capital Pty Ltd. is Archumbl Pty Ltd is 337 Claremont St.,
Kellyville Ridge, NSW 2155, Australia. |
|
|
(9) |
Brian
Kirchoff and Tirsa Hackshaw are the Trustee of the Strider Lir
Trust and may be deemed to have voting and investment power over
the shares. The address of Strider Lir Trust: c/o The Library, 435
South Spring Street, Suite 332, Los Angeles, CA 90013 |
|
|
(10) |
Becky Moore
is the Manager of Scottish Isles Investing, LLC and may be deemed
to have voting and investment power over the shares. The address of
Scottish Isles Investing, LLC is PO Box 44, Bishop, GA
30621-9998.
|
(11) |
Richard
Shebib II is the Manager of 9G Investments, LLC (f/k/a Maize and
Gray, LLC) and may be deemed to have voting and investment power
over the shares. The address of Maize and Gray, LLC is 30800
Telegraph Road, Suite 2800, Bingham Farms, MI 48025. |
|
|
(12) |
Kendall
Prince is the Manager of KWP50, LLC and may be deemed to have
voting and investment power over the shares. The address of KWP 50,
LLC: 7135 E. Lakeview Ave., Mesa, AZ 85209. |
|
|
(13) |
Kendal
Madsen is the Manager of the General Partner of North Falls
Investments, L.P. and may be deemed to have voting and investment
power over the shares. The address of North Falls Investments, L.P.
is 1550 W. Gordon Avenue, Suite 1, Layton, Utah 84041. |
|
|
(14) |
Christina
Pelz is the Manager of CMP76, LLC and may be deemed to have voting
and investment power over the shares. The address of CMP76, LLC:
375 S. Curson Avenue, Los Angeles, CA 90036. |
|
|
(15) |
Chris
Williams is the Manager of Murtaugh Group, LLC and may be deemed to
have voting and investment power over the shares. The address of
Murtaugh Group, LLC is PO Box 246, Great Barrington, MA
01230. |
|
|
(16) |
Jordan Smith
is the Manager of Infinity Block Investments, LLC and may be deemed
to have voting and investment power over the shares. The address of
Infinity Block Investments LLC is P.O. Box 2728, Lebanon, Virginia
24266. |
|
|
(17) |
Cathleen
Peters and Blayne Takemoto are the Member-Managers of Hahanakai,
LLC and may be deemed to have voting and investment power over the
shares. The address of Hahanakai is 98-023 Hekaka St. 603, Aiea,
Hawaii 96701. |
|
|
(18) |
Alev Dover
is the Director of Archura Capital Pty Ltd and may be deemed to
have voting and investment power over the shares. The address of
Archura Capital Pty Ltd. is Archumbl Pty Ltd is 337 Claremont St.,
Kellyville Ridge, NSW 2155, Australia. |
|
|
(19)
|
Lucas Hales
is the Manager of Brighton Capital Partners, LLC and may be deemed
to have voting and investment power over the shares. The address of
Brighton Capital is 3500 San Mateo Court, Austin, Texas 78738,
Attention: Lucas Hales, Manager. Brighton Capital is not a licensed
broker dealer or an affiliate of a licensed broker
dealer. |
|
|
(20) |
Juan Pablo
Morales is the General Manager of HUMBL CL SpA and may be deemed to
have voting and investment power over the shares. The address of
HUMBL CL SpA is San Pio X 2455, Oficina 1008, Providencia,
Santiago, Chile. |
|
|
(21) |
Brian Innes
is the Manager of Red Rock Development Group, LLC and may be deemed
to have voting and investment power over the shares. The address of
Red Rock Development Group, LLC is 1785 W. State Route 89A, Suite
2A, Sedona, AZ 86336. |
|
|
(22) |
Rajan
Narayan is the CEO of Cyberbeat Pte Ltd and may be deemed to have
voting and investment power over the shares. The address of
Cyberbeat Pte Ltd is 1 Fullerton Road #02-0, One Fullerton,
Singapore 049213. |
|
|
(23) |
Steven
Hinshaw is the Manager of HinCamp, LLC and may be deemed to have
voting and investment power over the shares. The address of
HinCamp, LLC is 850 New Burton Road Suite 201, Dover, DE
19904. |
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The
following discussion should be read in conjunction with the
consolidated financial statements and the related notes contained
elsewhere in this prospectus. In addition to historical
information, the following discussion contains forward looking
statements based upon current expectations that are subject to
risks and uncertainties. Actual results may differ substantially
from those referred to herein due to a number of factors,
including, but not limited to, risks described in the section
entitled “Risk Factors” and elsewhere in this
prospectus.
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.humblpay.com.
Overview
Following
our merger with HUMBL LLC on December 3, 2020, we changed our name
from Tesoro Enterprises, Inc. to HUMBL, Inc. and adopted the
business of HUMBL to deliver a more seamless digital pairing
experiences for consumers and merchants in the global
economy.
Comparison of Results of Operations for the Years Ended December
31, 2021 and 2020
The
following table sets forth the summary operations for the years
ended December 31, 2021 and 2020:
|
|
For the Years Ended |
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
2,503,388 |
|
|
$ |
- |
|
Cost of Revenues |
|
$ |
1,104,959 |
|
|
$ |
- |
|
Gross Profit |
|
$ |
1,398,429 |
|
|
$ |
- |
|
Development Costs |
|
$ |
2,117,683 |
|
|
$ |
96,567 |
|
Professional Fees |
|
$ |
3,905,699 |
|
|
$ |
539,568 |
|
Settlement |
|
$ |
1,870,000 |
|
|
$ |
- |
|
Stock-based compensation |
|
$ |
10,734,833 |
|
|
$ |
- |
|
Impairment - goodwill |
|
$ |
22,203,422 |
|
|
$ |
- |
|
Impairment – digital assets |
|
$ |
34,570 |
|
|
$ |
- |
|
General and Administrative
Expenses |
|
$ |
5,247,118 |
|
|
$ |
69,589 |
|
Interest Expense |
|
$ |
(943,559 |
) |
|
$ |
(6,739 |
) |
Beneficial Conversion Feature |
|
$ |
(3,300,000 |
) |
|
$ |
- |
|
Amortization of Debt Discounts |
|
$ |
(838,941 |
) |
|
$ |
- |
|
Gain on Sale of Digital Assets |
|
$ |
47,875 |
|
|
$ |
- |
|
Forgiveness of Debt |
|
$ |
66,117 |
|
|
$ |
- |
|
Other Income (Expense) |
|
$ |
28,200 |
|
|
$ |
- |
|
Provision for Income Taxes |
|
$ |
800 |
|
|
$ |
800 |
|
Net Loss |
|
$ |
(49,656,004 |
) |
|
$ |
(713,263 |
) |
Revenues
Revenues for the year ended December 31, 2021 were $2,503,388 as
compared to $0 for the year ended December 31, 2020, an increase of
$2,503,388. The increase was due to the sales of merchandise
related to the HUMBL Marketplace segment of $192,003, ticketing
revenue and merchant fees recognized from our acquisition of
Tickeri, Inc. as well the launch of HUMBL Tickets of $$902,678,
services rendered from Monster Creative of $1,104,322 and
subscription revenue of $265,025 from HUMBL Financial. There were
no revenues recognized in the year ended December 31, 2020 as we
just commenced our operations in 2021.
Cost
of Revenues and Gross Profit
Cost of revenues for the year ended December 31, 2021 were
$1,104,959 as compared to $0 for the year ended December 31, 2020,
an increase of $1,104,959. The increase was primarily due to the
sales of merchandise related to the HUMBL Marketplace segment as
well as the ticketing costs incurred for Tickeri, Inc. Our gross
profit of $1,398,429 is the result of the recognition of our
revenue and grew in the last two fiscal quarters due to full
reporting of the two acquisition companies that were completed in
June 2021.
Operating
Expenses
Operating expenses for the year ended December 31, 2021 were
$46,113,325 as compared to $705,724 for the year ended December 31,
2020, an increase of $45,407,601. 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 continue to increase in
our next 12 months as we continue to roll out new services in 2022.
Over 70% of our operating expenses relate to non-cash charges in
2021 and these charges comprise of over $34 million. We do not
expect that our non-cash charges will increase in 2022.
Development
Costs
Development costs which consist of salaried and outsourced
technical consultants for the year ended December 31, 2021 were
$2,117,683 compared with $96,567 for the year ended December 31,
2020. The increase of development costs related to the roll out of
HUMBL Marketplace which include development of our NFT Gallery and
the launch of HUMBL Tickets as well as the HUMBL Financial
platform. In addition, the Company continued the development of
HUMBL Pay which was started in 2020, and represented a majority of
the development costs in 2020.
Professional
Fees
Professional fees which consist of contracted individuals and
companies, legal, audit and accounting costs for the year ended
December 31, 2021 were $3,905,699 compared with $539,568 for the
year ended December 31, 2020. The increase in professional fees
related to the roll out of HUMBL Marketplace and HUMBL Financial of
$1,300,000, and professional fees in regulatory filings including
OTC compliance and reporting of approximately $1,600,000, as well
as increases in consultant costs of $400,000. We expect that these
costs will not increase during the fiscal year ending December 31,
2022.
Settlement
The Company incurred $1,870,000 in settlement expenses which are
included in our operating expenses for the year ended December 31,
2021 related to agreements with individuals for liabilities
incurred. We incurred none of these charges for the year ended
December 31, 2020.
Stock-Based Compensation
The Company incurred $10,734,833 in stock-based compensation
expenses for the year ended December 31, 2021 related to agreements
with consultants, advisors, and directors for services rendered. We
incurred none of these charges for the year ended December 31,
2020. We expect our stock-based compensation expenses to decline in
the next 12 months as many stock issuances were the result of the
start-up of our operations. The awards provided were valued in
accordance with ASC 718 at fair value.
Impairment of Goodwill and Digital Assets and Stock-Based
Compensation
The Company incurred $22,203,422 in non-cash charges related to
impairment of goodwill, and $34,570 in impairment of our digital
assets in the year ended December 31, 2021. The goodwill impairment
related to the impairment of the goodwill in the Tickeri and
Monster acquisitions. Both of these impairments were part of our
Marketplace segment. The impairment of the digital assets was based
on the valuation changes in the digital assets we hold. We incurred
none of these charges for the year ended December 31, 2020.
General and Administrative
General and administrative expenses for the year ended December 31,
2021 were $5,247,118 compared with $69,589 for the year ended
December 31, 2020. The increase in general and administrative
expenses is related to the start-up of operations and included
increases in travel ($570,000), advertising and business
development ($895,000), rent ($165,000), general office expenses
($196,000), insurance ($58,000), and the addition of management and
employees to grow our Pay, Marketplace and Financial segments
($1,950,000). The increase also includes the operating expenses
related to the operations including the general and administrative
costs associated with our subsidiaries Tickeri, Inc. and Monster
Creative, LLC. The general and administrative expenses relate to
nominal expenses of the Company related to the merger with
Tesoro.
There were no significant operations prior to the completion of the
merger in February 2021. We expect our general and administrative
expenses to be consistent in the next 12 months, unless we acquire
other businesses that will add expenses to the Company.
Other
Income (Expense)
In the year ended December 31, 2021 we incurred $4,940,308 in other
expenses, compared to $6,739 in other expenses in the year ended
December 31, 2020, and increase of $4,933,569. The 2021 other
expenses related to $943,559 of interest expense on debt incurred
during the year, $3,300,000 in a non-cash beneficial conversion
feature on a convertible note, and $838,941 in amortization of
discounts related to certain convertible notes. In addition, we had
other income of $94,317 on PPP forgiveness and other income and
$47,875 in gains on the sale of digital assets. There were no such
expenses in 2020 other than interest expense on convertible debt of
$6,739. We expect to incur additional other income (expense) in the
next 12 months related to our convertible notes, however, we do not
expect to incur any charges related to beneficial conversion
features in the next 12 months.
Provision for Income Taxes
We incurred $800 in the provision for state income taxes in 2021
and 2020.
Net
Loss
Net loss from operations for the year ended December 31, 2021 was
($49,948,504) as compared to a net loss of ($713,263) for the year
ended December 31, 2020. The $49,235,241 increase in the net loss
was due to the changes noted herein.
Segment Reporting
The
Company 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 the Company in
making operating decisions. As of December 31, 2021 and for the
year ended December 31, 2021, the Company operated in three
segments. The segments are HUMBL Marketplace, HUMBL Pay, and HUMBL
Financial. For the year ended December 31, 2020, the Company
operated in one segment.
Year Ended December
31, 2021 |
|
HUMBL
Pay |
|
|
HUMBL
Marketplace |
|
|
HUMBL
Financial |
|
|
Total |
|
Segmented operating
revenues |
|
$ |
15,114 |
|
|
$ |
2,224,506 |
|
|
$ |
263,768 |
|
|
$ |
2,503,388 |
|
Cost of revenues |
|
|
- |
|
|
|
1,104,959 |
|
|
|
- |
|
|
|
1,104,959 |
|
Gross profit |
|
|
15,114 |
|
|
|
1,119,547 |
|
|
|
263,768 |
|
|
|
1,398,429 |
|
Total operating
expenses net of depreciation, amortization and impairment |
|
|
11,201,593 |
|
|
|
10,555,028 |
|
|
|
2,108,383 |
|
|
|
23,865,004 |
|
Depreciation, amortization and
impairment |
|
|
22,850 |
|
|
|
22,221,701 |
|
|
|
4,570 |
|
|
|
22,249,121 |
|
Other
expenses |
|
|
2,531,630 |
|
|
|
1,902,352 |
|
|
|
506,326 |
|
|
|
4,940,308 |
|
(Loss) from
operations |
|
$ |
(13,740,959 |
) |
|
$ |
(33,559,534 |
) |
|
$ |
(2,355,511 |
) |
|
$ |
(49,656,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmented assets as of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
$ |
9,794 |
|
|
$ |
344,694 |
|
|
$ |
1,959 |
|
|
$ |
356,447 |
|
Intangible assets – digital
assets |
|
$ |
- |
|
|
$ |
2,695 |
|
|
$ |
- |
|
|
$ |
2,695 |
|
Goodwill |
|
$ |
- |
|
|
$ |
6,531,346 |
|
|
$ |
- |
|
|
$ |
6,531,346 |
|
Capital expenditures |
|
$ |
11,040 |
|
|
$ |
354,328 |
|
|
$ |
2,208 |
|
|
$ |
367,576 |
|
Comparison of Results of Operations
for the year ended December 31, 2020 and period May 13, 2019
(Inception) through December 31, 2019
The
following table sets forth the summary income statement for the
year ended December 31, 2020 and period May 13, 2019 (Inception)
through December 31, 2019:
|
|
For the Periods Ended |
|
|
|
December 31,
2020 |
|
|
December 31,
2019 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
- |
|
|
$ |
- |
|
Operating Expenses |
|
$ |
705,724 |
|
|
$ |
280,742 |
|
Other Expense and Provision for Income
Taxes |
|
$ |
7,539 |
|
|
$ |
800 |
|
Net Loss |
|
$ |
(713,263 |
) |
|
$ |
(281,542 |
) |
Revenues
We generated
no revenues during the periods ended December 31, 2020 and 2019 as
we were forming our business and commencing operations.
Operating
Expenses
Operating
expenses for the period ended December 31, 2020 were $705,724 as
compared to $280,742 for the period ended December 31, 2019, an
increase of $424,982. Operating expenses consists of development
costs, professional fees and general and administrative
expenses.
Development
Costs
Development
costs for the period ended December 31, 2020 were $96,567 compared
with $86,755 for the period ended December 31, 2019. The increase
of development costs related to the development of the various
platforms the Company has developed and the eventual roll out of
these platforms in 2021.
Professional
Fees
Professional
fees for the period ended December 31, 2020 were $539,568 compared
with $187,003 for the period ended December 31, 2019. The increase
in professional fees related to the roll out of HUMBL Marketplace
and Studios as well as the HUMBL Financial platform. In addition,
the Company completed its merger with Tesoro Enterprises which
contributed to the large increase in legal, accounting and
consulting costs.
General and
Administrative
General and
administrative expenses for the period ended December 31, 2020 were
$69,589 compared with $6,984 for the period ended December 31,
2019. The increase in general and administrative expenses is
related to a full year in 2020 of administrative
expenses.
Other
Income (Expense)
Interest
expense, net of interest income, for the period ended December 31,
2020 was $6,739 as compared to $0 for the period ended December 31,
2019. The increase was the result of the interest incurred on the
debt incurred in December 2020 related to the note payables, as
well as the amortization of debt discount on those
notes.
Net
Loss
Net loss
from operations for the period ended December 31, 2020 was
($713,263) as compared to a net loss of ($281,542) for the period
ended December 31, 2019. The $431,721 increase in the net loss was
primarily due to the professional fees and development costs on the
commencement of operations in 2020.
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, 2021, we had $3,493,213 in cash. Between the growth in
revenues by fees generated by HUMBL Financial and through sales of
merchandise and NFTs in the HUMBL Marketplace, as well as revenue
generated through our subsidiaries Tickeri, Inc. and Monster
Creative LLC, along with the successful launches of the HUMBL Pay
application, HUMBL Financial and HUMBL Tickets in 2021 as well as
proceeds received from the exercise of warrants in October 2021, we
have sufficient operating cash to continue the development of our
core products and services.
We
had a working capital deficit of $20,965,419 as of December 31,
2021 as compared to a working capital surplus of $1,560,832 as
December 31, 2020, respectively. The decrease in working capital is
the result of the incurrence of expenditures related to the
commencement of the various segments and the current potion of debt
that is due in the next 12 months. The Company believes it has
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 the Company’s operating expenses
(over 70%) are the result of non-cash charges such as impairment of
goodwill and stock-based compensation. The actual monthly cash burn
of the Company is approximately $1,000,000 per month at this time
and as our core products come online, this is likely to decrease as
much of this is directly related to our in house and outsourced
technology team. The Company has received $2,000,000 in additional
warrant exercises and $3,000,000 in related party debt proceeds in
the first quarter to date of 2022, however, as a result of the
operating losses and working capital deficit, management has
determined that there is substantial doubt about the Company’s
ability to continue as a going concern.
We
expect that the revenue generating operations of the Company will
continue to improve the liquidity of the Company moving forward.
However, going forward, the effect of the pandemic on the capital
markets may limit our ability to raise additional capital on the
terms acceptable to us at the time we need it, if at all. The
challenges related to remote work and travel restrictions that we
as a smaller company have faced in striving to meet our disclosure
obligations in a timely manner while taking the steps to protect
the health and safety of our employees have impacted, and may
continue to further impact, our ability to raise additional
capital.
The
consolidated financial statements of the Company have been prepared
assuming that the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable period. The consolidated financial statements of the
Company do not include any adjustments that may result from the
outcome of the uncertainties.
The
Company has made strategic acquisitions in the first few months of
2022 to enhance their core products and their intellectual
property. Management believes these acquisitions will result in
increased profitability.
The
Company plans to raise additional capital through the exercising of
their warrants as well as through future debt and equity financings
to carry out its business plan. Obtaining additional financing and
the successful development of the Company’s segments including
their new Blockchain Services group, ultimately, to profitable
operations, are necessary for the Company to continue
operations.
Net
cash used in operating activities was $9,608,212 and $856,317 for
the years ended December 31, 2021 and 2020, respectively. The
$8,751,895 increase in net cash used in operating activities was
primarily a result of the net loss increase from 2020 to 2021 and
the increase in account payable and accrued expenses ($1,054,048)
in 2021 as well as the valuation of our share-based compensation
which includes the value of issuances of common stock, Series B
Preferred Stock, warrants, options and includes the expenses
related to shares of common stock to be issued in 2021
($11,027,334) as well as other non-cash charges such as
amortization of discounts ($838,941), expenses related to the
settlement ($1,870,000) and the beneficial conversion feature
($3,300,000).
Net
cash used in investing activities was $237,182 for the year ended
December 31, 2021 related to purchases of fixed assets of $367,576
offset by cash received in the acquisitions of Tickeri, Inc and
Monster Creative, LLC of $130,394. There were no investing
activities in 2020.
Cash
provided by financing activities was $11,617,628 and $2,572,441 for
the years ended December 31, 2021 and 2020, respectively. Cash was
provided through proceeds from sales of membership interests in
HUMBL LLC in 2021 and 2020 of $10,000 and $1,307,441, respectively;
$0 and $1,000,000 from the sales of warrants and country rights in
2021 and 2020, respectively; $0 and $40,000 in proceeds of notes
payable in 2021 and 2020, respectively; payments of notes payable
of $40,557 and $0 in 2021 and 2020, respectively; repayment of
amounts to seller of $51,600 and $0 in 2021 and 2020, respectively;
proceeds of $6,700,000 and $225,000 in convertible notes payable in
2021 and 2020, respectively; proceeds from sales of common stock of
$1,000,000 and $0, in 2021 and 2020 respectively; redemption of
Series B Preferred Stock of $215 and $0, respectively, and proceeds
from the exercise of warrants of $4,000,000 and $0 in 2021 and
2020, respectively.
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.
The main
sources of convertible notes in 2021 were as follows:
|
(a) |
On April 14,
2021, the Company entered into a Convertible Promissory Note with
Brighton Capital Partners, LLC (“BCP”) in the amount of $3,300,000,
which includes a $300,000 Original Issue Discount (the “BCP Note”).
The BCP Note bears interest at ten percent (10%) per annum and
matures July 14, 2022. The BCP Note is convertible into shares of
the Company’s common stock at $3.15 per share. As per the BCP Note,
the Company shall have the right to prepay all or any portion of
the outstanding balance. If the Company exercises its right to
prepay this note, it will be at an amount of 115% of the balance
being prepaid. The BCP Note also contains a redemption right, where
beginning on the earlier of the effective date of the to be filed
Form S-1 Registration Statement and the twelve-month anniversary of
the BCP Note, BCP may cause the Company to redeem all or any
portion of the BCP Note. |
|
|
|
|
(b) |
On April 14,
2021, the Company and BCP entered into an EFA (“EFA”), whereby, at
the Company’s election, BCP shall invest up to $50,000,000 over the
course of twelve months. This EFA was terminated in October
2021.
|
|
(c) |
On May 13,
2021, the Company issued a convertible promissory note to an
investor for $382,500 with an original issue discount of $7,500,
for a term of twenty-two months maturing March 13, 2023. In
addition, the Company issued warrants to the same investors to
purchase up to 750,000 warrant shares with the convertible
note. |
|
(d) |
On May 13,
2021, the Company issued a convertible promissory note to an
investor for $420,750 with an original issue discount of $8,250,
for a term of twenty-two months maturing March 13, 2023. In
addition, the Company issued a warrant to the same investor to
purchase up to 825,000 warrant shares with the convertible
note. |
|
|
|
|
(e) |
On May 17,
2021, the Company issued a convertible promissory note to an
investor for $1,020,000 with an original issue discount of $20,000,
for a term of twenty-two months maturing March 17, 2023. The
Company is required to register 1,500,000 shares under a Form S-1
Registration Statement for this convertible note
agreement. |
|
|
|
|
(f) |
On May 19,
2021, the Company issued a convertible promissory note to an
investor for $497,250 with an original issue discount of $9,750,
for a term of twenty-two months maturing March 19, 2023. In
addition, the Company issued a warrant to the same investor to
purchase up to 975,000 warrant shares with the convertible note.
The Company is required to register this convertible note under a
Form S-1 Registration Statement. |
|
|
|
|
(g) |
On May 19,
2021, the Company issued a convertible promissory note to an
investor for $76,500 with an original issue discount of $1,500, for
a term of twenty-two months maturing March 19, 2023. In addition,
the Company issued a warrant to the same investor to purchase up to
150,000 warrant shares with the convertible note. The Company is
required to register this convertible note under a Form S-1
Registration Statement. |
|
(h) |
On May 19,
2021, the Company issued a convertible promissory note to an
investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing March 19, 2023. In
addition, the Company issued a warrant to the same investor to
purchase up to 300,000 warrant shares with the convertible note.
The Company is required to register this convertible note under a
Form S-1 Registration Statement. |
|
|
|
|
(i) |
On April 26,
2021, the Company, issued 437,500 for the acquisition of the Chile
country rights. The value of this transaction was $1,000,000
received in cash.
(j) On June 21, 2021, the Company issued a convertible promissory
note to an investor for $382,500 with an original issue discount of
$7,500, for a term of twenty-two months maturing April 21, 2023. In
addition, the Company issued a warrant to the same investor to
purchase up to 750,000 warrant shares with the convertible note.
The Company recognized a BCF discount in the amount of $100,828 on
this convertible note that is being amortized over the life of the
convertible note.
(k) On June 21, 2021, the Company issued a convertible promissory
note to an investor for $382,500 with an original issue discount of
$7,500, for a term of twenty-two months maturing April 21, 2023. In
addition, the Company issued a warrant to the same investor to
purchase up to 750,000 warrant shares with the convertible note.
The Company recognized a BCF discount in the amount of $100,828 on
this convertible note that is being amortized over the life of the
convertible note.
(l) On August 30, 2021, the Company issued a convertible promissory
note to an investor for $153,000 with an original issue discount of
$3,000, for a term of twenty-two months maturing June 30, 2023. In
addition, the Company issued a warrant to the same investor to
purchase up to 375,000 warrant shares with the convertible
note.
(m) On November 12, 2021,
the
Company issued a convertible promissory note to an investor for
$306,000 with an original issue discount of $6,000, for a term of
twenty-two months maturing September 12, 2023. In addition, the
Company issued a warrant to the same investor to purchase up to
1,000,000 warrant shares with the convertible note.
|
We will continue to fund business operations through sales of our
products and services, additional financings, and the exercise of
warrants being registered in this registration statement which we
believe will be exercised in whole or in part over the next twelve
to eighteen months.
BUSINESS
Overview
We are a Web
3, digital commerce platform that was built to connect consumers,
freelancers and merchants in the digital economy. We provide simple
tools and packaging for complex new technologies such as
blockchain, in the same way that previous cycles of e-commerce and
the cloud were more simply packaged by companies such as Facebook,
Apple, Amazon and Netflix over the past several decades.
Our
goal is to provide ready built tools and platforms for consumers
and merchants to seamlessly participate in the digital economy.
HUMBL is built on a patent-pending decentralized technology stack
that utilizes both core and partner technologies, to provide faster
connections to the digital economy and each other. We have four
principal wholly-owned subsidiaries through which we provide a
number of our products: Tickeri, Inc., Monster Creative, LLC and
Ixaya Business SA de CV.
We have
three interconnected product verticals:
● HUMBL Pay
– A mobile app that allows peers, consumers and merchants to
connect in the digital economy.
● HUMBL
Marketplace – A mobile marketplace that allows consumers and
merchants to connect more seamlessly in the digital
economy.
● HUMBL
Financial – Financial products and services, targeted for
simplified investing on the blockchain.
HUMBL Pay
HUMBL is
developing a mobile application that allows customers to migrate to
digital forms of payment, along with services such as maps, ratings
and reviews. The Company is also working rapidly to integrate the
use of search, discovery, peer-to-peer cash and ticketing around
the world as these services migrate into digital and
blockchain-based modalities. The mobile application is designed to
provide functionality to the following groups:
●
Individuals - Consumers who want to discover, pay, rate and review
experiences digitally versus paper bills and hardware point-of-sale
(“POS”);
●
Freelancers - Service providers and gig workers that want to get
paid from anywhere they work vs. paper bills and hardware POS;
and
● Merchants
– Primarily brick and mortar vendors that want to get paid
digitally vs. paper bills and hardware POS.
HUMBL Marketplace
Through
our online marketplace, we are developing the capability for
merchants to list a wide range of physical products, that, when
appropriate, incorporate the benefits of blockchain. HUMBL is
working on technologies to provides merchants with the ability to
list and sell goods with greater levels of authentication, to
improve the merchant’s ability to trade, track and receive payment
for their products.
Through
our online marketplace we also allow for the listing of
non-fungible tokens (NFTs). NFTs allow entities and individuals
such as athletes, celebrities, agencies, artists and companies to
monetize their digital images, multimedia content and catalogues on
the blockchain. HUMBL provides a marketplace for artists and
athletes to connect online in the sale of digital collectibles to
fans and collectors and provides a rigorous set of terms and
conditions that govern what can and cannot be listed on the
marketplace. We currently review all listings to screen for graphic
content, potential intellectual property rights violations, and
potential securities law violations. The NFT marketplace is
operated through a third-party marketplace plug-in (OpenSea),
electronic wallet extensions (such as MetaMask), and the Ethereum
blockchain. Users participate in the NFT marketplace by linking
their digital wallets to our platform and engaging (e.g., buying,
selling, bidding) with the NFTs listed on our platform. The
services provided by HUMBL are administrative. HUMBL is a platform
and does not act as a broker, financial institution, or creditor.
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.
We
receive revenue from the NFT marketplace in two ways. First, for
some clients HUMBL provides design services to help artists,
athletes and entertainers create NFTs to be sold to their fans. In
these circumstances HUMBL typically receives a flat fee for
providing such services that is paid out of the sales price of the
NFT. The size of the fee depends on the scope and complexity of the
design services provided. Second, HUMBL receives a transaction fee
each time an NFT sells on the NFT marketplace.
The NFT marketplace allows creators to mint NFTs using their own
intellectual property and list those NFTs for sale (primary sales)
on the marketplace. The NFT marketplace also allows for NFTs to be
resold (secondary sales) on the platform, but currently only NFTs
that were originally minted on the Company’s NFT Marketplace or are
otherwise approved by the Company may be listed for secondary sales
on the Marketplace. The Company does not otherwise support or
influence the market for the resale of NFTs sold on its platform.
Other than requiring creators to attest they own the IP used to
create their NFTs and monitoring for obvious copyright violations,
the Company does not enforce any rights related to the primary or
secondary sales of NFTs. Payment transactions for the purchase and
sale of NFTs are made through the use of smart contracts on the
Ethereum blockchain. The Company does not handle separate,
off-chain payments for NFTs. Tracking and payment of resale royalty
fees are accomplished automatically through the use of smart
contracts. The Company is not responsible for distributing or
managing resale royalty fees.
We have policies and procedures to analyze whether each NFT listed
on our platform could be deemed to be a “security” under applicable
laws. Our policies and procedures do not constitute a legal
standard, but rather represent our company-developed model, which
permits us to make a risk-based assessment regarding the likelihood
that a particular NFT could be deemed a “security” under applicable
laws. Our employees responsible for making such determinations have
received training regarding the hallmarks of a “security” and use
an evaluation form to help make determinations. We also rely on
outside law firms to help support the process for determining when
an NFT could be considered a “security.”
In September
2021, we launched HUMBL Tickets, initially focused on the offering
of secondary (resale) tickets to thousands of live events across
North America. The inventory listings and ticket fulfillment are
provided by Ticket Evolution and we earn a commission for each
sale. In addition to its subsidiary Tickeri, we will continue to
work with clients to merge the realms of NFTs, event tickets and
blockchain authentication.
HUMBL Financial
We developed
HUMBL Financial to package step-function technologies such as
blockchain into “several clicks” for the customer. With the total
value of digital assets in excess of $1 trillion, there is
increased conviction that investment markets will need to migrate
to more digital forms of asset tokenization. This will create
opportunities for a new generation of market participants and
provide access to markets that have been historically reserved for
high-net-worth individuals.
In 2021, HUMBL Financial created BLOCK ETX products to simplify
digital asset investing for customers and institutions seeking
exposure to a new, 24/7 digital asset class. We have launched this
product in 100 countries outside the United States. HUMBL Financial
has developed proprietary, multi-factor blockchain indexes, trading
algorithms and financial services for the new digital asset trading
markets to accommodate index, active and thematic investment
strategies. BLOCK ETXs are completely non-custodial,
algorithmically driven software services that allow customers to
purchase and hold digital assets in pre-set allocations through
their own digital asset exchange accounts. BLOCK ETXs are
compatible for United States customers who have accounts with
Coinbase Pro, Bittrex US or Binance US and for non-US customers who
have accounts with Bittrex Global. BLOCK ETXs were served first on
the desktop and web version of the HUMBL platform, with the goal of
future applications inside the HUMBL mobile application. HUMBL
Financial is open to the licensing of the BLOCK ETXs to
institutions and exchanges. HUMBL Financial also plans to offer
trusted, third-party financial services in areas such as payments,
investments, credit card services and lending across the HUMBL
platform over time.
In February 2022, the Company elected to suspend offering the BLOCK
ETX products pending further legal analysis regarding how to offer
the BLOCK ETXs in a fully compliant manner with the evolving laws
and regulatory treatment of such novel products. In accordance with
ASC 205-20-50-1(a), the timing of the disposal was February 28,
2022. The Company met the criteria for the BLOCK ETX operations to
be classified as held for sale at that time.
COVID-19
The
unprecedented events related to COVID-19, the disease caused by the
novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term
adverse effects on our business that we cannot predict as the
global pandemic continues to evolve. The extent and effectiveness
of responses by governments and other organizations also cannot be
predicted.
Our ability
to access the capital markets and maintain existing operations is
unknown during the COVID-19 pandemic. Any such limitation on
available financing and how we conduct business with our customers
and vendors would adversely affect our business both domestically
and abroad.
A list of
our critical accounting policies are as follows:
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.
Segment
Reporting
We follow
the provisions of ASC 280-10 Segment Reporting. This standard
requires that companies disclose operating segments based on the
manner in which management disaggregates the Company in making
internal operating decisions.
For
the year ended December 31, 2020 the Company and its chief
operating decision makers determined that the Company operated in
one segment as they were developing their business model. Effective
2021, the Company has established three distinct operating
segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. All
operations for the year ended December 31, 2021 and 2020,
respectively were conducted in North America.
Less than 4%
of the Company’s sales were from outside of North America,
therefore the Company has determined that segment reporting by
geographic location was not necessary. In the future, the Company
will continue to monitor their activity by region to determine if
it is feasible to report segment information by
location.
Revenue
Recognition
The Company
accounts 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.
The five
core principles will be evaluated for each service provided by the
Company and is further supported by applicable guidance in ASC 606
to support the Company’s recognition of revenue.
The Company
accounts for revenues based on the verticals in which they were
earned. The three principal verticals in which the Company operates
today are HUMBL Pay, HUMBL Marketplace, and HUMBL
Financial.
HUMBL
Pay
The Company
is anticipated to earn transaction revenues primarily from fees
charged to merchants and consumers on a transaction basis through
the Company’s mobile application. These fees may have a fixed
and/or variable component. The variable component is generally a
percentage of the value of the payment amount and is known at the
time the transaction is processed. For a portion of our
transactions, the variable component of the fee is eligible for
reimbursement when the underlying transaction is approved for a
refund. The Company may estimate the amount of fee refunds that
will be processed each quarter and record a provision against the
net revenues. The volume of activity processed on the platform,
which results in transaction revenue, is referred to as Total
Payment Volume (“TPV”). The Company will earn additional fees on
transactions where currency conversion is performed, when
cross-border transactions are enabled (i.e., transactions where the
merchant and consumer are in different countries), to facilitate
the instant transfer of funds for customers from their HUMBL
account to their debit card or bank account, and other
miscellaneous fees. The Company will rely on third party partners
to perform all money transmission services.
The Company
may earn revenues from other value-added services, which are
comprised primarily of revenue earned through partnerships,
referral fees, subscription fees, gateway fees, ticketing,
peer-to-peer payments and other services that will be provided to
merchants and consumers. These contracts typically have one
performance obligation which is provided and recognized over the
term of the contract.
The
transaction price is generally fixed and known at the end of each
reporting period; however, for some agreements, it may be necessary
to estimate the transaction price using the expected value method.
The Company is expected to record revenue earned in revenues from
other value-added services on a net basis when they are considered
the agent with respect to processing transactions.
HUMBL
Marketplace
The
Company recognizes revenue when its transfer control of promised
goods or services to customers in an amount that reflects the
consideration to which is expected to be entitled in exchange for
those goods or services. Revenue is recognized net of any taxes
collected, which are subsequently remitted to governmental
authorities.
Net
transaction revenues
The net
transaction revenues will primarily include final value fees,
feature fees, including fees to promote listings, and listing fees
from sellers in our Marketplace. The net transaction revenues will
also include store subscription and other fees often from large
enterprise sellers. The net transaction revenues are reduced by
incentives provided to customers.
The Company
has identified one performance obligation to sellers on the
Marketplace platform, which is to connect buyers and sellers on the
secure and trusted Marketplace platforms. Final value fees are
recognized when an item is sold on a Marketplace platform,
satisfying this performance obligation. There may be additional
services available to Marketplace sellers, mainly to promote or
feature listings, that are not distinct within the context of the
contract.
Accordingly,
fees for these additional services are recognized when the single
performance obligation is satisfied. Promoted listing fees are
recognized when the item is sold and feature and listing fees are
recognized when an item is sold, or when the contract
expires.
Further, to
drive traffic to the platform, the Company will provide incentives
to buyers and sellers in various forms including discounts on fees,
discounts on items sold, coupons and rewards. Evaluating whether a
promotion or incentive is a payment to a customer may require
significant judgment. Promotions and incentives which are
consideration payable to a customer are recognized as a reduction
of revenue at the later of when revenue is recognized or when the
incentive is paid or promise to be paid. Promotions and incentives
to most buyers on our Marketplace platforms, to whom there is no
performance obligation, are recognized as sales and marketing
expense. In addition, there may be credits provided to customers
when certain fees are refunded. Credits are accounted for as
variable consideration at contract inception when estimating the
amount of revenue to be recognized when a performance obligation is
satisfied to the extent that it is probable that a significant
reversal of revenue will not occur and updated as additional
information becomes available.
Ticketing
Revenues
The
Company with the acquisition of Tickeri and launch of HUMBL Tickets
recognizes revenues from their ticketing services primarily from
service fees, commissions and payment processing fees charged at
the time a ticket for an event is sold. We also derive revenues
from providing certain creators with account management services
and customer support. Our customers are primarily event creators
who use our platform to sell tickets to attendees. Revenue is
recognized when control of the promised goods or services is
transferred to customers, in an amount that reflects the
consideration we receive in exchange for those goods or services.
We allocate the transaction price by estimating a standalone
selling price for each performance obligation using a cost plus a
margin approach. For service fees and payment processing fees,
revenue is recognized when the ticket is sold. For account
management services and customer support, revenue is recognized
over the period from the date of the sale of the ticket to the date
of the event.
We evaluate
whether it is appropriate to recognize revenue on a gross or net
basis based upon our evaluation of whether we obtain control of the
specified goods or services by considering if we are primarily
responsible for fulfillment of the promise, have inventory risk,
and have the latitude in establishing pricing and selecting
suppliers, among other factors.
We
determined the event creator is the party responsible for
fulfilling the promise to the attendee, as the creator is
responsible for providing the event for which a ticket is sold,
determines the price of the ticket and is responsible for providing
a refund if the event is canceled. Our service is to provide a
platform for the creator and event attendee to transact and our
performance obligation is to facilitate and process that
transaction and issue the ticket. The amount that we earn for our
services is fixed. For the payment processing service, we
determined that we are the principal in providing the service as we
responsible for fulfilling the promise to process the payment and
we have discretion and latitude in establishing the price of our
service. Based on our assessment, we record revenue on a net basis
related to our ticketing service and on a gross basis related to
our payment processing service. As a result, costs incurred for
processing the transactions are included in cost of net revenues in
the consolidated statements of operations.
Revenue is
presented net of indirect taxes, value-added taxes, creator
royalties and reserves for customer refunds, payment chargebacks
and estimated uncollectible amounts. If an event is cancelled by a
creator, then any obligations to provide refunds to event attendees
are the responsibility of that creator.
If a creator
is unwilling or unable to fulfill their refund obligations, we may,
at our discretion, provide attendee refunds. Revenue is also
presented net of the amortization of creator signing fees when
applicable. The benefit we receive by securing exclusive ticketing
and payment processing rights with certain creators from creator
signing fees is inseparable from the customer relationship with the
creator and accordingly these fees are recorded as a reduction of
revenue in the consolidated statements of operations.
Marketing
services and other revenues
Marketing
services and other revenues are derived principally from the sale
of advertisements, classifieds fees, and revenue sharing
arrangements. Advertising revenue is derived principally from the
sale of online advertisements which are based on “impressions”
(i.e., the number of times that an advertisement appears in pages
viewed by users of our platforms) or “clicks” (which are generated
each time users on our platforms click through our advertisements
to an advertiser’s designated website) delivered to
advertisers.
The Company
uses the output method and apply the practical expedient to
recognize advertising revenue in the amount to which they have a
right to invoice. For contracts with target advertising commitments
with rebates, estimated payout is accounted for as a variable
consideration to the extent it is probable that a significant
reversal of revenue will not occur.
HUMBL
Financial
Revenue is
recognized upon transfer of control of promised services to
customers in an amount to which the Company expects to be entitled
in exchange for those services. Service subscription revenue is
recognized for the month in which services are provided. If a
customer pays for an annual subscription, revenue is allocated over
the months in the subscription and recognized for each month of the
service provided.
Fixed
Assets and Long-Lived Assets
ASC 360
requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company has
adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles –
Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment.
The Company
reviews recoverability of long-lived assets on a periodic basis
whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential
impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future
cash flows from its operations on an undiscounted basis. If such
assets are determined to be impaired, the impairment recognized is
the amount by which the carrying value of the assets exceeds the
fair value of the assets.
Fixed assets
and intangible assets with finite useful lives are stated at cost
less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs
and reviewed for indicators of impairment at least annually, or
more depending on circumstances.
The Company
assesses the impairment of identifiable intangibles whenever events
or changes in circumstances indicate that the carrying value may
not be recoverable. Factors the Company considers to be important
which could trigger an impairment review include the
following:
1.
Significant underperformance relative to expected historical or
projected future operating results;
2.
Significant changes in the manner of use of the acquired assets or
the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When the
Company determines that the carrying value of intangibles may not
be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot
be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment
based on a projected discounted cash flow method using a discount
rate determined by management to be commensurate with the risk
inherent in the current business model. Significant management
judgment is required in determining whether an indicator of
impairment exists and in projecting cash flows.
Significant Vendor
Relationships
We have
established contractual relationships with the following companies
that we consider to be material to providing our four core product
groups, HUMBL Pay, HUMBL Marketplace and HUMBL
Financial:
We need in
each country or region a payment processing company to allow the
consumers to pay online the merchants using our software services.
In the United States we have a Platform Connect Agreement and
Services Agreement with Stripe, Inc. as well a Referral Agreement
with Wyre, Inc. In South America we have a Payment Processing
Services Agreement with Bexs Tehnologia Da Informacao LTDA. We have
entered into the standard forms of agreements that these companies
offer to companies such as ours that promote online purchase of
goods and services.
We utilize
Gumroad, an online platform that facilitates the sale of products
by creators directly to consumer, to process payments for the
monthly fee that HUMBL Financial charges its customers to use the
service.
We utilize
Very Good Security (“VGS”), a company that encrypts debit and
credit card data as well as banking information, that allows us not
to hold onto, see or decrypt any of the raw credit card or banking
data from our customers since this information is handled directly
by VGS which encrypts all of it and securely sends this data
directly to Stripe.
Competition
Each of our
three principal verticals is highly competitive. Throughout the
globe, we currently face substantial competition from other service
providers that offer mobile payments, ticketing, NFT marketplaces
and digital asset investing products. We compete primarily on the
basis of availability of services and products, unique product
offerings and price.
HUMBL Pay
competes with PayPal and Square.
HUMBL
Marketplace competes with OpenSea, an open, decentralized marketplace for a
large variety of digital items—from game items to digital
collectibles to digital art, Makers Place, a digital
creation platform powered by blockchain technology for digital
creators, and Live Nation Entertainment, the world’s largest
ticketing company.
HUMBL
Financial competes with companies such as Shrimpy and Stacked
Invest that also provide digital asset investing
opportunities.
Employees
and Human Capital
As of
April 15, 2022, we had 42 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.
Properties
We purchased
a commercial property in the form of a suite at a luxury hotel.
HUMBL is the owner of this suite and entered into a long-term
rental agreement with the hotel to manage the property. HUMBL has
use of the suite for 28 calendar days a year, and will receive
their proportionate income for the other days the suite is being
used. We currently rent an office in San Diego, California at a
monthly cost of $12,400 on a six-month lease (“Company
Headquarters”). We believe that the Company Headquarters is
currently adequate for the purposes of our operations.
Legal
Proceedings
From time to
time we may be named in claims arising in the ordinary course of
business. Currently, there are no legal proceedings that are
pending against us or involve us that, in the opinion of our
management, could reasonably be expected to have a material adverse
effect on our business or financial condition.
We recently
received from Charles Lass a notification that he had filed four
trademark applications using the HUMBL name in various classes. We
have advised Mr. Lass through our trademark counsel that he should
immediately discontinue any use of the trademark for similar
services regarding his claims of ownership of the trademark HUMBL
and reminded him that we had various trademarks issued under the
name HUMBL with a first use date of April 1, 2018 and that his
previous attempt at using the HUMBL name had resulted in him
receiving a cease and desist letter from us dated April 14, 2020
regarding his since abandoned trademark filings for HUMBL. We
intend to vigorously contest any effort by Mr. Lass to violate our
trademark protection under federal law.
MANAGEMENT
Set forth
below is certain information regarding our executive officers and
directors. Each of the directors listed below was elected to our
board of directors to serve until our next annual meeting of
stockholders or until his or her successor is elected and
qualified. All directors hold office for one-year terms until the
election and qualification of their successors. The following table
sets forth information regarding the members of our board of
directors and our executive officers:
The
following persons are the executive officers and directors of our
Company:
Name |
|
Age |
|
Position |
Brian Foote |
|
42 |
|
President; Chief
Executive Officer; Chairman |
Jeffrey
Hinshaw |
|
34 |
|
Chief Operating Officer;
Chief Financial Officer; Director |
William B.
Hoagland |
|
40 |
|
Director |
Peter
Schulte |
|
64 |
|
Director |
Michele
Rivera |
|
46 |
|
Vice President, Global
Partnerships; Director |
Javier
Gonzalez |
|
34 |
|
Chief Technology
Officer |
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.
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 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 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.
William B.
Hoagland has served as a member of our Board of Directors since
July 23, 2021. Since 2019, Mr. Hoagland has served as the Chief
Executive Officer of Agora Digital Holdings, Inc. and Chief
Financial Officer of Ecoark Holdings, Inc. Immediately prior to
joining Ecoark Holdings, Inc. in 2019, Mr. Hoagland spent the
previous eight years as Managing Member of Trend Discovery Capital
Management (“Trend Discovery”), a hybrid hedge fund with a track
record of outperforming the S&P 500. Prior to founding Trend
Discovery in 2011, Mr. Hoagland spent six years as a Senior
Associate at Prudential Global Investment Management (PGIM),
working in both PGIM’s Newark, NJ and London, England offices. Mr.
Hoagland holds the Chartered Financial Analyst designation and is a
Level III candidate in the Chartered Market Technician Program. We
believe that this financial expertise and knowledge of the capital
markets makes him qualified to be a member of our Board of
Directors.
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.
Michele
Rivera has served as Vice President, Global Partnerships and has
been a member of our Board of Directors since November 24, 2020.
Prior to co-founding HUMBL LLC in May 2019, Ms. Rivera was a
Retailer with ECSD from November 2018 to February 2019. Prior to
that, Ms. Rivera worked as a Home Furnishings Retailer at Williams
Sonoma Inc. from October 1999 to October 2018. We believe that the
business experience of Ms. Rivera, including her experience with
the daily operations of companies as well as with the challenges of
growing companies, makes her qualified to be a member of our Board
of Directors.
Javier
Gonzalez has served as our Chief Technology Officer since June 3,
2021. Since November 2010, Mr. Gonzalez has worked as the Chief
Technology Officer of Tickeri, Inc., a leading ticket broker in the
Latin American and Caribbean ticketing market. From January 2008 to
January 2015, Mr. Gonzalez also worked as the Chief Technology
Officer of Kesta Happenings. From November 2007 to April 2013, Mr.
Gonzalez worked as a Software Engineer for AboutWeb.
Board of
Directors and Corporate Governance
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.
The Board of
Directors periodically reviews relationships that directors have
with our company to determine whether the directors are
independent. Directors are considered “independent” as long as they
do not accept any consulting, advisory or other compensatory fee
(other than director fees) from us, are not an affiliated person of
our company or our subsidiaries (e.g., an officer or a greater than
10% stockholder) and are independent within the meaning of
applicable United States laws, regulations and the Nasdaq Capital
Market listing rules. In this latter regard, the Board of Directors
uses the Nasdaq Marketplace Rules (specifically, Section 5605(a)(2)
of such rules) as a benchmark for determining which, if any, of our
directors are independent, solely in order to comply with
applicable SEC disclosure rules.
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.
Directors
and Officers Liability Insurance
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.
Committees of the
Board of Directors
Our Board of
Directors has appointed an audit committee, a compensation
committee and a nominating and corporate governance committee, each
of which has the composition and responsibilities described
below.
Audit
Committee
The
Company’s audit committee consists of William B. Hoagland, Peter
Schulte and Jeffrey Hinshaw. The Board has determined that Messrs.
Schulte and Hoagland are financially literate and qualify as
independent directors under Section 5605(a)(2) and Section
5605(c)(2) of the Nasdaq rules. Mr. Hoagland 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, William B.
Hoagland and Brian Foote. Our board has determined that each of
Messrs. Schulte and Hoagland qualifies as an independent director
under Section 5605(a)(2) of the Nasdaq 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, as described in Section
5605(d)(2) of the Nasdaq rules. 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,
William B. Hoagland and Michele Rivera. Our board has determined
that each of Messrs. Schulte and Hoagland qualifies as an
independent director under Section 5605(a)(2) of the Nasdaq 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. |
|
Compensation
Committee Interlocks and Insider Participation
None of our
directors or executive officers serves as a member of the board of
directors or compensation committee of any other entity that has
one or more of its executive officers serving as a member of our
board of directors.
Code of
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
the Nasdaq Capital Market 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.
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.
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.
EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation
awarded to or earned by: (i) each individual who served as the
principal executive officer and principal financial officer of the
Company during the years ended December 31, 2021 and 2020; and (ii)
each other individual that served as an executive officer of the
Company at the conclusion of the years ended December 31, 2021 and
2020 and who received more than $100,000 in the form of salary and
bonus during such year. For purposes of this report, these
individuals are collectively the “named executive officers” of our
Company.
Name and Position |
|
Years |
|
|
Salary |
|
|
Bonus |
|
|
Stock Awards |
|
|
Option Awards |
|
|
Non-equity Incentive Plan Compensation |
|
|
Non-qualified Deferred Compensation Earnings |
|
|
All Other Compensation |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Foote, |
|
|
2021 |
|
|
$ |
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
1 |
|
Chairman, President and Chief Executive Officer |
|
|
2020 |
|
|
$ |
30,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Hinshaw |
|
|
2021 |
|
|
$ |
90,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
90,000 |
|
Chief Operating Officer, Chief Financial Officer |
|
|
2020 |
|
|
$ |
48,750 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
$ |
48,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Hoagland, |
|
|
2021 |
|
|
|
25,000
|
|
|
|
|
|
|
|
146,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
146,340
25,000
|
|
Director |
|
|
2020 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Schulte, Director |
|
|
2021 |
|
|
|
- |
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
250,000
|
|
|
|
|
2020 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Michele Rivera |
|
|
2021 |
|
|
$ |
90,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
90,000 |
|
Vice President, Global Partnerships |
|
|
2020 |
|
|
$ |
53,900 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
53,900 |
|
Employment and
Advisory Agreements
On
June 3, 2021, we entered into an employment agreement with Javier
Gonzalez, our Chief Technology Officer and Juan Luis Gonzalez, the
CEO of our subsidiary, Tickeri, Inc. The employment agreements
provide that each executive will receive a salary of $150,000 a
year. On June 30, 2021, Doug Brandt and Kevin Childress entered
into employment agreements with our subsidiary, Monster Creative,
LLC. Pursuant to those employment agreements, Mr. Brandt will be
paid $500,000 a year and Mr. Childress will be paid $400,000 a
year. Mr. Brandt will act as Chief Executive Officer of Monster
Creative, LLC and Mr. Childress will act as President and Creative
Director of Monster Creative, LLC. On July 13, 2021, we entered
into a new employment agreement with Brian Foote, our Chairman,
President and Chief Executive Officer; Jeffrey Hinshaw, our Chief
Operating Officer, and Corporate Secretary; and Michele Rivera, our
Vice President, Global Partnerships. The employment agreements are
all in the same form and provide that Mr. Foote will receive a
salary of $1 and each of the other three officers will receive
salaries of $90,000 a year.
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 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. The employment agreements for Juan Gonzalez, Javier Gonzalez,
Doug Brandt and Kevin Childress also contain covenants restricting
them from competing against the Company and its subsidiaries during
the term of their employment and for a period of time
thereafter.
Equity
Compensation Plan Information
On July 21
2021, our Board of Directors and stockholders adopted our 2021
Stock Incentive Plan (the “2021 Plan”). The purpose of the 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 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
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 Plan and of any
awards granted there under and to modify awards granted under the
2021 Plan. The Administrator may not, however, reduce the price of
options or stock appreciation rights issued under the 2021 Plan
without prior approval of the Company’s shareholders.
Eligibility.
The 2021 Plan provides that awards may be granted to employees,
officers, directors and consultants of the Company or of any
parent, subsidiary or other affiliate of the Company as the
Administrator may determine. A person may be granted more than one
award under the 2021 Plan.
Shares that
are subject to issuance upon exercise of an option under the 2021
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 Plan but are forfeited or repurchased
by the Company 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 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 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
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 the Company’s 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 the Company’s 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
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 the Company 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 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 the Company
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 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 Plan or
amend the 2021 Plan in any respect; provided that the Administrator
may not, without approval of the stockholders, amend the 2021 Plan
in a manner that requires stockholder approval.
PRINCIPAL
SECURITYHOLDERS
The following table sets forth certain information as of April 25,
2022, the beneficial ownership of our common stock by the following
persons:
|
● |
each person
or entity who, to our knowledge, owns more than 5% of our common
stock; |
|
|
|
|
● |
our
executive officers named in the Summary Compensation Table
above; |
|
|
|
|
● |
each
director; and |
|
|
|
|
● |
all of our
executive officers and directors as a group. |
Unless
otherwise indicated in the footnotes to the following table, each
person named in the table has sole voting and investment power and
that person’s address is c/o 600 B Street, San Diego, California
92102, and our telephone number is (786) 738-9012. Shares of common
stock subject to options, warrants, or other rights currently
exercisable or exercisable within 60 days of the date of this
prospectus, are deemed to be beneficially owned and outstanding for
computing the share ownership and percentage of the stockholder
holding the options, warrants or other rights, but are not deemed
outstanding for computing the percentage of any other
stockholder.
Name and Address of Beneficial Owner |
|
Class of Securities |
|
# of Shares |
|
|
% of Class |
|
|
%
of Voting Shares(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Foote(1) |
|
Common |
|
|
11,894,304 |
|
|
|
* |
|
|
|
* |
|
|
|
Series A Preferred |
|
|
7,000,000 |
|
|
|
100 |
% |
|
|
51.9 |
% |
|
|
Series B Preferred |
|
|
243,421 |
|
|
|
47.01 |
% |
|
|
18.04 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Hinshaw(1) |
|
Common |
|
|
79,061,812 |
|
|
|
6.0 |
% |
|
|
* |
|
|
|
Series B Preferred |
|
|
35,087 |
|
|
|
6.9 |
% |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele
Rivera(1) |
|
Common |
|
|
47,266,000 |
|
|
|
3.0 |
% |
|
|
* |
|
|
|
Series B Preferred |
|
|
25,669 |
|
|
|
5.04 |
% |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Hoagland |
|
Common |
|
|
150,000 |
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Schulte |
|
Common |
|
|
287,422 |
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Javier Gonzalez |
|
Common |
|
|
4,672,897 |
|
|
|
* |
|
|
|
* |
|
|
|
Series B Preferred |
|
|
25 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Grado |
|
Common |
|
|
50,460,000 |
|
|
|
3.58 |
% |
|
|
* |
|
|
|
Series B Preferred |
|
|
54,079 |
|
|
|
9.0 |
% |
|
|
4.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group
(6 persons) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
138,659,538 |
|
|
|
9.83 |
% |
|
|
1.02 |
% |
Series A Preferred |
|
|
|
|
7,000,000 |
|
|
|
100 |
% |
|
|
51.9 |
% |
Series B Preferred |
|
|
|
|
296,240 |
|
|
|
58.25 |
% |
|
|
21.95 |
% |
(1) |
Officer
and/or director of our Company. |
(2) |
Voting
control is based on a total of 13,495,214,389 voting rights
attributable to shares of our commons stock with one vote per
share, shares of our Series A Preferred stock with 1,000 votes per
share and shares of our Series B Preferred stock with 10,000 votes
per share. |
* |
less than 1%
of the issued and outstanding shares of common stock. |
We have
agreed to keep such registration effective until all shares of
common stock can be sold without registration pursuant to Rule 144
under the Securities Act.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except as
set forth below, during the past three years, there have been no
transactions, whether directly or indirectly, between the Company
and any of its officers, directors or their family
members.
Brian
Foote’s parents, sister and cousin were investors in HUMBL LLC and
are investors in Brighton Capital. The foregoing relatives own
approximately 26.67% of the investor interests in Brighton Capital
and have no management or control rights over the operations of
Brighton Capital. Brian Foote’s parents are the trustees of the
trust that owns Sartorii.
DESCRIPTION OF
SECURITIES
Authorized Capital
Stock
Our
authorized capital stock consists of 7,450,000,000 shares of common
stock, par value $0.00001 per share, and 10,000,000 shares of
“blank check” preferred stock, par value $0.00001 per
share.
Issued
and Outstanding Capital Stock
The issued
and outstanding securities of the Company on the date of this
prospectus are as follows:
|
● |
1,429,214,389
shares
of common stock; |
|
|
|
|
● |
7,000,000
shares of Series A preferred stock; |
|
|
|
|
● |
506,600
shares
of Series B preferred stock; and |
|
|
|
|
● |
Warrants
to purchase 283,650,000 shares of common stock at a range of $0.20
to $1.00 per share and stock options to purchase 630,000 shares of
common stock at $0.70 per share. |
Description of Common
Stock
The holders
of common stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders, including the election of
directors. Generally, all matters to be voted on by stockholders
must be approved by a majority (or, in the case of election of
directors, by a plurality) of the votes entitled to be cast by all
shares of common stock that are present in person or represented by
proxy. Except as otherwise provided by law, amendments to the
articles of incorporation generally must be approved by a majority
of the votes entitled to be cast by all outstanding shares of
common stock. Our Articles of Incorporation do not provide for
cumulative voting in the election of directors. The common
stockholders will be entitled to such cash dividends as may be
declared from time to time by the Board from funds available. Upon
liquidation, dissolution or winding up of the Company, the common
stockholders will be entitled to receive pro rata all assets
available for distribution to such holders.
Description of
Preferred Stock
We have
10,000,000 shares of preferred stock authorized of which we have
designated 7,000,000 shares of Series A preferred stock, 570,000
shares of Series B preferred stock and we had 150,000 shares of
Series C preferred stock prior to withdrawing them on October 29,
2021.
Voting
Rights
Holders of
our Series A preferred stock are entitled to 1,000 votes for each
share held on all matters submitted to a vote of stockholders,
holders of our Series B preferred stock are entitled to 10,000
votes for each share held on all matters submitted to a vote of
stockholders, and holders of our Series C preferred stock are
entitled to 5,000 votes for each share hold on all matters
submitted to a vote of stockholders on any matter that is submitted
to a vote of stockholders.
Conversion
Rights
Only our
Series B preferred stock is convertible into common stock. Holders
of Series B preferred stock may at any time after December 3, 2021
convert each share of Series B preferred stock into 10,000 shares
of common stock.
On October
29, 2021, the Company by Board consent approved an amendment to
their Certificate of Amendment for the Series B Preferred Stock to
(a) reduce the number of authorized shares of Series B Preferred
stock to 570,000 and (b) for Series B Preferred shareholders
holding greater than 750 shares of Series B Preferred Stock, for
the calendar months of December 2021 and January 2022, Series B
Preferred shareholders shall not have the right, whether by
election, operation of law, or otherwise, to convert into Common
Stock shares of Series B Preferred stock constituting more than 5%
of the total number of Series B Preferred shares held by them; and
for each of the calendar months from February 2022 to May 2023, the
percentage that the Series B Preferred shareholder may convert is
3% of the total number of Series B Preferred shares held by them.
This action was approved by Series B Shareholder
consent.
Dividends
Holders of
our shares of Series A preferred stock and Series B preferred stock
shall be entitled to receive dividends, 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.
Redemption
Rights
We have the
right to redeem some or all the shares of the holders of our Series
A preferred stock and Series B preferred stock in the event of a
Change of Control (defined in our amended certificate of
incorporation as the time at which as a third party not affiliated
with the Company or any holders of the Series A preferred stock and
Series B preferred stock shall have acquired, in one or a series of
related transactions, more than 50% of our outstanding voting
securities) at a price equal to 100% of their liquidation
value.
Liquidation
Rights
Upon any
liquidation, dissolution, or winding-up of the Company, whether
voluntary or involuntary (a “Liquidation”), the holders of the
Series A preferred and Series B preferred will be entitled to
receive out of the assets, whether capital or surplus, of the
Company an amount equal to the liquidation value of their preferred
shares before any distribution or payment shall be made to the
holders of any junior securities, and if the assets of the Company
are insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of the Series A preferred
stock and the Series B preferred stock shall be ratably distributed
among those holders in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were
paid in full.
Anti-Takeover
Provisions
Certain
provisions of Delaware law, our amended certificate of
incorporation and our bylaws, which are summarized below, may have
the effect of delaying, deferring or discouraging another person
from acquiring control of us. They are also designed, in part, to
encourage persons seeking to acquire control of us to negotiate
first with our board of directors. We believe that the benefits of
increased protection of our potential ability to negotiate with an
unfriendly or unsolicited acquirer outweigh the disadvantages of
discouraging a proposal to acquire us because negotiation of these
proposals could result in an improvement of their terms.
Amended
Certificate of Incorporation and Bylaw
Provisions
Our amended
certificate of incorporation and our bylaws include a number of
provisions that could deter hostile takeovers or delay or prevent
changes in control of our board of directors or management team,
including the following:
Board of
Directors Vacancies
Our amended
certificate of incorporation and bylaws authorize only our board of
directors to fill vacant directorships, including newly created
seats. In addition, the number of directors constituting our board
of directors will be permitted to be set only by a resolution
adopted by a majority vote of our entire board of directors. These
provisions would prevent a stockholder from increasing the size of
our board of directors and then gaining control of our board of
directors by filling the resulting vacancies with its own nominees.
This will make it more difficult to change the composition of our
board of directors and will promote continuity of
management.
Stockholder Action;
Special Meeting of Stockholders
Our amended
certificate of incorporation provides that special meetings of our
stockholders may be called only by a majority of our board of
directors, the chairperson of our board of directors, our Chief
Executive Officer or our President, thus prohibiting a stockholder
from calling a special meeting. These provisions might delay the
ability of our stockholders to force consideration of a proposal or
for stockholders controlling a majority of our capital stock to
take any action, including the removal of directors.
Advance
Notice Requirements for Stockholder Proposals and Director
Nominations
Our bylaws
provide advance notice procedures for stockholders seeking to bring
business before our annual meeting of stockholders or to nominate
candidates for election as directors at our annual meeting of
stockholders. Our bylaws also specify certain requirements
regarding the form and content of a stockholder’s notice. These
provisions might preclude our stockholders from bringing matters
before our annual meeting of stockholders or from making
nominations for directors at our annual meeting of stockholders if
the proper procedures are not followed. We expect that these
provisions may also discourage or deter a potential acquirer from
conducting a solicitation of proxies to elect the acquirer’s own
slate of directors or otherwise attempting to obtain control of our
company.
No
Cumulative Voting
The Delaware
General Corporation Law provides that stockholders are not entitled
to cumulate votes in the election of directors unless a
corporation’s certificate of incorporation provides otherwise. Our
amended and restated certificate of incorporation does not provide
for cumulative voting.
Amendment
of Charter and Bylaws Provisions
Amendments
to our amended certificate of incorporation will require the
approval of the holders of at least a majority of the voting power
of the outstanding shares of our Class A common stock and Class B
common stock. Our amended and restated bylaws will provide that the
approval of the holders of at least a majority of the voting power
of the outstanding shares of our Class A common stock and Class B
common voting together as a single class is required for
stockholders to amend or adopt any provision of our
bylaws.
Issuance
of Undesignated Preferred Stock
Our board of
directors will have the authority, without further action by our
stockholders, to issue up to 10,000,000 shares of undesignated
preferred stock with rights and preferences, including voting
rights, designated from time to time by our board of directors. The
existence of authorized but unissued shares of preferred stock
would enable our board of directors to render more difficult or to
discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest or other means.
Exclusive
Forum
Our bylaws
will provide that, unless we consent in writing to the selection of
an alternative forum, the sole and exclusive forum for (i) any
derivative action or proceeding brought on our behalf, (ii) 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, (iii) any action asserting a claim against the
company or any director or officer of the company arising pursuant
to any provision of the Delaware General Corporation Law, (iv) any
action to interpret, apply, enforce, or determine the validity of
our amended and restated certificate of incorporation or amended
and restated bylaws, or (v) any other action asserting a claim that
is governed by the internal affairs doctrine shall be the Chancery
Court of the State of Delaware, in all cases subject to the court’s
having jurisdiction over indispensable parties named as defendants.
Our bylaws also provide that the federal district court in the
State of Delaware will be the exclusive forum for resolving any
complaint asserting a course of action under the Securities Act and
the Securities Exchange Act of 1934.
Any person
or entity purchasing or otherwise acquiring any interest in our
securities shall be deemed to have notice of and consented to these
provisions. We note that stockholders cannot waive compliance (or
consent to non-compliance) with the federal securities laws and the
rules and regulations thereunder.
Transfer
Agent
Our transfer
agent is Pacific Stock Transfer Company, 6725 Via Austi Parkway,
Suite 300, Las Vegas, Nevada.
Blank
Check Preferred Stock
The ability
to authorize “blank check” preferred stock makes it possible for
our board of directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any
attempt to acquire us. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in
control or management of our Company.
INDEMNIFICATION OF OFFICERS AND
DIRECTORS
Delaware
General Corporation Law (“DGCL”) Section 145 provides us with the
power to indemnify any of our directors, officers, employees and
agents. The person entitled to indemnification must have conducted
himself in good faith, and must reasonably believe that his conduct
was in, or not opposed to, our best interests. In a criminal
action, the director, officer, employee or agent must not have had
reasonable cause to believe that his conduct was
unlawful.
Under DGCL
section 145, advances for expenses may be made by agreement if the
director or officer affirms in writing that he has met the
standards for indemnification and will personally repay the
expenses if it is determined that such officer or director did not
meet those standards.
Our bylaws
include an indemnification provision under which we have the power
to indemnify our directors, officers, former directors and
officers, employees and other agents (including heirs and personal
representatives) against all costs, charges and expenses actually
and reasonably incurred, including an amount paid to settle an
action or satisfy a judgment to which a director or officer is made
a party by reason of being or having been a director or officer of
the Company. Our bylaws further provide for the advancement of all
expenses incurred in connection with a proceeding upon receipt of
an undertaking by or on behalf of such person to repay such amounts
if it is determined that the party is not entitled to be
indemnified under our bylaws. No advance will be made by the
Company to a party if it is determined that the party acting in bad
faith. These indemnification rights are contractual, and as such
will continue as to a person who has ceased to be a director,
officer, employee or other agent, and will inure to the benefit of
the heirs, executors and administrators of such a
person.
Insofar as
indemnification for liabilities arising under the Securities Act
may be permitted for our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE
SALE
We have a
limited public market for our common stock and a limited number of
shares in the public float. Sales of substantial amounts of our
common stock in the public market resulting from this Offering
could adversely affect the prevailing market price and our ability
to raise capital in the future.
As of the date of this prospectus, we have 1,409,675,639 shares of
common stock issued and outstanding. Upon the completion of this
offering, we will have outstanding an aggregate of up to an
additional 268,725,000 including the shares of the Selling
Stockholders. All 369,382,466 shares included in this offering will
be freely tradable without restriction or further registration
under the Securities Act. Of the 1,409,675,639 shares of our common
stock outstanding prior to the completion of this offering and held
by existing stockholders, approximately 1,098,460,250 shares are
currently free trading and the remaining are “restricted
securities” as that term is defined in Rule 144 under the
Securities Act. Restricted shares may be sold in the public market
only if registered or if they qualify for exemption under Rule 144
or 701 promulgated under the Securities Act, which rules are
summarized below, or another exemption.
Rule
144
In general,
under Rule 144, as currently in effect, a person who owns shares
that were acquired from us or one of our affiliates at least six
months prior to the proposed sale is entitled to sell, within any
three-month period beginning 90 days after the date of this
prospectus, a number of shares that does not exceed the greater
of:
|
● |
One
percent of the number of shares of common stock then outstanding,
which will equal approximately 11,713,749 shares immediately after
this offering; or |
|
|
|
|
● |
The average
weekly trading volume of the common stock on a national securities
exchange during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale. |
|
|
|
|
● |
In addition
to these volume limitations, sales of unregistered shares of our
common stock in reliance on Rule 144 may only be made by affiliates
if such sales: |
|
● |
are preceded
by a notice filing on Form 144; |
|
|
|
|
● |
are limited
to broker’s transactions, as such term is defined under Section
4(a)(4) of the Securities Act; and |
|
|
|
|
● |
only occur
at a time when current public information about us is available,
which generally would require that we are not delinquent with any
of our reports required pursuant to Sections 13 or 15(d) of the
Exchange Act. Rule 144 also provides that our affiliates who sell
shares of our common stock that are not restricted shares must
nonetheless comply with the same restrictions applicable to
restricted shares, with the exception of the holding period
requirement. |
Under Rule
144, a person who is not deemed to have been one of our affiliates
for purposes of the Securities Act at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed
to be sold for at least six months, including the holding period of
any prior owner other than one of our affiliates, is entitled to
sell such shares without complying with the manner of sale, volume
limitation or notice provisions of Rule 144. If the non-affiliate
has held the shares for at least one year, then the shares may be
sold without regard to the public information provisions of Rule
144. Therefore, unless otherwise restricted, shares held by
non-affiliates may be sold immediately upon the expiration of the
lock-up agreements.
Rule
701
In general,
under Rule 701 as currently in effect, any of our employees,
consultants or advisors who acquire shares from us in connection
with a compensatory stock or option plan or other written agreement
will be eligible to resell such shares 90 days after the effective
date of this offering in reliance of Rule 144, but without
compliance with certain restrictions, including the holding period,
contained in Rule 144.
Penny
Stock Rules
Broker-dealer practices
in connection with transactions in penny stocks are regulated by
certain penny stock rules adopted by the SEC. Penny stocks
generally are equity securities with a price of less than US $5.00.
Penny stock rules require a broker- dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information
about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock
held in the customer’s account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock, the
broker-dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject
to the penny stock rules. Our shares may in the future be subject
to such penny stock rules in which care our stockholders would, in
all likelihood, as a result of the penny stock rules, find it
difficult to sell their securities.
PLAN OF DISTRIBUTION
The Selling Stockholders may, from time to time, sell, transfer or
otherwise dispose of any or all of their securities or interests in
such securities on any stock exchange, market or trading facility
on which the securities are traded or in private transactions. The
Selling Stockholders may offer and sell the common stock registered
pursuant to this prospectus at the prevailing market price or in a
privately negotiated transaction.
The
aggregate proceeds to the Selling Stockholders from the sale of the
securities offered by them will be the purchase price of the
securities less discounts or commissions, if any. Each of the
Selling Stockholders reserves the right to accept and, together
with their agents from time to time, to reject, in whole or in
part, any proposed purchase of securities to be made directly or
through agents. We will not receive any of the proceeds from the
sale or other disposition of the securities by the Selling
Stockholders. However, we will receive up to approximately
$37,162,500 in gross proceeds upon the cash exercise of the
warrants issued to the Selling Stockholders.
The Selling
Stockholders also may resell all or a portion of the securities in
open market transactions in reliance upon Rule 144 under the
Securities Act of 1933, provided that they meet the criteria and
conform to the requirements of that rule.
The Selling
Stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the securities or interests therein may
be “underwriters” within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit
they earn on any resale of the securities may be underwriting
discounts and commissions under the Securities Act. Selling
Stockholders who are “underwriters” within the meaning of Section
2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act.
To the
extent required, the securities to be sold, the names of the
Selling Stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter,
any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus
supplement or, if appropriate, a post-effective amendment to the
Registration Statement.
The maximum
amount of compensation to be received by any FINRA member or
independent broker-dealer for the sale of any securities registered
under this prospectus will not be greater than 8% of the gross
proceeds from the sale of such securities.
To comply
with the securities laws of some states, if applicable, the
securities may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, the
securities may not be sold unless they have been registered or
qualified for sale under the applicable state securities laws, or
an exemption from registration or qualification requirements is
available and is complied with, or registration or qualification is
otherwise not required.
We have
advised the Selling Stockholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of
securities in the market and to the activities of the Selling
Stockholders and their affiliates. The Selling Stockholders may
indemnify any broker-dealer that participates in transactions
involving the sale of the securities against certain liabilities,
including liabilities arising under the Securities Act.
We intend to
seek qualification for sale of the securities in those states where
the securities will be offered. That qualification is necessary to
resell the securities in the public market. The securities can only
be offered if they are qualified for sale or are exempt from
qualification in the states in which the selling stockholders or
proposed purchasers reside. There is no assurance that the states
in which we seek qualification will approve of the security
re-sales.
LEGAL MATTERS
Culhane
Meadows PLLC, 1701 Pennsylvania Avenue, N.W., Suite 200,
Washington, D.C. 20006, will pass upon the validity of the shares
of our common stock to be sold in this Offering.
EXPERTS
The
financial statements of the Company as of and for the years ended
December 31, 2021 and 2020, included in this prospectus have been
audited by B.F. Borgers CPA PC, (“Borgers”) an independent
registered public accounting firm as set forth in their report, and
are included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing. Borgers also
audited the Tickeri, Inc. financial statements for the period
January 2, 2020 (Inception) through December 31, 2020 and the
Monster Creative LLC financial statements for the years ended
December 31, 2020 and 2019.
WHERE YOU CAN FIND MORE
INFORMATION
We have
filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of our common stock
offered by this prospectus. This prospectus, which constitutes a
part of the registration statement, does not contain all of the
information set forth in the registration statement, some of which
is contained in exhibits to the registration statement as permitted
by the rules and regulations of the SEC. For further information
with respect to us and our common stock, we refer you to the
registration statement, including the exhibits filed as a part of
the registration statement. Statements contained in this prospectus
concerning the contents of any contract or any other document are
not necessarily complete. If a contract or document has been filed
as an exhibit to the registration statement, please see the copy of
the contract or document that has been filed. Each statement in
this prospectus relating to a contract or document filed as an
exhibit is qualified in all respects by the filed exhibit. The SEC
maintains an internet website that contains reports, proxy
statements and other information about issuers, like us, that file
electronically with the SEC. The address of that website is
www.sec.gov.
As a result
of this offering, we will become subject to the information and
reporting requirements of the Exchange Act and, in accordance with
this law, will file periodic reports, proxy statements and other
information with the SEC. We also maintain a website at www.
humblpay.com. Upon completion of this offering, you may access
these materials free of charge as soon as reasonably practicable
after they are electronically filed with, or furnished to, the SEC.
Information contained on our website is not a part of this
prospectus and the inclusion of our website address in this
prospectus is an inactive textual reference only.
HUMBL,
INC.
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
TICKERI, INC.
FINANCIAL
STATEMENTS
MARCH 31,
2021 AND 2020
Table of
Contents
TICKERI,
INC.
FINANCIAL
STATEMENTS
DECEMBER
31, 2020
Table of
Contents
MONSTER CREATIVE, LLC
FINANCIAL
STATEMENTS
JUNE 30,
2021 AND 2020
Table of
Contents
MONSTER
CREATIVE, LLC
FINANCIAL
STATEMENTS
DECEMBER
31, 2020 AND 2019
Table of
Contents
AUDTED
PROFORMA
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, 2021 and 2020, 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, 2021 and 2020, 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
We
have served as the Company’s auditor since 2021
Lakewood,
CO
March
31, 2022
HUMBL, INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2021 AND 2020
|
|
2021 |
|
|
2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,493,213 |
|
|
$ |
1,720,979 |
|
Accounts
receivable, net |
|
|
325,267 |
|
|
|
- |
|
Intangible assets
– digital currency |
|
|
2,695 |
|
|
|
- |
|
Due from related
parties, net |
|
|
- |
|
|
|
77,146 |
|
Prepaid expenses and other current assets |
|
|
57,693 |
|
|
|
7,445 |
|
Total
current assets |
|
|
3,878,868 |
|
|
|
1,805,570 |
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
Fixed assets, net
of depreciation |
|
|
356,447 |
|
|
|
- |
|
Goodwill |
|
|
6,531,346 |
|
|
|
- |
|
Total
non-current assets |
|
|
6,887,793 |
|
|
|
- |
|
TOTAL
ASSETS |
|
$ |
10,766,661 |
|
|
$ |
1,805,570 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses |
|
$ |
1,460,266 |
|
|
$ |
20,392 |
|
Deferred
revenue |
|
|
- |
|
|
|
43,243 |
|
Obligation to
issue common shares |
|
|
676,408 |
|
|
|
- |
|
Due to seller |
|
|
327,412 |
|
|
|
- |
|
Current portion of
notes payable |
|
|
501,828 |
|
|
|
40,000 |
|
Notes payable –
related parties |
|
|
10,986,250 |
|
|
|
- |
|
Convertible notes
payable – related parties |
|
|
7,500,000 |
|
|
|
- |
|
Current portion of convertible notes payable, net of discount |
|
|
3,392,123 |
|
|
|
141,103 |
|
Total current
liabilities |
|
|
24,844,287 |
|
|
|
244,738 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
|
|
|
|
|
Notes payable, net
of current portion |
|
|
148,172 |
|
|
|
- |
|
Convertible notes payable, net of discount and net of current
portion |
|
|
2,232,702 |
|
|
|
- |
|
Total
non-current liabilities |
|
|
2,380,874 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
27,225,161 |
|
|
|
244,738 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingency |
|
|
- |
|
|
|
- |
|
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Preferred stock,
7,000,000
shares Series A Preferred stock authorized,
570,000 and
900,000 Series B Preferred stock authorized, and
150,000 Series C Preferred stock authorized (through
October 29, 2021 when cancelled) |
|
|
|
|
|
|
|
|
Series A Preferred
stock, par value $0.00001;
7,000,000
issued and outstanding as of December 31, 2021 and 2020,
respectively |
|
|
70 |
|
|
|
70 |
|
Series B Preferred
stock, par value $0.00001;
544,759
and
0 issued
and outstanding as of December 31, 2021 and 2020, respectively |
|
|
5 |
|
|
|
- |
|
Series C Preferred
stock, par value $0.00001;
0 issued and outstanding as of December 31, 2020,
respectively |
|
|
- |
|
|
|
- |
|
Preferred Stock
Value |
|
|
|
|
|
|
|
|
Common stock, par
value $0.00001; 7,450,000,000 and
5,000,000,000 shares
authorized, 1,023,039,433 and
974,177,443
shares issued and outstanding as of December 31, 2021 and 2020,
respectively |
|
|
10,230 |
|
|
|
9,742 |
|
Additional paid in
capital |
|
|
34,182,004 |
|
|
|
2,545,825 |
|
Accumulated deficit |
|
|
(50,650,809 |
) |
|
|
(994,805 |
) |
Total
stockholders’ equity (deficit) |
|
|
(16,458,500 |
) |
|
|
1,560,832 |
|
MEMBERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Members’ equity (deficit) |
|
|
- |
|
|
|
362,989 |
|
|
|
|
|
|
|
|
|
|
Total Members’ Equity (Deficit) |
|
|
- |
|
|
|
362,989 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
$ |
10,766,661 |
|
|
$ |
1,805,570 |
|
See
notes to consolidated financial statements.
HUMBL, INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
YEARS
ENDED DECEMBER 31, 2021 AND 2020
See
notes to consolidated financial statements.
HUMBL, INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
YEARS
ENDED DECEMBER 31, 2021 AND 2020
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(49,656,004 |
) |
|
$ |
(713,263 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Shares issued to founders for services |
|
|
|
|
|
|
|
|
Depreciation
expense |
|
|
11,129 |
|
|
|
- |
|
Impairment expense
- goodwill |
|
|
22,203,422 |
|
|
|
- |
|
Impairment expense
– digital assets |
|
|
34,570 |
|
|
|
- |
|
(Gain) on sale of
digital assets |
|
|
(47,875 |
) |
|
|
- |
|
Advertising
expense paid for by digital assets |
|
|
133,660 |
|
|
|
- |
|
Sales commission
received in digital assets |
|
|
(8,400 |
) |
|
|
- |
|
Amortization of
debt discounts |
|
|
838,941 |
|
|
|
2,042 |
|
Warrants granted
for services |
|
|
3,789,864 |
|
|
|
- |
|
Stock-based
compensation – common and preferred stock grants |
|
|
6,268,562 |
|
|
|
- |
|
Obligation to
issues common shares for services rendered |
|
|
676,408 |
|
|
|
- |
|
Forgiveness of PPP
loan |
|
|
(66,117 |
) |
|
|
- |
|
Bad debt |
|
|
88,693 |
|
|
|
- |
|
Settlement |
|
|
1,870,000 |
|
|
|
- |
|
Beneficial
conversion feature on convertible note payable |
|
|
3,300,000 |
|
|
|
- |
|
Changes in assets
and liabilities |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
77,332 |
|
|
|
- |
|
Intangible assets
– digital currency |
|
|
(114,650 |
) |
|
|
- |
|
Prepaid expenses
and other current assets |
|
|
(50,248 |
) |
|
|
(5,050 |
) |
Increase
(decrease) in amounts due related parties |
|
|
(11,547 |
) |
|
|
(157,357 |
) |
Accounts payable and accrued expenses |
|
|
1,054,048 |
|
|
|
17,311 |
|
Total adjustments |
|
|
- |
|
|
|
- |
|
Net cash used in
operating activities |
|
|
(9,608,212 |
) |
|
|
(856,317 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
Purchase of fixed
assets |
|
|
(367,576 |
) |
|
|
- |
|
Cash received in
purchase of Tickeri |
|
|
127,377 |
|
|
|
- |
|
Cash
received in purchase of Monster Creative |
|
|
3,017 |
|
|
|
- |
|
Net
cash used in investing activities |
|
|
(237,182 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from
sales of membership interests of HUMBL, LLC |
|
|
10,000 |
|
|
|
1,307,441 |
|
Proceeds from
sales of warrants and country rights option |
|
|
- |
|
|
|
1,000,000 |
|
Redemption of
Series B Preferred Stock |
|
|
(215 |
) |
|
|
- |
|
Proceeds from the
exercise of warrants |
|
|
4,000,000 |
|
|
|
- |
|
Contribution of equity from shareholders |
|
|
|
|
|
|
|
|
Member distributions |
|
|
|
|
|
|
|
|
Proceeds from note
payable |
|
|
- |
|
|
|
40,000 |
|
Proceeds from notes payable - related parties |
|
|
|
|
|
|
|
|
Payments of notes
payable |
|
|
(40,557 |
) |
|
|
- |
|
Repayment of
amount due to seller |
|
|
(51,600 |
) |
|
|
- |
|
Proceeds from
convertible notes payable |
|
|
6,700,000 |
|
|
|
225,000 |
|
Proceeds from issuance of common stock for cash |
|
|
1,000,000 |
|
|
|
- |
|
Net
cash provided by financing activities |
|
|
11,617,628 |
|
|
|
2,572,441 |
|
NET INCREASE IN
CASH |
|
|
1,772,234 |
|
|
|
1,716,124 |
|
Cash -
beginning of year |
|
|
1,720,979 |
|
|
|
4,855 |
|
Cash - end of
year |
|
$ |
3,493,213 |
|
|
$ |
1,720,979 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
|
Cash paid for
interest |
|
$ |
3,760 |
|
|
$ |
3,750 |
|
Cash paid for
income taxes |
|
$ |
800 |
|
|
$ |
800 |
|
|
|
|
|
|
|
|
|
|
SUMMARY OF NONCASH
ACTIVITIES: |
|
|
|
|
|
|
|
|
Effect of reverse
merger |
|
$ |
- |
|
|
$ |
10,062 |
|
Cancellation of
common stock |
|
$ |
- |
|
|
$ |
250 |
|
Reclassification
of deferred revenue related to warrant purchase |
|
$ |
43,243 |
|
|
$ |
- |
|
Conversion of
common stock into preferred stock |
|
$ |
796 |
|
|
$ |
- |
|
Conversion of
preferred stock into common stock |
|
$ |
794 |
|
|
$ |
- |
|
Recognition of
discounts at inception of convertible notes payable |
|
$ |
2,055,219 |
|
|
$ |
85,939 |
|
|
|
|
|
|
|
|
|
|
SUMMARY OF TICKERI
ACQUISITION: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
23,587 |
|
|
$ |
- |
|
Goodwill |
|
|
20,086,664 |
|
|
|
- |
|
Accounts payable
and accrued expenses |
|
|
(87,071 |
) |
|
|
- |
|
EIDL loan |
|
|
(150,000 |
) |
|
|
- |
|
PPP loan |
|
|
(557 |
) |
|
|
- |
|
Notes payable
issued |
|
|
(10,000,000 |
) |
|
|
- |
|
Common shares
issued |
|
|
(10,000,000 |
) |
|
|
- |
|
Net cash received
in acquisition of Tickeri |
|
$ |
(127,377 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
SUMMARY OF MONSTER
CREATIVE ACQUISITION: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
379,012 |
|
|
$ |
- |
|
Goodwill |
|
|
8,648,104 |
|
|
|
- |
|
Accounts payable
and accrued expenses |
|
|
(98,754 |
) |
|
|
- |
|
Due to seller |
|
|
(379,012 |
) |
|
|
- |
|
Notes payable -
officers |
|
|
(486,250 |
) |
|
|
- |
|
PPP loan |
|
|
(66,117 |
) |
|
|
- |
|
Notes payable
issued |
|
|
(500,000 |
) |
|
|
- |
|
Convertible notes issued |
|
|
(7,500,000 |
) |
|
|
- |
|
Net cash received
in acquisition of Monster Creative |
|
$ |
(3,017 |
) |
|
$ |
- |
|
See
notes to consolidated financial statements.
HUMBL, INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(DEFICIT)
YEARS
ENDED DECEMBER 31, 2021 AND 2020