UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 2021
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 000-55994
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THC THERAPEUTICS,
INC.
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(Exact name of registrant as specified in its charter)
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Nevada
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26-0164981
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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11700 W Charleston Blvd. #73
Las Vegas, Nevada
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89135
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (833)
420-8428
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Not applicable.
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Not applicable.
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Not applicable.
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Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. ☐
Yes ☒ No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. ☐
Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the preceding 12 months (or for such shorter period that
the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. ☐
Yes ☒ No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). ☐
Yes ☒ No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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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 pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). ☐
Yes ☒ No
On January 31, 2021, the last business day of the registrant’s
second fiscal quarter during the fiscal year ending July 31, 2021,
the aggregate market value of the registrant’s common stock held by
non-affiliates of the registrant was $32,750,947, based upon the
closing price on that date of the common stock of the registrant on
the OTC Link alternative quotation system of $2.40/share. For
purposes of this response, the registrant has assumed that its
directors, executive officers and beneficial owners of 5% or more
of its common stock are deemed to be affiliates of the
registrant.
As of March 21, 2022, the registrant had 34,117,671 shares of its
common stock, $0.001 par value, outstanding.
TABLE OF
CONTENTS
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of Rule 175 of the Securities Act of 1933, as
amended, and Rule 3b-6 of the Securities Act of 1934, as amended,
that involve substantial risks and uncertainties. These
forward-looking statements are not historical facts, but rather are
based on current expectations, estimates and projections about our
industry, our beliefs and our assumptions. Words such as
“anticipate,” “expects,” “intends,” “plans,” “believes,” “seeks”
and “estimates” and variations of these words and similar
expressions are intended to identify forward-looking statements.
These statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which
are beyond our control and difficult to predict and could cause
actual results to differ materially from those expressed or
forecasted in the forward-looking statements. You should not place
undue reliance on these forward-looking statements, which apply
only as of the date of this Form 10-K. Investors should carefully
consider all of such risks before making an investment decision
with respect to the Company’s stock. The following discussion and
analysis should be read in conjunction with our consolidated
financial statements for THC Therapeutics, Inc. Such discussion
represents only the best present assessment from our
Management.
PART
I
Item 1.
Business
Overview
THC Therapeutics, Inc. (the “Company”), was incorporated in the
State of Nevada on May 1, 2007, as Fairytale Ventures, Inc., and
later changed its name to Aviation Surveillance Systems, Inc. and
Harmonic Energy, Inc. On January 23, 2017, the Company changed its
name to THC Therapeutics, Inc. On January 17, 2018, the Company
changed its name to Millennium Blockchain Inc. On September 28,
2018, the Company changed its name back to THC Therapeutics, Inc.
THC Therapeutics, Inc., together with its subsidiaries, is
collectively referred to herein as the “Company,” and “THC
Therapeutics.”
The Company is focused on developing a sanitizing herb dryer, the
dHydronator®, which has been specifically designed for the drying
and sanitizing (i.e., reducing the bacterial count) of freshly
harvested cannabis, and other herbs, flowers, and tea leaves.
Corporate History
THC Therapeutics, Inc., was incorporated in the State of Nevada on
May 1, 2007, as Fairytale Ventures, Inc., as a development stage
company with plans to provide products and services related to
themed children’s parties, and later changed its name to Aviation
Surveillance Systems, Inc., when the Company shifted its business
plan to focus on merging with an operating firm, and Harmonic
Energy, Inc., when the Company shifted its plan of operations
again, instead focusing on oil and gas operations.
On January 23, 2017, the Company experienced a change of control,
and new management determined to shift the Company’s focus and
changed the Company’s name to THC Therapeutics, Inc., focusing on
wellness operations and development of a herb dryer for use with
cannabis. On May 30, 2017, the Company formed Genesis Float Spa
LLC, a wholly-owned subsidiary, to market its float spa assets
purchased for wellness centers. On January 17, 2018, the Company
changed its name to Millennium BlockChain Inc. and began to also
focus on acquiring digital equity or digital assets of blockchain
technology companies. On September 28, 2018, because of the
regulatory environment surrounding blockchain technology companies,
the Company changed its name back to THC Therapeutics, Inc.,
abandoned its blockchain technology focus, and refocused its
efforts on its wellness operations.
The Company’s fiscal year end is July 31st, its
telephone number is (833) 420-8428, and the address of its
principal executive office is 11700 W Charleston Blvd. #73, Las
Vegas, Nevada, 89135.
Description of Business
The Company is focused on operations in the wellness industry. The
Company is developing a sanitizing herb dryer, the dHydronator®,
with multiple design, function, and usage patents. This innovative,
laboratory-proven product is specifically designed for the drying
and sanitizing (i.e., reducing the bacterial count by using
ultraviolet light) of freshly harvested cannabis, and other herbs,
flowers, and tea leaves. The dHydronator® can reduce moisture
content of cannabis to 10-15% in only 10-14 hours. Traditional
herbal drying times can take up to two weeks. Additionally, after
the Company has launched the dHydronator®, and depending on
available funding, the Company intends to establish a float spa
facility that will allow each guest to customize their wellness
experience, at their own pace, based on their individual needs.
Wellness Operations
THC Therapeutics is focused on the wellness industry, with plans to
develop a patented herb dryer as well as an innovative float spa
facility in Las Vegas, Nevada, or southern California.
The Company is developing a sanitizing herb dryer, the
dHydronator®, with multiple design, function, and usage patents.
This innovative, laboratory-proven1 product is
specifically designed for the drying and sanitizing (i.e., reducing
the bacterial count by using ultraviolet light) of freshly
harvested cannabis, and other herbs, flowers, and tea leaves. The
dHydronator® can reduce moisture content of cannabis to 10-15% in
only 10-14 hours. Traditional herbal drying times can take up to
two weeks. The dHydronator® can also significantly reduce the
bacterial count of the cannabis during the drying process, but it
will not eliminate all bacteria from the cannabis or other plant
materials.
The Company has a functioning prototype of the dHydronator®, which
is now protected by a patent with the United States Patent and
Trademark Office (see “Patent, Trademark, License & Franchise
Restrictions and Contractual Obligations & Concessions” below),
and once the Company has sufficient funds available, the Company
plans to source parts for serial manufacturing and negotiate and
secure serial manufacturing and assembly. The Company also plans to
hire sales and marketing staff as funds are available.
________________
1 Tests were conducted in 2016-2017 by independent
cannabis-testing labs: first by CannLabs on the first-generation
dHydronator® prototype, and later by Digipath Labs on the
second-generation prototype. Optimal cannabis moisture content is
8-12%. The initial testing by CannLabs showed that (i) moisture
content across five wet cannabis samples was reduced to an average
moisture content of 13.81% with a standard deviation of 4.04% after
12 hours of drying, and 8.86% with a standard deviation of 2.25%
after 16 hours of drying, and (ii) after autoclaving cannabis
flowers to ensure sterility and then spiking multiple samples with
100 CFU of E. Coli and Salmonella bacteria and Aspergillus niger
mold, testing for the presence of the bacteria and mold by both
quantitative polymerase chain reaction (qPCR) and traditional
plating methods, which testing concluded that the dHydronator®
prototype eliminated or reduced the bacteria and mold
contamination, but did not quantify the results. The subsequent
testing by Digipath Labs on the second-generation prototype covered
multiple strains and independent tests to confirm the prior
findings. The strains tested were Lucy Diamond, Cotton Candy, Blue
Dream, Kings Cut, Pot of Gold and Diablo. The optimal drying time
was determined to be 10-14 hours in the first test. The Company’s
proprietary sanitizing technology brought the failing TAC (total
aerobic count) from over 300,000 CFU/g down to 78,000 CFU/g
(anything less than 100,000 CFU/g is considered “passing”) in the
second test. In the third test, after drying 14 hours and 15.5
hours in the dHydronator® and using the Company’s proprietary
sanitizing technology for a longer period than required, the
moisture content had been reduced from 80% (at 0 hours) to 10.89%
(at 14 hours) and 8.83% (at 15.5 hours), the THCA% had been reduced
from 21.2% (at 0 hours) to 17.26% (at 14 hours) and 18.26% (at 15.5
hours), and the TAC had been reduced from 210,000 CFU/g (at 0
hours) to 1,500 CFU/g (at 14 hours) and 500 CFU/g (at 15.5 hours).
In the fourth experiment, after 12 hours and 15.5 hours of drying
in the dHydronator® and using the proprietary sanitizing technology
for a longer period than required, the moisture content had reduced
from 80% to 12.00% (at 12 hours) and 7.44% (at 15.5 hours), the
THCA% had been reduced from 21.2% to 20.08% (at 12 hours) and
19.43% (at 15.5 hours), and the TAC had been reduced from 190,000
CFU/g to 51,000 CFU/g (at 12 hours) and 2,300 CFU/g (at 15.5
hours). After 14 hours of drying, the moisture content had been
reduced to 8.15%, the THCA% had been reduced to 19.82%, and the TAC
had been reduced to 21,000 CFU/g. In the fifth test, prior moisture
and THCA% results were tested, but this time using the Company’s
proprietary sanitizing technology for a much shorter time period,
using two samples of a different cannabis strain, and testing the
expanded cannabinoid profile data of each sample, and after 12
hours of drying two different samples, moisture content for the two
samples decreased from 74% and 74% to 9.17% and 9.90%,
respectively, and THCA% increased from 14.45% and 14.94% before
drying to 16.81% and 17.2%, respectively, after 12 hours of drying.
Test six was a test of the same strain as test five but using a
different lot of plant material, and moisture content decreased
from 81% to 11.5% after 12 hours of drying, while TCHA% increased
from 21.28% to 22.6% after 12 hours of drying. The seventh through
ninth tests confirmed prior results.
More specifically, once we have at least $2,000,000 in in available
cash flow or funds from other operations and if we receive the
patent, we intend to engage in further development efforts as
follows: (i) finalizing case design, with an estimated tooling
expense of approximately $300,000-$500,000; manufacturing
pre-production units for field testing and presentation to
potential partners and distributors, with an estimated expense of
$250,000; (iii) hiring a subject-matter expert and consultants or
employees in the home herb garden and legal cannabis marketplace to
manage the development and sales of herb dryer, with an estimated
expense of $400,000 for 12 months; (iv) engaging in further
detailed laboratory of our herb drying with respect to cannabis
plants and home herb garden plants, with an estimated expense of
$50,000 to $100,000 for 12 months; (v) establishing a relationship
with a market research and/or marketing company to explore creative
strategies, advertising concepts, and consumer opinion, explore
applications of our intellectual property in the existing wholesale
and retail distribution channels for home herb, garden products and
legal cannabis markets, and determine the best path for sales,
distribution and licensing of our intellectual property, with an
estimated expense of $1,000,000 for 12 months.
Additionally, on May 12, 2017, the Company entered into an asset
purchase agreement with a third party under which it acquired four
(4) float spa units and associated equipment. With the acquisition
of these assets, the Company intended to establish a float spa
facility that will allow each guest to customize their wellness
experience, at their own pace, based on their individual needs.
Once we have approximately $500,000-$1,000,000 in available cash
flow or funds from other operations, and after the launch of our
dHydronator® sanitizing herb dryer, we plan to capitalize on our
spa assets purchased in 2017 by (i) leasing a 2,500 to 5,000 square
foot facility in Nevada or California, to be built out as needed
(and with the size of the facility dependent on available capital);
(ii) obtaining necessary licenses and permits, (iii) purchasing
inventory, equipment, furnishings and supplies, including
inventory, fixtures, furnishings and equipment for an oxygen bar
and a Kampuchea, juice and tea Bar, refrigeration and storage
equipment, point of sale computers and tablets, digital monitors,
signage and display materials, and other suppliers; (iv) hiring spa
management personnel including a manager, assistant manager and two
spa attendants; (v) hiring marketing and sales consultants, and
(vi) launching a marketing campaign to include internet lead
services, Groupon and social networking.
Competition
There are a number of commercial herb dryers sold by competitors,
including Yofumo Technologies, which are already commercially
available, and which have significant market share. As to our float
spa plans, we believe True Rest Float Spa, which has over 20 spa
locations across the country, is our primary national competitor,
and there are numerous locally owned float spas throughout the
country that would considered competitors with our spa operations.
There is no assurance that we will be able to compete effectively
with any of these competitors.
Market Opportunity
The Company’s herb dryer, the dHydronator®, safely lowers moisture
content and sanitizes without harm to the integrity of the plant.
Our test results have been proven to dry cannabis in less than 14
hours verses up to 14 days using traditional drying methods. Test
results indicate the removal of many surface germs and bacteria
including powder mold, dust mites and spider mites from herbs,
plants, the surface of glass or ceramic herbal tea accessories, and
any other object that fits safely in the drying chamber. Therefore,
we believe that our product will be attractive to the cannabis and
home herb and garden product markets.
With regard to floatation therapy, the sensory deprivation consumer
typically ranges in age from eighteen to eighty. Floatation therapy
is a service that is unisex in its appeal and attracts many. As
many consumers seek natural alternative therapies for the relief
from pain, stress and sleep disorders that affect a significant
percentage of the population, we believe that our planned
floatation therapy spa facilities will be attractive to these
consumers.
Marketing Strategy
We plan to attend regional cannabis-related trade shows and offer
field testing to legal cannabis growers and suppliers in the United
States and Canada initially, and throughout the world once the
technology has been adopted in the regional market. We also plan to
establish a relationship with a market research and marketing
company to explore creative strategies, advertising concepts,
consumer opinion, existing distribution and sales channels and
potential licensing of our intellectual property, to determine the
best path for sales and distribution. We also intend to hire
subject matter expert consultants or employees in the legal
cannabis and home herb marketplace to manage the development and
sales of our products. Once our marketing experts identify an
herbal or commercial agriculture niche or venue to enter or
solicit, we will market to distributors and retailers via trade
shows and direct contact.
With regard to our spa plans, we intend to launch internet, Groupon
and social networking campaigns offering coupons and membership
plans for floatation therapy, and our planned oxygen bar and
Kampuchea, juice and tea bar. We plan to invite local TV and Radio
personalities to tour our facilities, and we plan to offer local
healthcare and rehabilitation service providers and non-competitive
spa owners and managers a private tour of our spa facilities.
Customers
Due to the nature of its business and its focus on development of
its patent-pending herb dryer, the Company does not currently have
any customers.
Patent, Trademark, License & Franchise Restrictions and
Contractual Obligations & Concessions
The Company has acquired the exclusive intellectual property rights
to the dHydronator® sanitizing plant dryer with improved convection
flow from the Company’s CEO and Director, Brandon Romanek. Mr.
Romanek’s father irrevocably assigned those intellectual property
rights to Mr. Romanek in 2016. A trademark application for the mark
“dHyrdonator” has been filed (serial no. 86874611), and a patent
application was filed with the United States Patent and Trademark
Office (“USPTO”), docket number 5503.101 (application nos.
15/467,722 and 62/312,327), for 20 separate herb dryer design,
function, and usage patents. On or about July 20, 2018, the
Company’s patent counsel received a Notification of Allowance from
the USPTO, notifying the Company that the USPTO would be allowing
all 20 claims, and on or about November 20, 2018, the USPTO granted
the final patent (patent no. 10,132,56), the Company was
subsequently notified of the patent grant, and the patent has been
recorded with the USPTO as being assigned to the Company.
Governmental Regulations
We will be governed by government laws and regulations governing
spas. We do not believe the dHydronator® will be subject to
regulation by the U.S. Food and Drug Administration or any other
government agency (other than pursuant to general laws governing
truth in advertising or similar laws under the purview of the
Federal Trade Commission). We believe that we are currently in
compliance with all laws which govern our operations and have no
current liabilities thereunder. Our intent is to maintain strict
compliance with all relevant laws, rules and regulations.
Employees
The Company currently has one full-time employee, our founder, CEO
and director, Brandon Romanek.
Reports to Security Holders
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its
independent registered public accounting firm and to make available
quarterly reports containing unaudited consolidated financial
statements for each of the first three quarters of each year. The
Company files Quarterly Reports on Form 10-Q, Annual Reports on
Form 10-K and Current Reports on Form 8-K with the Securities and
Exchange Commission in order to meet its timely and continuous
disclosure requirements. The Company may also file additional
documents with the Commission if those documents become necessary
in the course of its operations.
The public may read and copy any materials that the Company files
with the SEC at the SEC’s Public Reference Room at 100 F Street,
NE, Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The site
address is www.sec.gov.
Available Information
All reports of the Company filed with the SEC are available free of
charge through the SEC’s website at www.sec.gov. In addition, the
public may read and copy materials filed by the Company at the
SEC’s Public Reference Room located at 100 F Street, N.E.,
Washington, D.C. 20549. The public may also obtain additional
information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330.
Item 1A.
Risk Factors.
The Company, as a smaller reporting company (as defined by Rule
12b-2 of the Exchange Act), is not required to furnish information
required by this item. However, the following important factors
among others, could cause our actual operating results to differ
materially from those indicated or suggested by forward-looking
statements made in this Annual Report on Form 10-K or presented
elsewhere by management from time to time.
There are numerous and varied risks, known and unknown, that
may prevent us from achieving our goals. If any of these risks
actually occur, our business, financial condition or results of
operation may be materially adversely affected. In such case, the
trading price of our common stock could decline, and investors
could lose all or part of their investment.
There is substantial doubt about our ability to continue as
a going concern
We have not generated any revenues or profit during the years ended
July 31, 2021 and 2020. We expect that our operating expenses will
increase over the next twelve months to continue our development
activities. Based on our average monthly expenses and current burn
rate, we estimate that our cash on hand will not sufficiently
support our operation for the next twelve months. If we cannot
raise the money that we need in order to continue to operate our
business, we will be forced to delay, scale back or eliminate some
or all of our proposed operations. If any of these were to occur,
there is a substantial risk that our business would fail. If we are
unsuccessful in raising additional financing, we may need to
curtail, discontinue or cease operations.
We have had a history of losses and may incur future
losses, which may prevent us from attaining
profitability.
We have had a history of operating losses since our inception and,
as of July 31, 2021, we had an accumulated deficit of approximately
$36.6 million. We may incur operating losses in the future, and
these losses could be substantial and impact our ability to attain
profitability. We expect to significantly increase expenditures for
product development, general and administrative expenses, and sales
and marketing expenses, and there is no guarantee that we will ever
generate revenues, or that we ever achieve or sustain profitability
or positive operating cash flows. Even if we achieve profitability
and positive operating cash flows, we may not be able to sustain or
increase profitability or positive operating cash flows on a
quarterly or annual basis.
Federal drug regulation and enforcement may adversely
impact our operations.
Currently, there are approximately 37 states plus the District of
Columbia that have laws and/or regulation that recognize in one
form or another legitimate medical uses for cannabis and consumer
use of cannabis in connection with medical treatment, and there are
approximately 18 states and the District of Columbia that have more
expansive laws legalizing marijuana for recreational use.
Conversely, under the Controlled Substances Act (the “CSA”), the
policy and regulations of the Federal government and its agencies
is that cannabis has no medical benefit and a range of activities
including cultivation and use of cannabis for personal use is
prohibited. Until Congress amends the CSA with respect to medical
marijuana, there is a risk that federal authorities may enforce
current federal law.
As we plan on marketing our herb dryer to the cannabis industry,
federal enforcement of federal law would adversely affect the
cannabis industry and would therefore adversely affect the
Company’s planned operations and sales. Active enforcement of the
current federal regulatory position on cannabis may thus indirectly
and adversely affect revenues and profits of the Company.
Our products may become subject to regulation by the FDA,
which would materially increase the costs associated with
developing the products.
We do not believe our dHydronator® herb dryer product will be
subject to regulation by the U.S. Food and Drug Administration (the
“FDA”) or any other government agency (other than pursuant to
general laws governing truth in advertising and similar laws under
the purview of the Federal Trade Commission). The FDA could
disagree and determine that the dHydronator® is subject to FDA
regulation.
The process for obtaining regulatory approval to market products
regulated by the FDA is expensive, time-consuming, and can vary
substantially based on the type, complexity, and novelty of the
product candidates involved. Our ability to generate revenues from
the sale of the dHydronator® would be adversely affected if we are
delayed because our product is subject to FDA regulation, or if we
are unable to successfully develop our products to comply with FDA
regulation.
We may not be able to achieve our strategic initiatives and
grow our business as anticipated.
In September 2018, we determined to focus on our sanitizing herb
dryer and floatation spa plans. Our strategic initiatives have
required us to devote financial and operational assets to these
activities. Our success depends on our ability to appropriately
manage our expenses as we execute on our planned initiatives. If we
are not able to execute on this strategy successfully, our business
may not grow as we anticipate, which could adversely affect our
operating results.
We have a history of changing and discontinuing operations
and have retained obligations associated with discontinued
activities.
We have changed our name and business plan multiple times since our
inception in 2007, and have a history of discontinued operations.
We have carried liabilities of approximately $60,580 associated
with discontinued operations, and there is no guarantee that we
will not change our business plan in the future and discontinue
current operations.
If we were deemed an investment company under the
Investment Company Act, applicable restrictions could have a
material adverse effect on our business.
We do not believe that we are an “investment company” under the
Investment Company Act of 1940, as amended (the “Investment Company
Act”), because we believe we are covered by the Rule 3a-2 safe
harbor promulgated under the Investment Company Act.
Section 3(a)(1)(A) of the Investment Company Act defines the term
“investment company” to mean any issuer that “is or holds itself
out as being engaged primarily, or proposes to engage primarily, in
the business of investing, reinvesting, or trading in securities.”
Section 3(a)(1)(C) of the Investment Company Act defines
“investment company” as any issuer which “is engaged or proposes to
engage in the business of investing, reinvesting, owning, holding,
or trading in securities, and owns or proposes to acquire
investment securities having a value exceeding 40 per centum of the
value of such issuer’s total assets (exclusive of Government
securities and cash items) on an unconsolidated basis.” Generally,
any issuer meeting the definition of an investment company is
subject to all applicable provisions of the Investment Company Act
and must register with the Commission under Section 8 of the
Investment Company Act, unless it meets the terms and conditions of
various exceptions provided by the Investment Company Act
including, but not limited to, those provided in Section 3(c) of
the Investment Company Act, or in rules adopted by the SEC under
the Investment Company Act.
Rule 3a-2 promulgated by the SEC under the Investment Company Act
generally provides that, for purposes of Sections 3(a)(1)(A) and
3(a)(1)(C) of the Investment Company Act, an issuer will not be
deemed to be engaged in the business of investing, reinvesting,
owning, holding or trading in securities for a period not to exceed
one year if the issuer has a bona fide intent to be engaged in a
non-investment company business. This rule is intended to enable
the issuer to make an orderly transition to a non-investment
company business during the one-year safe harbor period.
While we previously acquired rights to equity and digital tokens of
other companies, with those rights having a value exceeding 40% of
our total assets, we determined in September of 2018 that we would
focus our operational efforts on developing and launching our
sanitizing herb dryer and would no longer engage in the business of
acquiring blockchain-related assets. As of January 31, 2019, all of
our rights to equity and digital tokens of other companies had been
fully impaired and had nominal value pursuant to the relevant
accounting guidance, and in May and June of 2019, we rescinded all
of our agreements to acquire rights to equity and digital tokens of
other companies. As those agreements have been legally rescinded,
it is as if we never acquired any rights to equity or digital
tokens. As a result, we believe we were never an “investment
company” and are covered by the Rule 3a-2 safe harbor.
However, if we were to be deemed an investment company, we would be
required to register as an investment company or adjust our
business strategy and assets. If we were required to register as an
investment company under the Investment Company Act, we would incur
substantial expenses associated with such registration, and we
would become subject to substantial regulation with respect to our
capital structure, management, operations, transactions with
affiliated persons, asset composition, including restrictions with
respect to diversification and industry concentration, and other
matters, which would have a material adverse effect on our
business.
If we fail to protect our intellectual property, then our
ability to compete could be negatively affected, which would harm
our financial condition and operating results.
We have acquired the rights to our sanitizing herb dryer, the
dHydronator®, from our CEO, Mr. Romanek, and the herb dryer has
received patent protection. There is no guarantee that we will be
able to maintain the patent in the future.
We believe that the market for the dHydronator® depends to a
significant extent upon the goodwill and patent protection afforded
by the patent protection covering the dHydronator®. In addition,
the laws of certain foreign countries may not protect our
intellectual property rights to the same extent as the laws of the
United States. The failure to maintain the patent for the
dHydronator®, or the loss or infringement of our patent rights
would impair the goodwill associated with the dHydronator® and harm
our reputation, which would harm our financial condition and
operating results.
If our intellectual property is not adequate to provide us
with a competitive advantage or to prevent competitors from
replicating our products, or if we infringe the intellectual
property rights of others, then our financial condition and
operating results would be harmed.
Our future success and ability to compete in the herb drying market
depends upon our ability to produce a sanitizing herb dryer, which
we attempt to protect under a combination of patent and trade
secret laws, confidentiality procedures and contractual provisions.
However, we have not yet been issued a patent, and even if we are,
the legal protections afforded by patent law and contractual
proprietary rights in our products provide only limited protection
and may be time-consuming and expensive to enforce or maintain.
Further, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our proprietary
rights or from independently developing non-infringing products
that are competitive with, equivalent to or superior to our herb
dryer.
Monitoring infringement or misappropriation of intellectual
property can be difficult and expensive, and we may not be able to
detect every infringement or misappropriation of intellectual
property rights. Even if we do detect infringement or
misappropriation of our proprietary rights, litigation to enforce
these rights could cause us to divert financial and other resources
away from our business operations. Further, the laws of some
foreign countries do not protect our proprietary rights to the same
extent as do the laws of the United States.
Additionally, third parties may claim that our herb dryer infringes
upon their intellectual property rights, and there can be no
assurance that one or more of our products will not be found to
infringe upon third-party intellectual property rights in the
future.
Our products may be subject to recalls.
Manufacturers and distributors of products are sometimes subject to
the recall or return of their products for a variety of reasons,
including product defects, such as contamination, unintended
harmful side effects or interactions with other substances,
packaging safety and inadequate or inaccurate labeling disclosure.
If our sanitizing herb dryer, the dHydronator®, is recalled due to
an alleged product defect or for any other reason, we could be
required to incur the unexpected expense of the recall and any
legal proceedings that might arise in connection with the recall.
We may lose a significant amount of sales and may not be able to
replace those sales at an acceptable margin, or at all. In
addition, a product recall may require significant management
attention and adversely affect our other operations.
Additionally, if our herb dryer were subject to recall, the
goodwill associated with that product and with us could be harmed.
A recall would likely lead to decreased demand for our herb dryer,
but it could also materially and adversely effect our spa as well
and the perception of our company as a whole. Additionally, product
recalls may lead to increased scrutiny of our operations by
regulatory agencies, requiring further management attention and
potential legal fees and other expenses. Furthermore, any product
recall affecting the cannabis industry more broadly could lead
consumers to lose confidence in the safety and security of products
sold by other participants in the industry, which could have a
material adverse effect on our business, financial condition and
results of operations.
Our future success depends on our ability to retain our
chief executive officer and other key executives and to attract,
retain and motivate qualified personnel.
We are highly dependent on Brandon Romanek, our Chief Executive
Officer. Although we have entered into an employment agreement with
Mr. Romanek providing for certain benefits, including severance in
the event of a termination without cause, this agreement does not
prevent him from terminating his employment with us at any time. We
do not maintain “key person” insurance for any personnel. The loss
of the services of Mr. Romanek could impede the achievement of our
herb dryer and spa research, development, commercialization and
acquisition objectives.
In addition, we rely on consultants and advisors, to assist us in
formulating our development and commercialization strategy. Our
consultants and advisors may be employed by employers other than us
and may have commitments under consulting or advisory contracts
with other entities that may limit their availability to us.
We will need additional funding if we intend on executing
our operational plans and making future acquisitions. If we are
unable to raise capital when needed, we would be forced to delay,
reduce or eliminate our planned development.
We expect our expenses to increase in connection with our ongoing
activities. Furthermore, upon the effectiveness of this
Registration Statement, we expect to incur additional costs
associated with operating as a mandatory filer under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly,
we will need to obtain substantial additional funding in connection
with our continuing operations. If we are unable to raise capital
when needed or on attractive terms, we would be forced to delay,
reduce or eliminate some or all of our herb dryer and spa
development plans.
Raising additional capital may cause dilution to our
stockholders, restrict our operations or require us to relinquish
rights to our technologies or other assets.
Until the time, if ever, that we can generate substantial product
revenues, we plan to finance our cash needs through some
combination of equity offerings, debt financings, collaborations,
strategic alliances and licensing arrangements. We do not have any
committed external source of funds. To the extent that we raise
additional capital through the sale of equity or convertible debt
securities, the ownership interest of our existing stockholders
will be diluted, and the terms of these new securities may include
liquidation or other preferences that adversely affect the rights
of our existing stockholders. Debt financing, if available, may
involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends.
Our common stock is subject to the SEC’s penny stock rules,
which may make it difficult for broker-dealers to complete customer
transactions and could adversely affect trading activity in our
securities.
The SEC has adopted regulations which generally define “penny
stock” to be an equity security that has a market price of less
than $5.00 per share, subject to specific exemptions. The market
price of our common stock is currently less than $5.00 per share
and therefore our stock is considered a “penny stock” according to
SEC rules, unless we are listed on a national securities exchange.
Under these rules, broker-dealers who recommend such securities to
persons other than institutional accredited investors must:
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make a special written suitability determination for the
purchaser;
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•
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receive the purchaser’s prior written agreement to the
transaction;
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•
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provide the purchaser with risk disclosure documents which identify
certain risks associated with investing in “penny stocks” and which
describe the market for these “penny stocks” as well as a
purchaser’s legal remedies; and
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•
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obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the required
risk disclosure document before a transaction in a “penny stock”
can be completed.
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If required to comply with these rules, broker-dealers may find it
difficult to effectuate customer transactions and trading activity
in our securities may be adversely affected.
The market price of our common stock may be volatile and
may fluctuate in a way that is disproportionate to our operating
performance.
Our stock price may experience substantial volatility as a result
of a number of factors, including:
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sales or potential sales of substantial amounts of our common
stock;
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•
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the success of competitive products or technologies;
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•
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announcements about us or about our competitors, including new
product introductions and commercial results;
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•
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the recruitment or departure of key personnel;
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•
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developments concerning our licensors or manufacturers;
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•
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litigation and other developments;
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•
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actual or anticipated changes in estimates as to financial results,
development timelines or recommendations by securities
analysts;
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•
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variations in our financial results or those of companies that are
perceived to be similar to us; and
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•
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general economic, industry and market conditions.
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Many of these factors are beyond our control. The stock markets in
general, and the market for companies related to the cannabis in
any way in particular, have historically experienced extreme price
and volume fluctuations. These fluctuations often have been
unrelated or disproportionate to the operating performance of these
companies. Broad market and industry factors could reduce the
market price of our common stock, regardless of our actual
operating performance.
We currently have outstanding shares of preferred stock
that have special rights that could limit our ability to undertake
corporate transactions, inhibit potential changes of control and
reduce the proceeds available to our common stockholders in the
event of a change in control.
We currently have outstanding two classes of stock, common stock
and preferred stock, and there are two series of preferred stock,
Series A Preferred Stock and Series B Preferred Stock. The holders
of our Series A Preferred Stock are entitled to super voting and
super converting rights.
As a result of the rights associated with our Series A Preferred
Stock, we may not be able to undertake certain corporate
transactions, including equity or debt offerings necessary to raise
sufficient capital to run our business, change of control
transactions or other transactions that may otherwise be beneficial
to our businesses. These provisions may discourage, delay or
prevent a merger, acquisition or other change in control of us that
stockholders may consider favorable, including transactions in
which our common stockholders might otherwise receive a premium
price for their shares. The market price of our common stock could
be adversely affected by the rights of our preferred
stockholders.
We have never paid and do not intend to pay cash
dividends.
We have never paid cash dividends on any of our capital stock and
we currently intend to retain future earnings, if any, to fund the
development and growth of our business. As a result, capital
appreciation, if any, of our common stock will be our common
stockholders’ sole source of gain for the foreseeable future. Under
the terms of our existing Articles of Incorporation, we cannot
declare, pay or set aside any dividends on shares of any class or
series of our capital stock, other than dividends on shares of
common stock payable in shares of common stock, unless we pay
dividends to the holders of our preferred stock. Additionally,
without special stockholder and board approvals, we cannot
currently pay or declare dividends and will be limited in our
ability to do so until such time, if ever, that we are listed on a
stock exchange.
Our executive officer and director have the ability to
control all matters submitted to stockholders for
approval.
Our executive officer and director, Brandon Romanek, holds 200,000
shares of our Series A Preferred Stock (each share votes as the
equivalent of 100 shares of common stock on all matters submitted
for a vote by the common stockholders), as well as 10,531,632
shares of our common stock, and as such, he would be able to
control all matters submitted to our stockholders for approval, as
well as our management and affairs. For example, Mr. Romanek would
control the election of directors and approval of any merger,
consolidation or sale of all or substantially all of our assets.
This concentration of voting power could delay or prevent an
acquisition of our company on terms that other stockholders may
desire.
Provisions in our articles of incorporation and by-laws and
under Nevada law could make an acquisition of us, which may be
beneficial to our stockholders, more difficult and may prevent
attempts by our stockholders to replace or remove our current
management.
Provisions in our articles of incorporation and by-laws may
discourage, delay or prevent a merger, acquisition or other change
in control of us that stockholders may consider favorable (a
“Corporate Transaction”), including transactions in which our
common stockholders might otherwise receive a premium price for
their shares.
Specifically, our authorized capital stock in our articles of
incorporation includes preferred stock issuable in one or more
series. Our board of directors has the authority to issue preferred
stock and determine the price, designation, rights, preferences,
privileges, restrictions and conditions, including voting and
dividend rights, of those shares without any further vote or action
by stockholders. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of holders
of any preferred stock that may be issued. Issuance of preferred
stock with preferential voting rights or economic rights, could
make it more difficult for a third party to acquire a majority of
the voting power of our outstanding voting securities, which could
deprive our holders of common stock to purchase common stock at a
premium that they might otherwise realize in connection with a
proposed acquisition of our company. Similarly, our bylaws
generally state that a majority of our board of directors
constitute a quorum for the transaction of business and do not
require that a larger percentage of our directors constitute a
quorum. These provisions in our articles of incorporation and
bylaws effectively mean that a simple majority of our board of
directors could, without common shareholder approval, designate a
class of preferred stock, and issue shares of that class of
preferred stock, in a manner that would discourage, delay or
prevent a Corporate Transaction from occurring.
These provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock,
thereby depressing the market price of our common stock. In
addition, because our board of directors is responsible for
appointing the members of our management team, 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.
We will incur increased costs as a result of operating as a
public reporting company, and our management will be required to
devote substantial time to new compliance initiatives.
As a public reporting company, we will incur significant legal,
accounting and other expenses that we did not incur as a
non-reporting company. In addition, the Sarbanes-Oxley Act of 2002
and rules subsequently implemented by the SEC, have imposed various
requirements on public companies, including establishment and
maintenance of effective disclosure and financial controls and
corporate governance practices. Our management and other personnel
will need to devote a substantial amount of time to these
compliance initiatives. Moreover, these rules and regulations will
increase our legal and financial compliance costs and will make
some activities more time consuming and costly. For example, we
expect that these rules and regulations may make it more difficult
and more expensive for us to obtain director and officer liability
insurance.
We currently have outstanding, and we may, in the future
issue instruments which are convertible into
shares of common stock, which will
result in additional dilution to you.
We currently have outstanding debt and equity instruments which are
convertible into shares of common stock, and we may need to issue
similar instruments in the future. In the event that these
convertible instruments are converted into shares of common stock,
or that we make additional issuances of other convertible or
exchangeable securities, you could experience additional dilution.
Furthermore, we cannot assure you that we will be able to issue
shares or other securities in any offering at a price per share
that is equal to or greater than the price per share paid by
investors or the then-current market price.
We cannot predict every event and circumstance that may
impact our business and, therefore, the risks discussed herein may
not be the only ones you should consider.
As we continue to grow our business, we may encounter other risks
of which we are not aware as of the date of this Registration
Statement. These additional risks may cause serious damage to our
business in the future, the impact of which we cannot estimate at
this time.
Item 1B.
Unresolved Staff Comments.
None.
Item 2.
Properties.
The Company does not own any real property. Currently the Company
leases approximately 2,000 square feet of 5,000 shared mixed-use
office and living space in Flagstaff, Arizona, from our CEO, Mr.
Romanek, at a monthly rent of $3,500. The lease includes all
utilities, and the lease term ends March 30, 2021.
Item 3.
Legal Proceedings.
From time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business. We are not presently a party to
any material litigation, nor to the knowledge of management is any
litigation threatened against us, which may materially affect us,
other than as set forth herein.
On or about December 18, 2020, Power Up Lending Group, Ltd. (“Power
Up”) filed suit against the Company, the Company’s executive
officers, and the Company’s transfer agent (Case Index No.
614700/2020, Supreme Court of the State of New York for Nassau
County, Power Up Lending Group, Ltd. v. THC Therapeutics, Inc.,
Parker Mitchell, Transhare Corporation, and Brandon Romanek),
alleging that the Company’s convertible promissory notes issued to
Power Up are in default as a result of the Company’s alleged
failure to honor the conversion terms of the notes along with
related claims, and seeking monetary damages in excess of $280,920
(representing 200% of the outstanding note balances) and equitable
relief to force the Company to honor Power Up’s conversion of note
amounts into Company common stock. The Company and its officers
answered the complaint and filed counterclaims against Power Up.
The parties settled in July of 2021, and the case was dismissed by
Power Up.
On or about January 5, 2021, another Company lender, Iliad Research
and Trading, L.P. (“Iliad”), sent a demand letter to the Company
regarding the Company’s alleged default under its promissory note
issued to Iliad. The Company retained litigation counsel in Nevada
and responded, and Iliad took no further action until it sued the
Company in the fall of 2021 in Utah, where Iliad is domiciled (case
no. 210000342 filed in the Third Judicial Court of Salt Lake City,
Utah). In December of 2021, the Company was improperly served, and
Iliad received a default judgment, and the Company is currently
disputing the default judgment.
In the spring of 2021, the Company’s former CEO, Parker Mitchell,
filed suit against the Company for wrongful termination (case no.
A-21-833007-Z filed in the District Court for Clark County,
Nevada). The matter was subsequently settled on or about December
12, 2021, and the case was then dismissed.
In the fall of 2021, the Company’s former CFO, an individual
representing himself as Jonathan Cross, but who, upon information
and belief was the convicted felon, John Dankovich, made numerous
demands of the Company in connection with his termination by the
Company. The Company responded to Mr. Dankovich on or about
November 11, 2021, and Mr. Dankovich subsequently took no further
action.
In the fall of 2021, one of the Company’s former directors and
current Company business consultant, Joshua Halford, made a demand
for payment of funds due to Mr. Halford under a consulting
agreement, Mr. Halford and the Company have since resolved the
matter, and Mr. Halford is still providing consulting and technical
design services to the Company in connection with the Company’s
dHyrdonator herb dryer product redesign.
Item 4. Mine
Safety Disclosures.
Not applicable.
PART
II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
Market for Common Equity
Market Information
The Company’s common stock is quoted on the OTC Link alternative
trading system operated by OTC Markets Group, Inc., under the
symbol “THCT.” As of July 31, 2021, the Company’s common stock was
held by 37 stockholders of record, which does not include
stockholders whose shares are held in street or nominee name.
The following chart is indicative of the fluctuations in the stock
prices for the fiscal years ended July 31, 2021 and 2020:
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For the Years Ended July 31,
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2021
|
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2020
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High
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Low
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High
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Low
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First Quarter
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$ |
0.079 |
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$ |
0.027 |
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$ |
5.30 |
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$ |
1.345 |
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Second Quarter
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$ |
0.50 |
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$ |
0.02 |
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$ |
1.75 |
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$ |
0.23 |
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Third Quarter
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$ |
0.75 |
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|
$ |
0.16 |
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$ |
0.48 |
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$ |
0.03 |
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Fourth Quarter
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$ |
0.28 |
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$ |
0.07 |
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$ |
0.18 |
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$ |
0.041 |
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__________
Source: www.otcmarkets.com
The Company’s transfer agent is ClearTrust, LLC, 16540 Pointe
Village Dr., Suite 205, Lutz, Florida, 33558.
Dividend Distributions
We have not paid any cash dividends on our common stock and have no
present intention of paying any dividends on the shares of our
common stock for the foreseeable future. Our current policy is to
retain earnings, if any, for use in our operations and in the
development of our business. Our future dividend policy may be
modified from time to time by our board of Directors.
Securities authorized for issuance under equity compensation
plans
The Company does not have any securities authorized for issuance
under equity compensation plans.
Penny Stock
Our common stock is considered “penny stock” under the rules the
Securities and Exchange Commission (the “SEC”) under the Securities
Exchange Act of 1934. The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in penny
stocks. Penny stocks are generally equity securities with a price
of less than $5.00, other than securities registered on certain
national securities exchanges or quoted on the NASDAQ Stock Market
System, provided that current price and volume information with
respect to transactions in such securities is provided by the
exchange or quotation system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock, to deliver
a standardized risk disclosure document prepared by the Commission,
that:
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contains a description of the nature and level of risks in the
market for penny stocks in both public offerings and secondary
trading;
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contains a description of the broker’s or dealer’s duties to the
customer and of the rights and remedies available to the customer
with respect to a violation to such duties or other requirements of
Securities’ laws; contains a brief, clear, narrative description of
a dealer market, including bid and ask prices for penny stocks and
the significance of the spread between the bid and ask price;
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contains a toll-free telephone number for inquiries on disciplinary
actions;
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defines significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
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contains such other information and is in such form, including
language, type, size and format, as the Commission shall require by
rule or regulation.
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The broker-dealer also must provide, prior to effecting any
transaction in a penny stock, the customer with:
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bid and offer quotations for the penny stock;
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the compensation of the broker-dealer and its salesperson in the
transaction;
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the number of shares to which such bid and ask prices apply, or
other comparable information relating to the depth and liquidity of
the marker for such stock; and
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monthly account statements showing the market value of each penny
stock held in the customer’s account.
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In addition, the penny stock rules that require that prior to a
transaction in a penny stock not otherwise exempt from those rules;
the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser’s written acknowledgement of the receipt of a
risk disclosure statement, a written agreement to transactions
involving penny stocks, and a signed and dated copy of a written
suitably statement.
These disclosure requirements may have the effect of reducing the
trading activity in the secondary market for our stock.
Related Stockholder Matters
None.
Unregistered Sales of Equity Securities during Three Months
Ended July 31, 2021
On June 4, 2021, a convertible note holder converted $19,500 in
principal and fees into 1,203,704 shares of common stock at a
conversion price of $0.0162 per share.
On July 7, 2021, a convertible note holder converted $20,000 in
principal and fees into 372,439 shares of common stock at a
conversion price of $0.0537 per share.
The forgoing shares issued upon conversion of convertible
promissory notes were issued in reliance on the exemption from
registration provided by Section 3(a)(9) of the Securities Act of
1933, as amended, as the shares were issued solely in exchange of
convertible debt securities of the Company issued to the lenders
previously, there was no additional consideration for the exchange,
and there was no renumeration for solicitation of the exchange.
On or about July 28, 2021, the Company sold 300 shares of Series C
Preferred Stock for $300,000 to GHS Investments, LLC. These shares
were sold in reliance on the exemption from registration provided
by Section 4(a)(2) of the Securities Act of 1933, as amended, and
Rule 506(b) promulgated thereunder, as there was no general
solicitation, the investor was an accredited investor, and the
transaction did not involve a public offering.
Purchase of Equity Securities
None.
Item 6.
Selected Financial Data.
As the Company is a “smaller reporting company,” this item is
inapplicable.
Item 7.
Management’s Discussion and Analysis of Financial Condition and
Results of Operation.
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of Rule 175 of the Securities Act of 1933, as
amended, and Rule 3b-6 of the Securities Act of 1934, as amended,
that involve substantial risks and uncertainties. These
forward-looking statements are not historical facts, but rather are
based on current expectations, estimates and projections about our
industry, our beliefs and our assumptions. Words such as
“anticipate,” “expects,” “intends,” “plans,” “believes,” “seeks”
and “estimates” and variations of these words and similar
expressions are intended to identify forward-looking statements.
These statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which
are beyond our control and difficult to predict and could cause
actual results to differ materially from those expressed or
forecasted in the forward-looking statements. You should not place
undue reliance on these forward-looking statements, which apply
only as of the date of this Form 10-K. Investors should carefully
consider all of such risks before making an investment decision
with respect to the Company’s stock. The following discussion and
analysis should be read in conjunction with our consolidated
financial statements and summary of selected financial data for THC
Therapeutics, Inc. Such discussion represents only the best present
assessment from our Management.
Plan of Operation
THC Therapeutics is focused on the wellness and nutraceutical
industry. The Company is developing a sanitizing herb dryer, the
dHydronator®, with multiple design, function, and usage patents.
This innovative, laboratory-proven product is specifically designed
for the drying and sanitizing (i.e., reducing the bacterial count)
of freshly harvested cannabis, and other herbs, flowers, and tea
leaves. The dHydronator® can reduce moisture content of cannabis to
10-15% in only 10-14 hours. Traditional herbal drying times can
take up to two weeks. The Company also intends to establish a float
spa facility that will allow each guest to customize their wellness
experience, at their own pace, based on their individual needs.
The following summary of our results of operations should be read
in conjunction with our audited consolidated financial statements
for the years ended July 31, 2021 and 2020, which are included
herein.
Our financial statements are stated in U.S. Dollars and are
prepared in accordance with generally accepted accounting
principles of the United States (“GAAP”).
Going Concern Qualification
Several conditions and events cast substantial doubt about the
Company’s ability to continue as a going concern. The Company has
incurred cumulative net losses of approximately $36.5 million since
its inception and requires capital for its contemplated operational
and marketing activities to take place. The Company’s ability to
raise additional capital through the future issuances of common
stock is unknown. The obtainment of additional financing, the
successful development of the Company’s contemplated plan of
operations, and its transition, ultimately, to the attainment of
profitable operations are necessary for the Company to continue
operations. The ability to successfully resolve these factors raise
substantial doubt about the Company’s ability to continue as a
going concern.
For the Year Ended July 31, 2021 and
2020:
Our operating results for the year ended July 31, 2021 and 2020,
and the changes between those periods for the respective items are
summarized as follows:
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Years ended
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July 31,
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Change
|
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2021
|
|
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2020
|
|
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Amount
|
|
|
Percentage
|
|
|
Operating loss
|
|
$ |
(939,977 |
) |
|
$ |
(1,390,410 |
) |
|
$ |
450,433 |
|
|
(32
|
)%
|
|
Other income (expense)
|
|
$ |
(945,468 |
) |
|
$ |
(540,989 |
) |
|
$ |
(404,479 |
) |
|
|
75 |
% |
|
Net income (loss)
|
|
$ |
(1,885,445 |
) |
|
$ |
(1,931,399 |
) |
|
$ |
45,954 |
|
|
(2
|
)%
|
Revenues
We did not earn any revenues during the fiscal years ending July
31, 2021 and 2020, respectively. We do not anticipate earning
significant revenues until such time that we have fully developed
our operational strategy and launched sales of our herb dryer
product.
Operating Income (Loss)
Our loss from operations decreased by $450,433 during the fiscal
year ended July 31, 2021, from an operating loss of $1,390,410 for
the 2020 fiscal year. The following table presents operating
expenses for the 2021 and 2020 fiscal years:
|
|
|
Years ended
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
Change
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
Percentage
|
|
|
Professional fees
|
|
$ |
253,838 |
|
|
$ |
315,755 |
|
|
$ |
(61,917 |
) |
|
|
(20 |
)% |
|
Consulting fees
|
|
|
205,170 |
|
|
|
611,313 |
|
|
|
(406,143 |
) |
|
|
(66 |
)% |
|
Salaries and wages
|
|
|
267,975 |
|
|
|
264,563 |
|
|
|
3,412 |
|
|
|
1 |
% |
|
General and administrative expenses
|
|
|
212,994 |
|
|
|
198,779 |
|
|
|
14,215 |
|
|
|
7 |
% |
|
Total operating expenses
|
|
$ |
939,977 |
|
|
$ |
1,390,410 |
|
|
$ |
(450,433 |
) |
|
(32
|
%)
|
We realized a decrease of $61,917 in professional fees during the
fiscal year ended July 31, 2021, as compared to 2020 fiscal year,
primarily due to a decrease in legal fees. We also realized a
decrease of $406,143 in consulting fees during the fiscal year
ended July 31, 2021, as compared to the 2020 fiscal year, primarily
due to a decrease in stock-based compensation.
We realized a decrease of $3,744 in depreciation expenses during
fiscal year ended July 31, 2021, as compared to the same period in
2020, due to an asset becoming fully depreciated mid-way through
the year ended July 31, 2020.
Other Income (Expense)
The following table presents other income and expenses for the
fiscal years ended July 31, 2020 and 2021:
|
|
|
Years ended
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
Change
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
Percentage
|
|
|
Gain/(loss) on change in derivative liability
|
|
$ |
(393,718 |
) |
|
$ |
123,860 |
|
|
$ |
(517,578 |
) |
|
|
(418 |
)% |
|
Gain/(loss) on settlement of debts
|
|
|
- |
|
|
|
(165,000 |
) |
|
|
165,000 |
|
|
|
(100 |
)% |
|
Gain (loss) on sale of investment
|
|
|
- |
|
|
|
(12,149 |
) |
|
|
12,149 |
|
|
|
100 |
% |
|
Interest Expense
|
|
|
(551,750 |
) |
|
|
(487,700 |
) |
|
|
64,050
|
|
|
|
47 |
% |
|
Total other income (expense)
|
|
$ |
(945,468 |
|
|
$ |
(540,989 |
) |
|
$ |
404,479 |
|
|
|
75 |
% |
Gain/loss on change in derivative liability decreased by $517,578
during the fiscal year ended July 31, 2021, as compared to the 2020
fiscal year, due to the fluctuations in the price of our common
stock between reporting periods. Loss on settlement of debts
decreased by $165,000 during the year ended July 31, 2021, as
compared to 2020 fiscal year, due to more debt settlements in the
prior year. Loss on sale of investment decreased by $12,149 during
the fiscal year ended July 31, 2021, compared to the 2020 fiscal
year, due to a decrease in the sale of investments in the 2021
year. Interest expense increased by $64,050 during the fiscal year
ended July 31, 2021, as compared to the 2020 fiscal year, due to a
default on a loan payable in the 2021 fiscal year.
Net Income (loss)
Net loss increased to $(1,885,445) during the fiscal year ended
July 31, 2021, from a net loss of $(1,931,399) in the 2020 fiscal
year.
Liquidity and Capital Resources
Based upon our current financial condition, we do not have
sufficient cash to operate our business at the current level for
the next twelve months. We intend to fund operations through sales
of our herb dryer and debt and/or equity financing arrangements,
which may be insufficient to fund expenditures or other cash
requirements. We plan to seek additional financing in a private
equity offering to secure funding for operations. There can be no
assurance that we will be successful in raising additional funding.
If we are not able to secure additional funding, the implementation
of our business plan will be impaired. There can be no assurance
that such additional financing will be available to us on
acceptable terms or at all.
Working Capital
The following table presents our working capital position as of
July 31, 2021, and July 31, 2020:
|
|
|
July 31,
|
|
|
July 31,
|
|
|
Change
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
Percentage
|
|
|
Cash and cash equivalents
|
|
$ |
296,130 |
|
|
$ |
43,239 |
|
|
$ |
252,891 |
|
|
|
585 |
% |
|
Prepaid expenses
|
|
|
4,586 |
|
|
|
- |
|
|
|
4,586 |
|
|
|
100 |
% |
|
Inventory
|
|
|
830 |
|
|
|
- |
|
|
|
830 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$ |
301,546 |
|
|
$ |
43,239 |
|
|
$ |
258,307 |
|
|
|
597 |
% |
|
Current liabilities
|
|
|
2,857,394 |
|
|
|
1,828,920 |
|
|
|
1,028,474 |
|
|
|
56 |
% |
|
Working capital deficit
|
|
$ |
(2,555,848 |
) |
|
$ |
(1,785,681 |
) |
|
$ |
(770,167 |
) |
|
|
43 |
% |
The change in working capital during the year ended July 31, 2021,
was primarily due to an increase in current assets of $258,307 and
an increase in current liabilities of $1,028,474. Current assets
increased due to an increase in cash and prepaid expenses as of
July 31, 2021. Current liabilities increased due to a default on a
convertible note, which resulted in convertible notes payable, net
of $561,346, advances from related parties of $96,313, convertible
notes payable – related party, net of $200,000, derivative
liability of $1,001,213, as compared to convertible notes payable,
net of $305,110, advances from related parties of $83,660,
convertible notes payable – related party, net of $124,931,
derivative liability of $735,496 as of July 31, 2020. Cash
increased as of July 31, 2021, by $252,891 to $296,130, primarily
caused by the sale of common stock and preferred stock in the
fiscal year ending July 31, 2021.
Cash Flow
We fund our operations with cash received from advances from
officer’s and related parties, debt, and issuances of equity.
The following tables presents our cash flow for the fiscal
years ended July 31, 2021 and 2020:
|
|
|
Years ended
|
|
|
|
|
|
|
|
July 31,
|
|
|
Change 2021
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Versus 2020
|
|
|
Cash Flows Used in Operating Activities
|
|
$ |
(388,477 |
) |
|
$ |
(587,933 |
) |
|
$ |
199,456 |
|
|
Cash Flows Used in Investing Activities
|
|
|
(152,785 |
) |
|
|
- |
|
|
|
(152,785 |
) |
|
Cash Flows Provided by Financing Activities
|
|
|
794,153 |
|
|
|
313,621 |
|
|
|
480,532 |
|
|
Net increase (decrease) in Cash During Period
|
|
$ |
252,891 |
|
|
$ |
(274,312 |
) |
|
$ |
527,203 |
|
Cash Flows from Operating Activities
We did not generate positive cash flows from operating activities
for the fiscal year ended July 31, 2021.
For the fiscal year ended July 31, 2021, net cash flows used in
operating activities consisted of a net loss of $1,885,445, reduced
by depreciation of $16,370, stock-based compensation of $115,692,
amortization of debt discounts of $277,845, loss on change in
derivative liability of $393,718, convertible loan increase due to
default of $179,960, and increased by a net increase in change of
operating assets and liabilities of $513,383. For the fiscal year
ended July 31, 2020, net cash flows used in operating activities
consisted of a net loss of $1,931,399, reduced by depreciation of
$20,114, stock-based compensation of $438,434, amortization of debt
discounts of $426,376, offset by a gain on change in derivative
liabilities of $136,040, loss on settlement of debts of $165,000,
and increased by a net increase in change of operating assets and
liabilities of $429,582.
Cash Flows from Investing Activities
For the fiscal year ended July 31, 2021, net cashflows used in
investing activities consisted of purchases of silver of $152,785.
For the fiscal year ended July 31, 2020, no cashflows were used in
investing activities.
Cash Flows from Financing Activities
For the fiscal year ended July 31, 2021, we received $91,081 from
loans from related party, we received $506,500 from the sale of
common stock, we received $300,000 from the sale of preferred
stock, and used $78,428 for net repayments on related party debts
and $25,000 for net repayments on convertible notes payable. For
the fiscal year ended July 31, 2020, we received $163,499 from
convertible notes, we received $128,522 from loans from related
party, we received $288,014 from loans, and we used $149,081 for
net repayments on related party debts and $117,333 for net
repayments on notes payable.
Anticipated Cash Requirements
We estimate that our expenses to further implement our plan of
operations over the next 12 months, will be approximately
$3,810,000 as described in the table below. These estimates may
change significantly depending on the nature of our future business
activities and our ability to raise capital from shareholders or
other sources. We further anticipate incurring additional costs and
expenses for accounting, legal, and other miscellaneous fees
relating to compliance with SEC requirements and the filing of the
registration statement of which this prospectus forms a part.
|
Description
|
|
Estimated
Expenses
|
|
|
Legal, Accounting & Other Professional Expenses
|
|
$ |
200,000 |
|
|
Costs Associated with Being a Public Company
|
|
|
200,000 |
|
|
Trade Shows and Travel
|
|
|
400,000 |
|
|
Website Development
|
|
|
120,000 |
|
|
Rent
|
|
|
70,000 |
|
|
Advertising and Marketing
|
|
|
750,000 |
|
|
Staffing
|
|
|
770,000 |
|
|
General Working Capital
|
|
|
800,000 |
|
|
Cash Reserves
|
|
|
500,000 |
|
|
Total
|
|
$ |
3,810,000 |
|
Given that our cash needs are strongly driven by our growth
requirements, we also intend to maintain a reserve sum for other
risk contingencies that may arise.
We intend to meet our cash requirements for the next 12 months
through the use of the cash we have on hand and through business
operations, future equity financing, debt financing, or other
sources, which may result in further dilution in the equity
ownership of our shares. We currently do not have any other
arrangements in place to complete any private placement financings
and there is no assurance that we will be successful in completing
any such financings on terms that will be acceptable to us.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on
the Company’s financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to
investors.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in
conformity with U.S. generally accepted accounting principles
(“GAAP”) and the Company’s discussion and analysis of its financial
condition and operating results require the Company’s management to
make judgments, assumptions and estimates that affect the amounts
reported in its consolidated financial statements and accompanying
notes. Note 3, “Summary of Significant Accounting Policies,” of the
Notes to Consolidated Financial Statements included in this Form
10, describes the significant accounting policies and methods used
in the preparation of the Company’s consolidated financial
statements. Management bases its estimates on historical experience
and on various other assumptions it believes to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates, and such
differences may be material.
Management believes the Company’s critical accounting policies and
estimates are those related to revenue recognition. Management
considers these policies critical because they are both important
to the portrayal of the Company’s financial condition and operating
results, and they require management to make judgments and
estimates about inherently uncertain matters. The Company’s
management has reviewed these critical accounting policies and
related disclosures.
Principles of Consolidation – The consolidated financial
statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Use of Estimates – The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates include estimates used to review the
Company’s goodwill, impairments and estimations of long-lived
assets, revenue recognition on percentage of completion type
contracts, allowances for uncollectible accounts, inventory
valuation, and the valuations of non-cash capital stock issuances.
The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable in the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
Cash and Cash Equivalents – For purposes of the statement of
cash flows, the Company considers all highly liquid investments and
short-term instruments with original maturities of three months or
less to be cash equivalents.
Fair Value of Financial Instruments – The carrying amounts
reflected in the balance sheets for cash, accounts payable and
accrued expenses approximate the respective fair values due to the
short maturities of these items.
As required by the Fair Value Measurements and Disclosures Topic of
the FASB ASC, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring
fair value as follows: (Level 1) observable inputs such as quoted
prices in active markets; (Level 2) inputs, other than the quoted
prices in active markets, that are observable either directly or
indirectly; and (Level 3) unobservable inputs in which there is
little or no market data, which require the reporting entity to
develop its own assumptions.
The three levels of the fair value hierarchy are described
below:
Level 1: Unadjusted quoted prices in active markets that are
accessible at the measurement date for identical, unrestricted
assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs
that are observable, either directly or indirectly, for
substantially the full term of the asset or liability;
Level 3: Prices or valuation techniques that require inputs that
are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
Revenue Recognition: We recognize revenue in accordance with
generally accepted accounting principles as outlined in the
Financial Accounting Standard Board’s (“FASB”) Accounting Standards
Codification (“ASC”) 606, Revenue From Contracts with Customers,
which requires that five steps be followed in evaluating revenue
recognition: (i) identify the contract with the customer; (ii)
identity the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction
price; and (v) recognize revenue when or as the entity satisfied a
performance obligation.
We did not have a cumulative impact as of January 1, 2018 due to
the adoption of Topic 606 and there was not an impact to our
consolidated statements of operations for the years ended July 31,
2021 and 2020 as a result of applying Topic 606.
The company has made an accounting policy election to exclude from
the measurement of the transaction price all taxes assessed by
governmental authorities that are collected by the company from its
customers (sales and use taxes, value added taxes, some excise
taxes).
Product Sales – Revenues from the sale of products are
recognized when title to the products are transferred to the
customer and only when no further contingencies or material
performance obligations are warranted, and thereby have earned the
right to receive reasonably assured payments for products sold and
delivered.
Costs of Revenue – Costs of revenue includes raw materials,
component parts, and shipping supplies. Shipping and handling costs
is not a significant portion of the cost of revenue.
Goodwill and Intangible Assets – The Company follows
Financial Accounting Standard Board’s (FASB) Codification Topic
350-10 (“ASC 350-10”), “Intangibles – Goodwill and Other.”
According to this statement, goodwill and intangible assets with
indefinite lives are no longer subject to amortization, but rather
an annual assessment of impairment by applying a fair-value based
test. Fair value for goodwill is based on discounted cash flows,
market multiples and/or appraised values as appropriate. Under ASC
350-10, the carrying value of assets are calculated at the lowest
level for which there are identifiable cash flows.
Long-Lived Assets – In accordance with the Financial
Accounting Standards Board (“FASB”) Accounts Standard Codification
(ASC) ASC 360-10, “Property, Plant and Equipment,” the carrying
value of intangible assets and other long-lived assets is reviewed
on a regular basis for the existence of facts or circumstances that
may suggest impairment. The Company recognizes impairment when the
sum of the expected undiscounted future cash flows is less than the
carrying amount of the asset. Impairment losses, if any, are
measured as the excess of the carrying amount of the asset over its
estimated fair value.
Segment Reporting – Operating segments are defined as
components of an enterprise for which separate financial
information is available and evaluated regularly by the chief
operating decision maker, or decision-making group, in deciding the
method to allocate resources and assess performance. The Company
currently has one reportable segment for financial reporting
purposes, which represents the Company’s core business.
Income Taxes – The Company accounts for its income taxes in
accordance with FASB Codification Topic ASC 740-10, “Income
Taxes”, which requires recognition of deferred tax assets and
liabilities for future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and tax credit
carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Stock-Based Compensation – The Company follows the
guidelines in FASB Codification Topic ASC 718-10
“Compensation-Stock Compensation”, which requires the
measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors
including employee stock options and employee stock purchases
related to an Employee Stock Purchase Plan based on the estimated
fair values.
Earnings (Loss) Per Share – The Company reports earnings
(loss) per share in accordance with FASB Codification Topic ASC
260-10 “Earnings Per Share.” Basic earnings (loss) per
share is computed by dividing income (loss) available to common
shareholders by the weighted average number of common shares
available. Diluted earnings (loss) per share is computed similar to
basic earnings (loss) per share except that the denominator is
increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. Diluted
earnings (loss) per share has not been presented since the effect
of the assumed exercise of options and warrants to purchase common
shares (common stock equivalents) would have an anti-dilutive
effect.
Emerging Growth Company
We are an “emerging growth company” under the federal securities
laws and will be subject to reduced public company reporting
requirements. In addition, Section 107 of the JOBS Act also
provides that an “emerging growth company” can take advantage of
the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting
standards. In other words, an “emerging growth company” can delay
the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We are choosing to take
advantage of the extended transition period for complying with new
or revised accounting standards. As a result, our financial
statements may not be comparable to those of companies that comply
with public company effective dates.
Recently Issued Accounting Pronouncements
We do not expect the adoption of any recently issued accounting
pronouncements to have a significant impact on our net results of
operations, financial position, or cash flows.
Seasonality
We do not expect our sales to be impacted by seasonal demands for
our products and services.
Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk.
As the Company is a “smaller reporting company,” this item is
inapplicable.
Item 8.
Consolidated Financial Statements and Supplementary
Data.
|
|
Gries &
Associates, LLC
Certified Public
Accountants
501 S. Cherry Street Ste
1100
Denver, Colorado
80246
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Stockholders
THCT Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of THC
Therapeutics, Inc. (the Company), which comprise the balance sheet
as of July 31, 2020 and July 31, 2021 and the related statements of
Operations, Changes in Stockholder’s Equity, and Cash Flows for the
years then ended, and the related notes to the financial
statements.
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 audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United Sates) (“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 audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to 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 were 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. According
we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluation of the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going Concern Uncertainty
As shown in the financial statements, the Company incurred net loss
of $1,931,399 and $1,885,445 during the years ended July 31, 2020,
and July 31, 2021, respectively, and accumulated losses of
$36,517,980. The Company’s current liabilities exceed its current
assets by $1,785,681 and $2,555,848 as of July 31, 2020 and July
31, 2021, respectively. These factors create an uncertainty as to
the Company’s ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent upon the
success of raising additional capital through the issuance of
common stock and the ability to generate sufficient operating
revenue. The financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as
a going concern.
Emphasis of Matters-Risks and Uncertainties
The Company is not able to predict the ultimate impact that COVID
-19 will have on its business. However, if the current economic
conditions continue, the pandemic could have an adverse impact on
the economies and financial markets of many countries, including
the geographical area in which the Company plans to operate.
|
We have served as the Company’s
auditor since 2021.
|
|
|
|
|
Denver, Colorado
March 28, 2022
|
blaze@griesandassociates.com
501 S. Cherry Street Suite 1100, Denver, Colorado 80246
(O)720-464-2875 (M)773-255-5631 (F)720-222-5846
THC THERAPEUTICS INC.
CONSOLIDATED BALANCE SHEETS
|
ASSETS
|
|
July 31,
2021
|
|
|
July 31,
2020
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$ |
296,130 |
|
|
$ |
43,239 |
|
|
Prepaid expenses
|
|
|
4,586 |
|
|
|
- |
|
|
Inventory
|
|
|
830 |
|
|
|
- |
|
|
Total current assets
|
|
|
301,546 |
|
|
|
43,239 |
|
|
|
|
|
|
|
|
|
|
|
Physical silver assets
|
|
|
152,785 |
|
|
|
- |
|
|
Fixed assets, net
|
|
|
9,480 |
|
|
|
21,446 |
|
|
Intangible assets, net
|
|
|
16,257 |
|
|
|
20,661 |
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
480,068 |
|
|
|
85,346 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$ |
485,010 |
|
|
$ |
571,249 |
|
|
Accrued liabilities due to related parties
|
|
|
513,512 |
|
|
|
8,474 |
|
|
Advances from related parties
|
|
|
96,313 |
|
|
|
83,660 |
|
|
Convertible notes payable, net
|
|
|
561,346 |
|
|
|
305,110 |
|
|
Convertible notes payable- related party, net
|
|
|
200,000 |
|
|
|
124,931 |
|
|
Derivative liability
|
|
|
1,001,213 |
|
|
|
735,496 |
|
|
Total current liabilities
|
|
|
2,857,394 |
|
|
|
1,828,920 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,857,394 |
|
|
|
1,828,920 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (See note 9)
|
|
|
100,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Preferred stock; $0.001 par value; 10,000,000 shares
authorized;
|
|
|
|
|
|
|
|
|
|
218,300 and 218,000 series A and B and C shares issued and
outstanding
|
|
|
|
|
|
|
|
|
|
as of July 31, 2021 and 2020, respectively
|
|
|
|
|
|
|
|
|
|
Preferred A stock; $0.001 par value; 3,000,000 shares
authorized;
|
|
|
|
|
|
|
|
|
|
218,000 and 218,000 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
as of July 31, 2021 and 2020, respectively
|
|
|
218 |
|
|
|
218 |
|
|
Preferred B stock; $0.001 par value; 16,500 shares authorized;
|
|
|
|
|
|
|
|
|
|
0 and 0 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
as of July 31, 2021 and 2020, respectively
|
|
|
- |
|
|
|
- |
|
|
Preferred C stock; $0.001 par value; 10,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
300 and 0 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
as of July 31, 2021 and 2020, respectively
|
|
|
- |
|
|
|
- |
|
|
Common stock; $0.001 par value; 500,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
29,287,337 and 21,461,784 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
as of July 31, 2021 and 2020, respectively
|
|
|
29,287 |
|
|
|
21,462 |
|
|
|
|
|
|
|
|
|
|
|
Stock payable
|
|
|
658,892 |
|
|
|
221,700 |
|
|
Stock receivable
|
|
|
(6,902,000 |
) |
|
|
(6,902,000 |
) |
|
Additional paid-in capital
|
|
|
40,254,257 |
|
|
|
39,547,581 |
|
|
Accumulated deficit
|
|
|
(36,517,980 |
) |
|
|
(34,632,535 |
) |
|
Total stockholders' deficit
|
|
|
(2,477,326 |
) |
|
|
(1,743,574 |
) |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$ |
480,068 |
|
|
$ |
85,346 |
|
The accompanying notes are an integral part of these financial
statements.
THC THERAPEUTICS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
|
For the Years Ended
|
|
|
|
|
July 31,
2021
|
|
|
July 31,
2020
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
253,838 |
|
|
|
315,755 |
|
|
Consulting fees
|
|
|
205,170 |
|
|
|
611,313 |
|
|
Salaries and wages
|
|
|
267,975 |
|
|
|
264,563 |
|
|
General and administrative
|
|
|
212,994 |
|
|
|
198,779 |
|
|
Total operating expenses
|
|
|
939,977 |
|
|
|
1,390,410 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(939,977 |
) |
|
|
(1,390,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivative liability
|
|
|
(393,718 |
) |
|
|
123,860 |
|
|
Loss on settlement of det
|
|
|
- |
|
|
|
(165,000 |
) |
|
Loss on sale of investment
|
|
|
- |
|
|
|
(12,149 |
) |
|
Interest expense
|
|
|
(551,750 |
) |
|
|
(487,700 |
) |
|
Total other income (expense)
|
|
|
(945,468 |
) |
|
|
(540,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(1,885,445 |
) |
|
$ |
(1,931,399 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share
|
|
$ |
(0.08 |
) |
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common
|
|
|
|
|
|
|
|
|
|
shares outstanding
|
|
|
23,659,514 |
|
|
|
16,551,334 |
|
The accompanying notes are an integral part of these financial
statements.
THC THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS
DEFICIT
|
|
|
Preferred A Stock
|
|
|
Preferred B Stock
|
|
|
Preferred C Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Stock
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Total Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Payable
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Deficit
|
|
|
Balance, July 31, 2019
|
|
|
217,000 |
|
|
$ |
217 |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,434,098 |
|
|
$ |
14,434 |
|
|
$ |
38,421,610 |
|
|
$ |
417,469 |
|
|
$ |
(6,902,000 |
) |
|
$ |
(32,701,136 |
) |
|
|
(749,406 |
) |
|
Shares and warrants for services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
607,661 |
|
|
|
608 |
|
|
|
338,211 |
|
|
|
(166,320 |
) |
|
|
- |
|
|
|
- |
|
|
|
172,499 |
|
|
Conversion of Preferred to Common Stock
|
|
|
(1,000 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
|
250 |
|
|
|
(232 |
) |
|
|
(17 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Shares issued for conversion of convertible debt
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,525,025 |
|
|
|
4,525 |
|
|
|
242,407 |
|
|
|
(29,432 |
) |
|
|
- |
|
|
|
- |
|
|
|
217,500 |
|
|
Rescission of equity grant
|
|
|
(13,000 |
) |
|
|
(13 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance of warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
265,935 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
265,935 |
|
|
Shares issued for warrant exercise
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,645,000 |
|
|
|
1,645 |
|
|
|
(1,645 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Shares issued to settle debt
|
|
|
15,000 |
|
|
|
15 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
239,985 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
240,000 |
|
|
Derivative liability written off to additional paid in capital
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
41,297 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
41,297 |
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,931,399 |
) |
|
|
(1,931,399 |
) |
|
Balance, July 31, 2020
|
|
|
218,000 |
|
|
|
218 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21,461,784 |
|
|
|
21,462 |
|
|
|
39,547,581 |
|
|
|
221,700 |
|
|
|
(6,902,000 |
) |
|
|
(34,632,535 |
) |
|
|
(1,743,574 |
) |
|
Shares issued for conversion of convertible debt
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,292,219 |
|
|
|
4,292 |
|
|
|
97,208 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
101,500 |
|
|
Shares and warrants issued for services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
115,692 |
|
|
|
- |
|
|
|
- |
|
|
|
115,692 |
|
|
Common stock issued for cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,533,334 |
|
|
|
3,533 |
|
|
|
181,467 |
|
|
|
321,500 |
|
|
|
- |
|
|
|
- |
|
|
|
506,500 |
|
|
Preferred stock issued for cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
300 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
300,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
300,000 |
|
|
Derivative liability
written off to additional paid in capital
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
128,001 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
128,001 |
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,885,445 |
) |
|
|
(1,885,445 |
) |
|
Balance, July 31, 2021
|
|
|
218,000 |
|
|
$ |
218 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
300 |
|
|
$ |
- |
|
|
|
29,287,337 |
|
|
$ |
29,287 |
|
|
$ |
40,254,257 |
|
|
$ |
658,892 |
|
|
$ |
(6,902,000 |
) |
|
$ |
(36,517,980 |
) |
|
$ |
(2,477,326 |
) |
The accompanying notes are an integral part of these
financial statements.
THC THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For the Years Ended
|
|
|
|
|
July 31,
2021
|
|
|
July 31,
2020
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(1,885,445 |
) |
|
$ |
(1,931,399 |
) |
|
Adjustments to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
|
Loss (gain) on change in derivative liabilities
|
|
|
393,718 |
|
|
|
(136,040 |
) |
|
Amortization of debt discount
|
|
|
277,845 |
|
|
|
426,376 |
|
|
Stock based compensation
|
|
|
115,692 |
|
|
|
438,434 |
|
|
Convertible loan increase due to default
|
|
|
179,960 |
|
|
|
- |
|
|
Depreciation and amortization
|
|
|
16,370 |
|
|
|
20,114 |
|
|
Loss on settlement of accounts payable
|
|
|
- |
|
|
|
165,000 |
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in inventory
|
|
|
(830 |
) |
|
|
- |
|
|
Increase (decrease) in prepaid assets
|
|
|
(4,586 |
) |
|
|
140,250 |
|
|
Increase (decrease) in accounts payable
|
|
|
(86,239 |
) |
|
|
498,514 |
|
|
Increase (decrease) in accounts payable related party
|
|
|
505,038 |
|
|
|
(209,182 |
) |
|
Increase (decrease) in contingent liability
|
|
|
100,000 |
|
|
|
- |
|
|
Net cash used in operating activities
|
|
|
(388,477 |
) |
|
|
(587,933 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from investing
|
|
|
|
|
|
|
|
|
|
Purchase of silver
|
|
|
(152,785 |
) |
|
|
- |
|
|
Net cash used in investing activities
|
|
|
(152,785 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows provided by Financing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds from related party advances
|
|
|
91,081 |
|
|
|
128,522 |
|
|
Payments on related party advances
|
|
|
(78,428 |
) |
|
|
(149,081 |
) |
|
Proceeds from sale of common stock
|
|
|
506,500 |
|
|
|
- |
|
|
Proceeds from sale of preferred stock
|
|
|
300,000 |
|
|
|
- |
|
|
Proceeds from convertible notes payable
|
|
|
- |
|
|
|
163,499 |
|
|
Proceeds from loans
|
|
|
- |
|
|
|
288,014 |
|
|
Repayments of convertible notes payable
|
|
|
(25,000 |
) |
|
|
(117,333 |
) |
|
Net cash provided by financing activities
|
|
|
794,153 |
|
|
|
313,621 |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in Cash
|
|
|
252,891 |
|
|
|
(274,312 |
) |
|
|
|
|
|
|
|
|
|
|
|
Beginning cash balance
|
|
|
43,239 |
|
|
|
317,551 |
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash balance
|
|
$ |
296,130 |
|
|
$ |
43,239 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
|
Cash paid for tax
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability written off to additional paid in capital
|
|
$ |
128,001 |
|
|
$ |
41,297 |
|
|
Shares issued for the conversion of notes payable
|
|
$ |
101,500 |
|
|
$ |
- |
|
The accompanying notes are an integral part of these
financial statements.
THC THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND HISTORY
Description of business – THC Therapeutics, Inc. (referred
to as the “Company”) is focused developing its patented product,
the dHydronator®, a sanitizing herb dryer. The main function of the
dHydronator is to greatly accelerate the drying time of a herb
while sanitizing it. The dHydronator can be used to dry a variety
of herbs, but it has been specifically tested for use with
cannabis, and it can reduce the drying time for cannabis from 10-14
days to less than 14 hours.
History – The Company was incorporated in the State of
Nevada on May 1, 2007, as Fairytale Ventures, Inc., and later
changed its name to Aviation Surveillance Systems, Inc. and
Harmonic Energy, Inc. On January 23, 2017, the Company changed its
name to THC Therapeutics, Inc.
On May 30, 2017, the Company formed Genesis Float Spa LLC, a
wholly-owned subsidiary, to market its float spa assets purchased
for wellness centers. The Company’s health spa plans are part of
the Company’s strategic focus on revenue generation and creating
shareholder value.
On January 17, 2018, the Company changed its name to Millennium
Blockchain Inc.
On September 28, 2018, the Company changed its name back to THC
Therapeutics, Inc.
THC Therapeutics, Inc., together with its subsidiaries, shall
herein be collectively referred to as the “Company.”
2. BASIS OF PRESENTATION AND GOING CONCERN
Basis of Presentation and Principles of Consolidation -
These consolidated financial statements and related notes are
presented in accordance with accounting principles generally
accepted in the United States (“US GAAP”) and include the accounts
of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
Going Concern – The accompanying consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America on a
going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities and commitments in the normal
course of business.
Management evaluated all relevant conditions and events that are
reasonably known or reasonably knowable, in the aggregate, as of
the date the consolidated financial statements are issued and
determined that substantial doubt exists about the Company’s
ability to continue as a going concern. The Company’s ability to
continue as a going concern is dependent on the Company’s ability
to generate revenues and raise capital. The Company has not
generated sufficient revenues to provide sufficient cash flows to
enable the Company to finance its operations internally. As of July
31, 2021, the Company had $296,130 cash on hand. At July 31, 2021
the Company has an accumulated deficit of $36,517,980. For the year
ended July 31, 2021 the Company had a net loss of $1,885,445, and
net cash used in operations of $388,477. These factors raise
substantial doubt about the Company’s ability to continue as a
going concern within one year from the date of filing.
Over the next twelve months management plans to use borrowings and
security sales to mitigate the effects of cash flow deficits;
however, no assurance can be given that debt or equity financing,
if and when required, will be available. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded assets and classification of liabilities
that might be necessary should the Company be unable to continue
existence.
COVID-19 Pandemic - In December 2019, an outbreak of a novel
strain of coronavirus originated in Wuhan, China (“COVID-19”) and
has since spread worldwide, including to the Unites States, posing
public health risks that have reached pandemic proportions (the
“COVID-19 Pandemic”). The COVID-19 Pandemic poses a threat to the
health and economic wellbeing of our employees, customers and
vendors. Like most businesses world-wide, the COVID-19 Pandemic has
impacted the Company financially; however, management cannot
presently predict the scope and severity with which COVID-19 will
impact our business, financial condition, results of operations and
cash flows.
3. SUMMARY OF SIGNIFICANT POLICIES
Use of Estimates
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates include
estimates used to review the Company’s goodwill, impairments and
estimations of long-lived assets, revenue recognition on percentage
of completion type contracts, allowances for uncollectible
accounts, inventory valuation, and the valuations of non-cash
capital stock issuances. The Company bases its estimates on
historical experience and on various other assumptions that are
believed to be reasonable in the circumstances, the results of
which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
all highly liquid investments and short-term instruments with
original maturities of three months or less to be cash equivalents.
There were $296,130 and $43,239 in cash and no cash equivalents as
of July 31, 2021 2020, respectively.
Concentration Risk
At times throughout the year, the Company may maintain cash
balances in certain bank accounts in excess of FDIC limits. As of
July 31, 2021 , the cash balance in excess of the FDIC limits was
$46,130. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit
risk in these accounts.
Revenue Recognition
We recognize revenue in accordance with generally accepted
accounting principles as outlined in the Financial Accounting
Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”)
606, Revenue From Contracts with Customers, which requires that
five steps be followed in evaluating revenue recognition: (i)
identify the contract with the customer; (ii) identity the
performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price; and (v)
recognize revenue when or as the entity satisfied a performance
obligation.
The company has made an accounting policy election to exclude from
the measurement of the transaction price all taxes assessed by
governmental authorities that are collected by the company from its
customers (sales and use taxes, value added taxes, some excise
taxes).
Revenues from the sale of products are recognized when title to the
products are transferred to the customer and only when no further
contingencies or material performance obligations are warranted,
and thereby have earned the right to receive reasonably assured
payments for products sold and delivered.
Fair Value of Financial Instruments
The carrying amounts reflected in the balance sheets for cash,
accounts payable and accrued expenses approximate the respective
fair values due to the short maturities of these items.
As required by the Fair Value Measurements and Disclosures Topic of
the FASB ASC, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring
fair value as follows: (Level 1) observable inputs such as quoted
prices in active markets; (Level 2) inputs, other than the quoted
prices in active markets, that are observable either directly or
indirectly; and (Level 3) unobservable inputs in which there is
little or no market data, which require the reporting entity to
develop its own assumptions.
The three levels of the fair value hierarchy are described
below:
Level 1: Unadjusted quoted prices in active markets that are
accessible at the measurement date for identical, unrestricted
assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs
that are observable, either directly or indirectly, for
substantially the full term of the asset or liability;
Level 3: Prices or valuation techniques that require inputs that
are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
Financial assets and liabilities measured at fair value on a
recurring basis are summarized below as of July 31, 2021:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical Silver Assets
|
|
$ |
152,785 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
152,785 |
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,001,243 |
|
|
$ |
1,001,243 |
|
As of July 31, 2021, the Company’s stock price was $0.11, risk-free
discount rate of 0.05% and volatility of 236.13%.
The following tables provides a summary of the changes in fair
value, including net transfers in and/or out, of the derivative
financial instruments, measured at fair value on a recurring basis
using significant unobservable inputs for the year ended July 31,
2021.
|
|
|
Amount
|
|
|
Balance July 31, 2020
|
|
$ |
735,496 |
|
|
Derivative reclassed to additional paid in capital
|
|
|
(128,001 |
) |
|
Change in fair market value of derivative liabilities
|
|
|
393,718 |
|
|
Balance July 31, 2021
|
|
$ |
1,001,213 |
|
Financial assets and liabilities measured at fair value on a
recurring basis are summarized below as of July 31, 2020:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
735,496 |
|
|
$ |
735,496 |
|
As of July 31, 2020, the Company’s stock price was $0.07, risk-free
discount rate of 0.11% and volatility of 240.18%.
The following tables provides a summary of the changes in fair
value, including net transfers in and/or out, of the derivative
financial instruments, measured at fair value on a recurring basis
using significant unobservable inputs for the year ended July 31,
2021.
|
|
|
Amount
|
|
|
Balance July 31, 2019
|
|
$ |
611,265 |
|
|
Debt discount originated from derivative liabilities
|
|
|
289,388 |
|
|
Initial loss on inception
|
|
|
222,278 |
|
|
Derivative reclassed to additional paid in capital
|
|
|
(41,297 |
) |
|
Change in fair market value of derivative liabilities
|
|
|
(346,138 |
) |
|
Balance July 31, 2020
|
|
$ |
735,496 |
|
Goodwill and Intangible Assets
The Company follows Financial Accounting Standard Board’s (FASB)
Codification Topic 350-10 (“ASC 350-10”), “Intangibles –
Goodwill and Other.” According to this statement, goodwill and
intangible assets with indefinite lives are no longer subject to
amortization, but rather an annual assessment of impairment by
applying a fair-value based test. Fair value for goodwill is based
on discounted cash flows, market multiples and/or appraised values
as appropriate. Under ASC 350-10, the carrying value of assets are
calculated at the lowest level for which there are identifiable
cash flows.
Long-Lived Assets
In accordance with the Financial Accounting Standards Board
(“FASB”) Accounts Standard Codification (ASC) ASC 360-10,
“Property, Plant and Equipment,” the carrying value of intangible
assets and other long-lived assets is reviewed on a regular basis
for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the
expected undiscounted future cash flows is less than the carrying
amount of the asset. Impairment losses, if any, are measured as the
excess of the carrying amount of the asset over its estimated fair
value. During the three months ending July 31, 2021 and 2020 the
Company recorded an impairment expense of $0 and $0,
respectively.
Income Taxes
The Company accounts for its income taxes in accordance with FASB
Codification Topic ASC 740-10, “Income Taxes”, which
requires recognition of deferred tax assets and liabilities for
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and tax credit
carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Stock-Based Compensation
The Company follows the guidelines in FASB Codification Topic ASC
718-10 “Compensation-Stock Compensation”, which requires
the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors
including employee stock options and employee stock purchases
related to an Employee Stock Purchase Plan based on the estimated
fair values.
Earnings (Loss) Per Share
The Company computes net income (loss) per share in accordance with
ASC 260, Earnings per Share. ASC 260 requires
presentation of both basic and diluted earnings per share (“EPS”)
on the face of the income statement. Basic EPS is computed by
dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock
using the if-converted method. In computing diluted EPS, the
average stock price for the period is used in determining the
number of shares assumed to be purchased from the exercise of stock
options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti dilutive. There were no potential
equivalent shares as of July 31, 2021 and 2020.
Advertising Costs
The Company’s policy regarding advertising is to expense
advertising when incurred. The Company incurred advertising
expenses of $29,912 and $54,678 during the years ended July 31,
2021 and 2020, respectively.
4. PHYSICAL SILVER ASSETS
During the year ending July 31, 2021, the Company purchased silver
bars and coins for $152,785. We determine the fair value of our
silver on a nonrecurring basis in accordance with ASC
820, Fair Value Measurement, based on quoted prices
on the active exchange(s) that we have determined is its principal
market for silver (Level 1 inputs). We perform an analysis each
quarter to identify whether events or changes in circumstances,
principally decreases in the quoted prices on active exchanges,
indicate that it is more likely than not that our silver assets are
impaired. In determining if an impairment has occurred, we consider
the lowest market price of silver quoted on the active exchange
since acquiring the silver. If the then current carrying value of a
silver exceeds the fair value so determined, an impairment loss has
occurred with respect to those silver assets in the amount equal to
the difference between their carrying values and the price
determined.
5. FIXED ASSETS
Fixed assets consist of the following:
|
|
|
July 31,
2021
|
|
|
July 31,
2020
|
|
|
dHydronator prototype
|
|
$ |
27,100 |
|
|
$ |
27,100 |
|
|
Float Spa and associated equipment
|
|
|
60,000 |
|
|
|
60,000 |
|
|
Office furniture and equipment
|
|
|
532 |
|
|
|
532 |
|
|
Less: accumulated depreciation
|
|
|
(78,152 |
) |
|
|
(66,186 |
) |
|
Fixed assets, net
|
|
$ |
9,480 |
|
|
$ |
21,446 |
|
Depreciation expense for the years ended July 31, 2021 and 2020,
was $11,966 and $15,697, respectively.
6. INTANGIBLE ASSETS
Intangible assets consist of the following:
|
|
|
July 31,
2021
|
|
|
July 31,
2020
|
|
|
Patents and patents pending
|
|
$ |
19,699 |
|
|
$ |
19,699 |
|
|
Trademarks
|
|
|
1,275 |
|
|
|
1,275 |
|
|
Website and domain names
|
|
|
15,098 |
|
|
|
15,098 |
|
|
Less: accumulated depreciation
|
|
|
(19,815 |
) |
|
|
(15,411 |
) |
|
Intangible assets, net
|
|
$ |
16,257 |
|
|
$ |
20,661 |
|
Amortization expense for the years ended July 31, 2021 and 2020,
was $4,404 and $4,417, respectively.
7. RELATED PARTY TRANSACTIONS
ADVANCES FROM RELATED PARTIES
Our Chief Executive Officer and Harvey Romanek, father of our Chief
Executive Officer, previously agreed to advance funds to the
Company from time to time to support the ongoing operations of the
Company. Advances are due within ten days of demand and bear
interest at 5% annually.
Advances from related parties consist of the following as of July
31, 2021 :
|
|
|
Principal as
of
|
|
|
Year
ending
July 31,
2021
|
|
|
Principal as
of
|
|
|
Accrued
interest
balance
As
of
|
|
|
|
|
July
31,
2020
|
|
|
Funds
advanced
|
|
|
Funds
repaid
|
|
|
July
31,
2021
|
|
|
July
31,
2021
|
|
|
B. Romanek, President and CEO
|
|
$ |
13,267 |
|
|
$ |
91,081 |
|
|
$ |
(78,428 |
) |
|
$ |
25,920 |
|
|
$ |
7,909 |
|
|
Shareholder Relative of our President and
CEO
|
|
|
70,393 |
|
|
|
- |
|
|
|
- |
|
|
|
70,393 |
|
|
|
11,942 |
|
|
TOTAL
|
|
$ |
83,660 |
|
|
$ |
91,081 |
|
|
$ |
(78,428 |
) |
|
$ |
96,313 |
|
|
$ |
19,851 |
|
CONVERTIBLE NOTES PAYABLE RELATED PARTY
On May 1, 2019, we entered into a convertible promissory note
pursuant to which we borrowed $200,000 from Harvey Romanek, the
father of the Company’s Chief Executive Officer, Brandon Romanek.
Interest under the convertible promissory note is 10% per annum,
and the principal and all accrued but unpaid interest is due on May
1, 2021. The note is convertible six months after the issuance date
at the noteholder’s option into shares of our common stock at a
Variable Conversion Price of 65% multiplied by the lowest Trading
Price for the Common Stock during the ten (10) Trading Day period
ending on the last complete Trading Day prior to the Conversion
Date.
The Company recorded a debt discount in the amount of $200,000 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of $75,069
during the year ending July 31, 2021.
Further, the Company recognized a derivative liability of $387,232
and an initial loss of $187,232 based on the Black-Scholes pricing
model.
As of July 31, 2021, convertible notes due to related parties net
of unamortized debt discounts of $0, was $200,000.
8. CONVERTIBLE NOTES PAYABLE
Convertible Notes Payable at consists of the following:
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
On April 4, 2019, we entered into a master convertible promissory
note pursuant to which we may borrow up to $250,000 in $50,000
tranches.
On April 19, 2019, we borrowed the first tranche of $50,000, net of
debt issuance costs and investor legal fees of $7,000, resulting in
the Company receiving $43,000.
On June 19, 2019, we borrowed the second tranche of $50,000, net of
debt issuance costs and investor legal fees of $7,000, resulting in
the Company receiving $43,000.
On January 27, 2020, we borrowed the third tranche of $35,000, net
of debt issuance costs and investor legal fees of $7,000, resulting
in the Company receiving $30,500.
On January 31, 2019, the lender converted $9,532 of principle and
$500 of fees into 16,500 shares of common stock.
On December 12, 2020, the lender converted $9,700 of principle and
$500 of fees into 34,000 shares of common stock.
On February 10, 2020, the lender converted $10,156 of principle and
$500 of fees into 120,000 shares of common stock.
On March 24, 2020, the lender converted $7,628 of principle and
$500 of fees into 160,000 shares of common stock.
On April 13, 2020, the lender converted $7,900 of principle and
$500 of fees into 300,000 shares of common stock.
On April 28, 2020, the lender converted $5,084 of principle, $500
of fees, and $5,000 of interest into 588,000 shares of common
stock.
On May 26, 2020, the lender converted $13,000 of principle, and
$500 of fees into 750,000 shares of common stock.
Interest under the convertible promissory note is 10% per annum,
and the principal and all accrued but unpaid interest is due on
April 4, 2020. The note is convertible at any date after the
issuance date at the noteholder’s option into shares of our common
stock at a variable conversion price equal to the lesser of (i) the
lowest Trading Price during the previous twenty-five (25) Trading
Day period ending on the latest complete Trading Day prior to the
date of this Note or (ii) Variable Conversion Price of 60%
multiplied by the lowest Trading Price for the Common Stock during
the twenty-five (25) Trading Day period ending on the last complete
Trading Day prior to the Conversion Date.
The Company recorded debt discounts in the amount of $135,000 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of each tranche of the Note to be
amortized utilizing the effective interest method of accretion over
the term of each tranche of the Note. The aggregate debt discount
has been accreted and charged to interest expenses as a financing
expense in the amount of $17,270 during year ended July 31,
2021.
Further, the Company recognized a derivative
liability of $465,748 and an initial loss of $330,748 based on the
Black-Scholes pricing model. During the year ended July 31, 2021,
the Company recorded a gain on derivative liability of $44,479.
|
|
|
72,000
|
|
|
|
72,000
|
|
|
Unamortized debt discount
|
|
|
-
|
|
|
|
(17,260)
|
|
|
Total, net of unamortized discount
|
|
|
72,000
|
|
|
|
54,740
|
|
|
|
|
|
|
|
|
|
|
|
On June 20, 2019, we entered into a convertible promissory note
pursuant to which we borrowed $291,108, net of an Original Issue
Discount (“OID”) of $36,108 and investor legal expenses of $5,000
resulting in the Company receiving $250,000.
On January 31, 2019, the lender converted $30,000 of principle into
170,940 shares of common stock.
On March 27, 2020, the lender converted $30,000 of principle into
267,016 shares of common stock.
On April 23, 2020, the lender converted $21,000 of principle into
210,108 shares of common stock.
On April 23, 2020, the lender converted $30,000 of principle into
1,129,816 shares of common stock
On May 28, 2020, the lender converted $35,000 of principle into
1,318,118 shares of common stock
Interest under the convertible promissory note is 8% per annum, and
the principal and all accrued but unpaid interest is due on June
20, 2020. The note is convertible at any date after the issuance
date at the noteholder’s option into shares of our common stock at
a conversion price equal to $8.80 (the “Lender Conversion Price”).
Additionally, after 6 months from the date the Company receives
note funding, the noteholder has the right to demand whole or
partial redemption of amounts owed to the noteholder under the
note. Payments of redemption amounts by the Company to the
noteholder can be made in cash or by converting the redemption
amount into shares common stock of the Company, with such
conversions occurring at the lower of (i) the Lender Conversion
Price, or (ii) a price equal to the 65% of the two lowest Closing
Trade Prices during the ten (10) Trading Day period immediately
preceding the measurement date.
The Company recorded a debt discount in the amount of $182,499 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of $0 during
the year ended July 31, 2021.
Further, the Company recognized a derivative liability of $141,391
and an initial loss of $0 based on the Black-Scholes pricing model.
During the year ended July 31, 2021, the Company recorded a gain on
derivative liability of $20,620.
|
|
|
145,108
|
|
|
|
145,108
|
|
|
Unamortized debt discount
|
|
|
-
|
|
|
|
-
|
|
|
Total, net of unamortized discount
|
|
|
145,108
|
|
|
|
145,108
|
|
|
On February 20, 2020, we entered into a convertible promissory note
pursuant to which we borrowed $135,680, net of an Original Issue
Discount (“OID”) of $7,680 and investor legal expenses of $2,500
resulting in the Company receiving $125,500.
On September 2, 2020, the lender converted $10,000 of principle
into 242,718 shares of common stock
On September 30, 2020, the lender converted $12,000 of principle
into 476,190 shares of common stock
On November 14, 2020, the lender converted $20,000 of principle
into 938,967 shares of common stock.
On December 1, 2020, the lender converted $20,000 of principle into
1,058,201 shares of common stock.
On December 16, 2020 the lender served a notice of default due to
failure of the Company to honor a conversion notice served earlier
in December. Due to the default the note incurred an additional
$113,180 due in principal and $7,008 in interest.
On December 1, 2020, the lender converted $19,500 of principle into
1,203,704 shares of common stock.
On July 7, 2021, the lender converted $20,000 of principle into
372,439 shares of common stock.
On July 9, 2021 the Company entered into an agreement to assign the
loan to a new investor.
The fair value of the derivative liability associated with the
conversions for year ended July 31, 2021 on the date of settlement
of $128,001 was recorded to additional paid in capital.
Interest under the convertible promissory note is 10% per annum,
and the principal and all accrued but unpaid interest is due on
August 15, 2021. The note is convertible at any date after the
issuance date at the noteholder’s option into shares of our common
stock at a conversion price equal to 71% of the average of the 2
lowest trading prices of the common stock during the 10 completed
trading days prior to conversion date.
The Company recorded a debt discount in the amount of $135,680 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of
$90,371during the year ended July 31, 2021.
Further, the Company recognized a derivative liability of $192,236
and an initial loss of $64,236 based on the Black-Scholes pricing
model.
|
|
|
147,360
|
|
|
|
135,680
|
|
|
Unamortized debt discount
|
|
|
(3,714)
|
|
|
|
(94,085)
|
|
|
Total, net of unamortized discount
|
|
|
143,646
|
|
|
|
41,595
|
|
|
On March 26, 2020, we entered into a convertible promissory note
pursuant to which we borrowed $3,000, net of legal expenses of
$3,000 resulting in the Company receiving $0.
Interest under the convertible promissory note is 0% per annum, and
the principal and all accrued but unpaid interest is due on March
26, 2021. The note is convertible at any date after the issuance
date at the noteholder’s option into shares of our common stock at
a conversion price equal to the average of the closing trading
prices of the common stock during the 3 completed trading days
prior to conversion date.
The Company recorded a debt discount in the amount of $3,000 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of $1,956.16
during the year ended July 31, 2021.
Further, the Company recognized a derivative liability of $1,500
and an initial loss of $1,500 based on the Black-Scholes pricing
model.
|
|
|
3,000
|
|
|
|
3,000
|
|
|
Unamortized debt discount
|
|
|
(-)
|
|
|
|
(1,956)
|
|
|
Total, net of unamortized discount
|
|
|
3,000
|
|
|
|
1,044
|
|
|
On May 1, 2020, we entered into a convertible promissory note
pursuant to which we borrowed $100,000, net of consulting expenses
of $100,000 resulting in the Company receiving $0. During the year
ended July 31, 2021, the Company made cash payments of $25,000.
Interest under the convertible promissory note is 10% per annum,
and the principal and all accrued but unpaid interest is due on May
1, 2021. The note is convertible at any date after the effective
date at the noteholder’s option into shares of our common stock at
a conversion price equal to 65% of the average of the three lowest
closing prices in the 10 trading days prior to the conversion.
The Company recorded a debt discount in the amount of $64,888 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of $48,710
during the year ended July 31, 2021.
Further, the Company recognized a derivative liability of $64,888
based on the Black-Scholes pricing model.
|
|
|
75,000
|
|
|
|
100,000
|
|
|
Unamortized debt discount
|
|
|
(-)
|
|
|
|
(48,710)
|
|
|
Total, net of unamortized discount
|
|
|
75,000
|
|
|
|
51,290
|
|
|
On May 7, 2020, we entered into a convertible promissory note
pursuant to which we borrowed $66,780, net of an Original Issue
Discount (“OID”) of $3,780 and investor legal expenses of $3,000
resulting in the Company receiving $60,000.
Interest under the convertible promissory note is 10% per annum,
and the principal and all accrued but unpaid interest is due on
October 29, 2021. The note is convertible at any date after the
issuance date at the noteholder’s option into shares of our common
stock at a conversion price equal to 71% of the average of the 2
lowest trading prices of the common stock during the 10 completed
trading days prior to conversion date.
The Company recorded a debt discount in the amount of $66,780 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of $44,479
during the year ended July 31, 2021.
Further, the Company recognized a derivative liability of $138,172
and an initial loss of $75,172 based on the Black-Scholes pricing
model.
On December 16, 2020 the lender served a notice of default due to
failure of the Company to honor a conversion notice served earlier
in December. Due to the default the note incurred an additional
$66,780 due in principal and $279 in interest.
On July 9, 2021 the Company entered into an agreement to assign the
loan to a new investor.
|
|
|
133,560
|
|
|
|
66,780
|
|
|
Unamortized debt discount
|
|
|
(10,968)
|
|
|
|
(55,447)
|
|
|
Total, net of unamortized discount
|
|
|
122,592
|
|
|
|
11,333
|
|
|
Total convertible notes payable, net of unamortized discount
|
|
$
|
561,346
|
|
|
$
|
305,110
|
|
9. COMMITMENTS AND CONTINGENCIES
From time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business. We are not presently a party to
any material litigation, nor to the knowledge of management is any
litigation threatened against us, which may materially affect us,
other than as set forth herein.
On
or about December 18, 2020, Power Up Lending Group, Ltd. (“Power
Up”) filed suit against the Company, the Company’s executive
officers, and the Company’s transfer agent (Case Index No.
614700/2020, Supreme Court of the State of New York for Nassau
County, Power Up Lending Group, Ltd. v. THC Therapeutics, Inc.,
Parker Mitchell, Transhare Corporation, and Brandon Romanek),
alleging that the Company’s convertible promissory notes issued to
Power Up are in default as a result of the Company’s alleged
failure to honor the conversion terms of the notes along with
related claims, and seeking monetary damages in excess of $280,920
(representing 200% of the outstanding note balances) and equitable
relief to force the Company to honor Power Up’s conversion of note
amounts into Company common stock. The Company and its officers
answered the complaint and filed counterclaims against Power Up.
The parties settled in July of 2021, and the case was dismissed by
Power Up.
On
or about January 5, 2021, another Company lender, Iliad Research
and Trading, L.P. (“Iliad”), sent a demand letter to the Company
regarding the Company’s alleged default under its promissory note
issued to Iliad. The Company retained litigation counsel in Nevada
and responded, and Iliad took no further action until it sued the
Company in the fall of 2021 in Utah, where Iliad is domiciled (case
no. 210900342 filed in the 3rd Judicial Court of Salt Lake
City,Utah). In December of 2021, the Company was improperly served,
and Iliad received a default judgment, and the Company is currently
disputing the default judgment.
In the spring of 2021, the Company’s former CEO, Parker Mitchell,
filed suit against the Company for wrongful termination (case no
A-21-833007-C filed in the Districk Court Clark City,Nevada). The
matter was subsequently settled on or about Decemner 12. 2021 , and
the case was dismissed on or about December 12,2021 . On December
12, 2021, the suit was settled for $100,000 which was recorded as a
contingent liability as of July 31, 2021.
In
the fall of 2021, the Company’s former CFO, an individual
representing himself as Jonathan Cross, but who, upon information
and belief was the convicted felon, John Dankovich, made numerous
demands of the Company in connection with his termination by the
Company. The Company responded to Mr. Dankovich on or about
November 11, 2021, and Mr. Dankovich subsequently took no further
action.
In the fall of 2021, one of the Company’s former directors and
current Company business consultant, Joshua Halford, made a demand
for payment of funds due to Mr. Halford under a consulting
agreement, Mr. Halford and the Company have since resolved the
matter, and Mr. Halford is still providing consulting and technical
design services to the Company in connection with the Company’s
dHyrdonator herb dryer product redesign.
NOTE 10 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. The Company recorded the valuation allowance due to
the uncertainty of future realization of federal and state net
operating loss carryforwards. The deferred income tax assets are
comprised of the following at July 31, 2021 and 2020 :
|
|
|
2021
|
|
|
2020
|
|
|
Deferred income tax assets:
|
|
$ |
7,668,776 |
|
|
$ |
7,272,832 |
|
|
Valuation allowance
|
|
|
(7,668,776 |
) |
|
|
(7,272,832 |
) |
|
Net deferred tax asset
|
|
$ |
- |
|
|
$ |
- |
|
Reconciliation between the statutory rate and the effective tax
rate is as follows at December 31, 2021 and 2020:
|
|
|
2020
|
|
|
2019
|
|
|
Effective Tax Rate Reconciliation:
|
|
|
|
|
|
|
|
Federal statutory tax rate
|
|
|
21.0 |
% |
|
|
21.0 |
% |
|
State taxes, net of federal benefit
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
Change in valuation allowance
|
|
|
(21.0 |
)% |
|
|
(21.0 |
)% |
|
Effective tax rate
|
|
|
0.0 |
% |
|
|
0.0 |
% |
As of July 31, 2021, the Company had net operating loss
carryforwards of approximately $36,517,980 and net operating loss
carryforwards expire in 2021 through 2030. The current year’s net
operating loss will carryforward indefinitely, limited to 80% of
the current year taxable income.
The current income tax benefit of $7,668,776 generated for the year
ended July 31, 2021 was offset by an equal increase in the
valuation allowance. The valuation allowance was increased due to
uncertainties as to the Company’s ability to generate sufficient
taxable income to utilize the net operating loss carryforwards
which is the only significant component of deferred taxes.
The Company recognizes interest and penalties related to uncertain
tax positions in general and administrative expense. As of December
31, 2021 and 2020 the Company has no unrecognized uncertain tax
positions, including interest and penalties.
11. STOCK WARRANTS
The following is a summary of warrant activity during the nine
months ended July 31, 2021.
|
|
|
Number of
Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Balance, July 31, 2020
|
|
|
922,129 |
|
|
$ |
16.73 |
|
|
Warrants granted and assumed
|
|
|
- |
|
|
|
- |
|
|
Warrants expired
|
|
|
(106,750 |
) |
|
|
(.02 |
) |
|
Warrants canceled
|
|
|
- |
|
|
|
- |
|
|
Warrants exercised
|
|
|
- |
|
|
|
- |
|
|
Balance outstanding and exercisable, July 31, 2021
|
|
|
815,379 |
|
|
$ |
16.21 |
|
The following is a summary of warrant activity during the year
ended July 31, 2020:
|
|
|
Number
of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Balance, July 31, 2019
|
|
|
1,506,250 |
|
|
$ |
10.34 |
|
|
Warrants granted and assumed
|
|
|
1,247,190 |
|
|
|
0.088 |
|
|
Warrants expired
|
|
|
- |
|
|
|
- |
|
|
Warrants canceled
|
|
|
- |
|
|
|
- |
|
|
Warrants exercised
|
|
|
(1,831,311 |
) |
|
|
0.27 |
|
|
Balance outstanding and exercisable, July 31,
2020
|
|
|
922,119 |
|
|
$ |
16.73 |
|
12. SHAREHOLDERS’ DEFICIT
Overview
The Company’s authorized capital stock consists of 500,000,000
shares of $0.001 par value common stock and 10,000,000 shares of
$0.001 par value preferred stock.
As of July 31, 2021 and July 31, 2020, the Company had 29,287,337
and 21,461,784 shares of common stock issued and outstanding,
respectively.
As of July 31, 2021 and July 31, 2020, the Company had 218,000 and
218,000 shares of Series A Preferred Stock issued and outstanding,
respectively.
As of July 31, 2021 and July 31, 2020, the Company had 0 and 0
shares of Series B Preferred Stock issued and outstanding,
respectively.
As of July 31, 2021 and July 31, 2020, the Company had 300 and 0
shares of Series C Preferred Stock issued and outstanding,
respectively.
Series A Preferred Stock
On January 24, 2017, pursuant to Article III of our Articles of
Incorporation, the Company designated a class of preferred stock,
the “Series A Preferred Stock,” consisting of three million
(3,000,000) shares, par value $0.001.
Under the Certificate of Designation, holders of the Series A
Preferred Stock are entitled at their option to convert their
preferred shares into common stock at a conversion rate of one
hundred (100) shares of common stock for every one (1) share of
Series A Preferred Stock. The holders are further entitled to vote
together with the holders of the Company’s common stock on all
matters submitted to shareholders at a rate of one hundred (100)
votes for each share held. The holders are entitled to equal rights
with our common stockholders as it relates to liquidation
preference.
Series B Preferred Stock
On May 12, 2017, pursuant to Article III of our Articles of
Incorporation, the Company designated a class of preferred stock,
the “Series B Preferred Stock,” consisting of up to one hundred
twenty thousand (120,000) shares, par value $0.001. On June 5,
2017, the Company amended the designation to increase the number of
shares of Series B Preferred Stock to one hundred sixty-five
thousand (165,000) shares, par value $0.001.
Under the Certificate of Designation, as amended, holders of Series
B Preferred Stock are entitled to a liquidation preference on the
stated value of $10.00 per share. The shares carry a mandatory
conversion provision, and all shares of Series B Preferred Stock
will be redeemed by the Company one year from issuance, at a
variable conversion rate equal to the stated price of $10.00
divided by the prior day’s closing price as quoted on OTC Markets.
Holders of Series B Preferred Stock are not entitled to any voting
or dividend rights.
As of April 30, 2021, all shares of Series B Preferred Stock
eligible for mandatory conversion have been converted into common
stock.
Series C Preferred Stock
On July 29, 2021, pursuant to Article III of our Articles of
Incorporation, the Company designated a class of preferred stock,
the “Series C Preferred Stock,” consisting of up to three hundred
(300) shares, par value $0.001.
Under the Certificate of Designation, as amended, holders of Series
C Preferred Stock are entitled to a liquidation preference on the
stated value of $1,200 per share. Holders of Series C Preferred
Stock are entitled to a cumulative dividend of 10% per annum.
Series C Preferred Stock is convertible at the option of the Holder
at a price equal to 80% of the lowest VWAP of the Common Stock
during the twenty (20) Trading Days immediately preceding, but not
including, the Conversion Date. Series C Preferred Stock Holders
will vote together with the common stock on an as-converted basis
subject to the Beneficial Ownership Limitations.
On July 28, 2021 the Company sold 300 shares of Series C Preferred
Stock for $300,000 cash.
Issuances of Common and Preferred Stock for the year ended July
31, 2021
On September 2, 2020, a convertible note holder converted $10,000
in principal and fees into 242,718 shares of common stock at a
conversion price of $0.0412 per share.
On September 30, 2020, a convertible note holder converted $12,000
in principal and fees into 476,190 shares of common stock at a
conversion price of $0.0252 per share.
On November 14, 2020, a convertible note holder converted $20,000
in principal and fees into 938,967 shares of common stock at a
conversion price of $0.0213 per share.
On December 01, 2020, a convertible note holder converted $20,000
in principal and fees into 1,058,201 shares of common stock at a
conversion price of $0.0189 per share.
On December 15, 2020 the Company entered into an agreement to issue
240,000 shares of common stock valued at $14,520 for services
provided during the year. As of July 31, 2021 the shares had not
been issued and were recorded as stock payable.
On December 16, 2020 the Company issued 1,200,000 shares of common
stock for $60,000 cash,
On December 22, 2020 the Company issued 500,000 shares of common
stock for $25,000 cash,
On December 23, 2020 the Company issued 700,000 shares of common
stock for $35,000 cash,
On December 28, 2020 the Company agreed to issue 500,000 shares of
common stock for $25,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable.
On December 28, 2020 the Company agreed to issue 500,000 shares of
common stock for $25,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable.
On December 29, 2020 the Company issued 800,000 shares of common
stock for $40,000 cash,
On December 31, 2020 the Company agreed to issue 800,000 shares of
common stock for $40,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable.
On January 1, 2021 the Company agreed to issue 500,000 shares of
common stock for $25,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable.
On January 15, 2021 the Company entered into an agreement to issue
240,000 shares of common stock valued at $47,016 for services
provided during the year. As of July 31, 2021 the shares had not
been issued and were recorded as stock payable.
On January 15, 2021 the Company entered into an agreement to issue
240,000 shares of common stock valued at $47,016 for services
provided during the year. As of July 31, 2021 the shares had not
been issued and were recorded as stock payable.
On January 25, 2021 the Company agreed to issue 300,000 shares of
common stock for $22,500 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 2, 2021 the Company agreed to issue 293,334 shares of
common stock for $22,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 2, 2021 the Company agreed to issue 466,667 shares of
common stock for $35,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 8, 2021 the Company agreed to issue 533,333 shares of
common stock for $40,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 10, 2021 the Company agreed to issue 170,000 shares of
common stock for $17,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 10, 2021 the Company agreed to issue 333,334 shares of
common stock for $25,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 11, 2021 the Company agreed to issue 50,000 shares of
common stock for $5,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 11, 2021 the Company agreed to issue 200,000 shares of
common stock for $20,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 16, 2021 the Company agreed to issue 200,000 shares of
common stock for $20,000 cash, As of July 31, 2021 the shares had
not been issued and were recorded as stock payable
On February 17, 2021 the Company issued 333,334 shares of common
stock for $25,000 cash,
On June 4, 2021, a convertible note holder converted $19,500 in
principal and fees into 1,203,704 shares of common stock at a
conversion price of $0.0162 per share.
On July 7, 2021, a convertible note holder converted $20,000 in
principal and fees into 372,439 shares of common stock at a
conversion price of $0.0537 per share.
13. SUBSEQUENT EVENTS
On
August 24, 2021, the Company entered into an Engagement Agreement
with Shefford Capital Management LLC (Shefford), pursuant to which
Shefford will act as the Company’s exclusive accounting and
financial advisor, Shefford’s managing director, Jonathan Cross,
will act as the Company’s Chief Financial Officer, and Shefford
shall develop and execute accounting and financial strategy for the
Company.
In
consideration of Shefford’s services to be provided to the Company
under the Engagement Agreement, the Company will (i) compensate
Shefford $2,000 per month, plus an additional $2,000 in each month
that a Quarterly Report on Form 10-Q or Annual Report on Form 10-K
is due to be filed by the Company; (ii) issue Shefford options to
purchase 1,000,000 shares of Company common stock at an exercise
price of $0.1539 per share, which options shall vest in full 90
days after grant; (iii) issue Shefford monthly options to purchase
200,000 shares of Company common stock at the end of each month,
commencing September 2021 and ending August 2022, provided the
Engagement Agreement has not been terminated prior to each monthly
grant date, and with the exercise price of the monthly options
equal to the closing price of Company common stock on each grant
date. The initial term of the Engagement Agreement is one year, and
each party has the right to terminate the Engagement Agreement upon
the provision of 30 days’ written notice to the other party.
On September 3, 2021, the Company and Shefford Capital Partners,
LLC, a Delaware limited liability company, entered into
a Securities Purchase Agreement pursuant to
which (i) the Shefford agreed to purchase from the Company
$25,000,000 of the Company’s restricted common stock at future
closings during a three-year term, and (ii) the Investor agreed to
arrange a $25,000,000 traditional debt facility for the Company to
position the Company with a 1:1 debt-to-equity ratio.
The proceeds of each closing can only be used to acquire businesses
in or related to the marijuana and psychedelic industries, or other
modern healthcare-related industries, and the Investor is required
to approve each. The purchase price for the common stock at each
closing will be closing price of the Company’s common stock on the
date immediately preceding the earlier of the closing of each
Acquisition, or the announcement of that Acquisition.
On November 2, 2021, Jonathan Cross was terminated as the Company’s
Chief Financial Officer. Mr. Cross was appointed Chief Financial
Officer on August 24, 2021.
On November 2, 2021, Joshua Halford resigned as a director of the
Company. Mr. Halford was appointed a director on February 17,
2021.
On November 8, 2021 Mr. Halford resigned as the Company’s Chief
Operating Officer. Mr. Halford was appointed Chief Operating
Officer on March 8, 2021.
In the spring of 2021, the Company’s former CEO, Parker Mitchell,
filed suit against the Company for wrongful termination. On
December 12, 2021, the suit was settled for $100,000.
Item 9.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no reportable events under this item for the fiscal year
ended July 31, 2021.
Item 9A.
Controls and Procedures.
Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure
controls and procedures” to mean the company’s controls and other
procedures of an issuer that are designed to ensure that
information required to be disclosed in the reports that it files
or submits under the Securities Exchange Act of 1934 (the “Exchange
Act”) is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission’s
rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934
is accumulated and communicated to the issuer’s management,
including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The Company
maintains such a simple system of controls and procedures in an
effort to ensure that all information which it is required to
disclose in the reports it files under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the
time periods specified under the SEC’s rules and forms and that
information required to be disclosed is accumulated and
communicated to principal executive and principal financial
officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out
an evaluation, under the supervision and with the participation of
our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our chief
executive officer and chief financial officer concluded that our
disclosure controls and procedures were not effective to provide
reasonable assurance of achieving the objectives of timely alerting
them to material information required to be included in our
periodic SEC reports and of ensuring that such information is
recorded, processed, summarized and reported with the time periods
specified. Our chief executive officer and chief financial officer
also concluded that our disclosure controls and procedures were not
effective as of the end of the period covered by this report to
provide reasonable assurance of the achievement of these
objectives.
Management’s Annual Report on Internal Control Over Financial
Reporting
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting as
defined in rule 13a-15(f) and 15d-15(f) under the Exchange Act.
Internal control over financial reporting is a process designed by,
or under the supervision of the CEO to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external
purposes in accordance with generally accepted accounting
principles. Internal controls over financial reporting includes
those policies and procedures that (i) pertain to the maintenance
of records which in reasonable detail accurately and fairly reflect
the transactions and disposition of the Company’s assets; (ii)
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of consolidated financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are
being made in accordance with authorizations of management and
Directors of the issuer; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could
have a material effect on the Company’s consolidated financial
statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
A material weakness is a deficiency or a combination of
deficiencies in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim consolidated financial
statements will not be prevented or detected on a timely basis.
Management assessed the effectiveness of the Company’s internal
control over financial reporting as of July 31, 2021. Based on this
assessment, management concluded that, as of July 31, 2021, the
Company’s internal control over financial reporting was not
effective based on those criteria.
To remediate our internal control weaknesses, management intends to
implement the following measures:
|
|
·
|
The Company plans to add independent directors to its Board and
create an audit committee with at least three directors that
qualify as “independent” directors pursuant to relevant NASDAQ or
similar exchange rules.
|
|
|
·
|
The Company will add sufficient knowledgeable accounting personnel
to properly segregate duties and to effect a timely, accurate
preparation of the financial statements.
|
|
|
·
|
Upon the hiring of additional accounting personnel, the Company
will develop and maintain adequate written accounting policies and
procedures.
|
The additional hiring of accounting personnel and appointment of
independent members of the Board is contingent upon the Company’s
operational efforts. Management expects to hire additional
personnel and staff its audit committee with at additional
independent directors in the coming fiscal year but provides no
assurances that it will be able to do so.
We understand that remediation of material weaknesses and
deficiencies in internal controls are a continuing work in progress
due to the issuance of new standards and promulgations. However,
remediation of any known deficiency is among our highest
priorities. Our management will periodically assess the progress
and sufficiency of our ongoing initiatives and make adjustments as
and when necessary.
This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant rules
of the SEC that permit us to provide only management’s report in
this annual report. On July 21, 2010, President Obama signed the
Dodd-Frank Wall Street Reform and Consumer Protection Act. Included
in the Act is a provision that permanently exempts smaller public
companies that qualify as either a “Non-Accelerated Filer” or
“Smaller Reporting Company” from the auditor attestation
requirement of Section 404(b) of the Sarbanes-Oxley Act of
2002.
There was no change in our internal control over financial
reporting during the fiscal quarter ended July 31, 2021, that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Except as set forth above, there were no changes in our internal
control over financial reporting that occurred during the period
covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
Limitations on the Effectiveness of Controls
The Company’s management, including the CEO and CFO, does not
expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all error
and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that
the control system’s objectives will be met. Further, the design of
the control system must reflect that there are resource constraints
and that the benefits must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the company
have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple error or mistake. Controls
can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of
controls. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Projections
of any evaluation of controls effectiveness to future periods are
subject to risks. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of
compliance with policies or procedures.
Item 9B.
Other Information.
None.
PART
III
Item 10.
Directors, Executive Officers and Corporate
Governance.
The names, ages, positions, periods served of the Company’s present
directors are set forth in the following table:
|
Name
|
|
Age
|
|
Positions
|
|
Period of Service Began
|
|
Brandon Romanek
|
|
46
|
|
CEO, CFO, President, Treasurer, Secretary, Director (1)
|
|
January 12, 2017 (1)
|
__________
|
(1)
|
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. Parker Mitchell served as our Chief Executive Officer
from December 11, 2020–April 2, 2021. An individual identifying
himself as Jonathan Cross was appointed as the Chief Financial
Officer of the Company on August 24, 2021, and he was terminated as
the Chief Financial Officer of the Company on November 2, 2021.
Joshua Halford served as a director of the Company from February
17, 2021–November 2, 2021, and as COO of the Company from March 8,
2021-November 8, 2021.
|
There are no agreements with respect to electing directors. The
Board of Directors appoints officers annually and each executive
officer serves at the discretion of the Board of Directors. The
Company does not have any standing committees at this time, and due
to its small size does not believe that committees are necessary at
this time. The Company’s Board fulfills the duties of an audit
committee. None of the directors held any directorships during the
past five years in any company with a class of securities
registered pursuant to Section 12 of the Exchange Act or subject to
the requirements of Section 15(d) of such act, or of any company
registered as an investment company under the Investment Company
Act of 1940.
Director and Officer Biographical Information
Brandon Romanek
Brandon Romanek’s background in brokerage firms, hedge funds,
institutions, money management, and trading prepared him for the
task of building THC Therapeutics. Beginning in 1999, Mr. Romanek
traded with Wedbush, Merrill Lynch other brokerage firms using
portfolio margin. Mr. Romanek has traded on many platforms
including Real Tick, Sterling, LightSpeed, and Firetip. From
2002-2006, Mr. Romanek traded CFD’s with the CMC Markets in
Toronto. From 2008, Mr. Romanek was a commodities trader in the
precious metals markets. He was a broker dealer in physical metals
from 2009-2011, mostly doing business with Amark, a publicly traded
metals dealer. Mr. Romanek is also founder and CEO of SBR Asset
Management. Mr. Romanek became the CEO, CFO, President, Treasurer,
Secretary, and a director of the Company in January of 2017, and he
has not been the director of any other public company during the
past five years. We believe that Mr. Romanek’s financial markets
background makes him a valuable member of our Board of
Directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, our sole officer and director, Mr.
Romanek, has not, during the past ten years:
|
|
(1)
|
had a petition under the Federal
bankruptcy laws or any state insolvency law filed by or against, or
a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such person, or any
partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or
business association of which he was an executive officer at or
within two years before the time of such filing; |
|
|
|
|
|
|
(2)
|
been convicted in a criminal
proceeding or is a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses); |
|
|
(3)
|
been the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
|
|
|
(i)
|
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;
|
|
|
|
|
|
|
(ii)
|
Engaging in any type of business practice; or
|
|
|
|
|
|
|
(iii)
|
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities laws;
|
|
|
(4)
|
been the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in (3)(i)
above, or to be associated with persons engaged in any such
activity;
|
|
|
|
|
|
|
(5)
|
been found by a court of competent jurisdiction in a civil action
or by the Commission to have violated any Federal or State
securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended, or
vacated;
|
|
|
|
|
|
|
(6)
|
been found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any
Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
|
|
|
|
|
|
|
(7)
|
been the subject of, or a party to, any Federal or State judicial
or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
|
|
|
(i)
|
Any Federal or State securities or commodities law or regulation;
or
|
|
|
|
|
|
|
(ii)
|
Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or
|
|
|
|
|
|
|
(iii)
|
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
|
|
(8)
|
been the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
|
Our Directors are elected at the annual meeting of the
stockholders, with vacancies filled by the Board of Directors, and
serve until their successors are elected and qualified, or their
earlier resignation or removal. Officers are appointed by the board
of Directors and serve at the discretion of the board of Directors
or until their earlier resignation or removal. Any action required
can be taken at any annual or special meeting of stockholders of
the corporation which may be taken without a meeting, without prior
notice and without a vote, if consent of consents in writing
setting forth the action so taken, shall be signed by the holders
of the outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the corporation by delivery to
its registered office, its principle place of business, or an
officer or agent of the corporation having custody of the book in
which the proceedings of meetings are recorded.
Indemnification of Directors and Officers
Nevada law allows for the indemnification of officers, directors,
and any corporate agents in terms sufficiently broad to indemnify
such persons under certain circumstances for liabilities, including
reimbursement for expenses, incurred arising as a result of their
service as officers, directors or agents of the Company. The Bylaws
of the Company provide that the Company will indemnify its
directors and officers to the fullest extent authorized or
permitted by law and such right to indemnification will continue as
to a person who has ceased to be a director or officer of the
Company and will inure to the benefit of his or her heirs,
executors and similar successors; provided, however, that, except
for proceedings to enforce rights to indemnification, the Company
will not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized by
the Board of Directors. The right to indemnification conferred will
include the right to be paid by the Company the expenses (including
attorney’s fees) incurred in defending any such proceeding in
advance of its final disposition.
The Company may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Company
similar to those conferred on directors and officers of the
Company. Furthermore, the Company may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the Company or another company against any expense,
liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss
under Nevada law.
Code of Ethics
We intend to adopt a code of ethics that applies to our officers,
directors and employees, including our principal executive officer
and principal accounting officer, but have not done so to date due
to our relatively small size. We intend to adopt a written code of
ethics in the near future.
Item 11.
Executive Compensation.
The table below summarizes all compensation awarded to, earned by,
or paid to our former or current executive officers for the fiscal
years ended July 31, 2021 and 2020.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($) (2)
|
|
|
($)
|
|
|
Brandon Romanek
|
|
2021
|
|
|
178,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
42,000 |
(2) |
|
|
220,000 |
|
|
CEO, CFO, President & Director (1)
|
|
2020
|
|
|
178,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
42,000 |
(2) |
|
|
220,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parker Mitchell (3)
|
|
2021
|
|
|
8,226
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
8,226
|
|
|
CEO
|
|
2020
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua Halford (4)
|
|
2021
|
|
|
72,000
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
72,000
|
|
|
COO
|
|
2020
|
|
|
72,000
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
72,000
|
|
___________
|
(1)
|
Mr. Romanek was appointed as CEO, CFO, President, Treasurer,
Secretary and a director of the Company on January 12, 2017.
|
|
(2)
|
The Company leases an office from Mr. Romanek for $3,500 per
month.
|
|
(3)
|
Mr. Mitchell served as CEO of the Company from December 11,
2020–April 2, 2021.
|
|
(4)
|
Mr. Halford served as the COO of the Company from March 8,
2021-November 8, 2021.
|
Director Compensation
No
directors of the Company receive compensation for serving as a
director of the Company (although Mr. Romanek and Mr. Halford, our
directors during the fiscal year ending July 31, 2021, received
compensation for their services as officers of the Company).
Employment Agreements
Except for the following agreements, the Company does not have any
written agreements with any of its current executive officers or
directors.
On
November 1, 2017, we entered into an employment agreement with
Brandon Romanek, our Chief Executive Officer. In accordance with
this agreement, Mr. Romanek provides services to the Company in
exchange for $78,000 per year plus vacation and bonuses as approved
annually by the board of directors, as well as reimbursement of
expenses incurred.
On
February 1, 2019, we amended the employment agreement with Brandon
Romanek, our Chief Executive Officer. In accordance with this
agreement, Mr. Romanek provides services to the Company in exchange
for $178,000 per year plus vacation and bonuses as approved
annually by the board of directors, as well as reimbursement of
expenses incurred. Pursuant to the original and amended employment
agreement, Mr. Romanek’s employment can be terminated by either the
Company or Mr. Romanek at any time, but if the Company terminates
Mr. Romanek for a reason other than total disability or “Cause” or
if Mr. Romanek terminates his employment for “Good Reason” in the
absence of Cause, then the Company is obligated to pay Mr. Romanek
(i) a severance payment equal to 18 months’ salary plus one years’
incentive compensation bonus, and (ii) a pro rata portion of the
bonus that Mr. Romanek would have received for the portion of the
year that Mr. Romanek was employed, and any unvested equity
compensation awards will immediately vest. “Cause” is generally
defined as (i) willful failure to perform material duties, (ii)
willful and gross misconduct, (iii) conviction or plea of no
contest to the commission of a felony or any misdemeanor that is a
crime of moral turpitude, (iv) breach of the non-competition,
non-solicitation or confidentiality covenants in the employment
agreement, or (v) any other willful act having the intended effect
of injuring the reputation, business or business relationships of
the Company or its affiliates. “Good Reason” is generally defined
as a (i) a material reduction in the employee’s base salary or a
material reduction in annual incentive compensation opportunity, in
each case other than any isolated or inadvertent failure by Company
that is not in bad faith and is cured within 30 business days after
the employee gives Company notice of such event, (ii) a material
diminution the employee’s title, duties and responsibilities, other
than any isolated or inadvertent failure by Company that is not in
bad faith and is cured within 30 business days after the employee
gives Company notice of such event, (iii) a transfer of the
employee’s primary workplace by more than 50 miles from his current
workplace, or (iv) the failure of a successor to the Company to
have assumed the employment agreement obligations in connection
with any sale of the business. Finally, if there is a change of
control of the Company (generally defined as the sale or other
disposition of substantially all of the Company’s property, assets
or business or a merger or similar transaction with another entity
in which more than 50% of the voting power of the Company is
disposed of), Mr. Romanek will have the option to terminate his
employment, and such termination will be considered a termination
by the Company for reasons other than Cause (meaning that Mr.
Romanek would be entitled to the severance and prorated bonus
described above, and any unvested equity compensation awards would
immediately vest).
During the year ending July 31, 2020, the Company accrued $187,750
due to Mr. Romanek related to this agreement, and during the year
ending July 31, 2021, the Company accrued $187,748 due to Mr.
Romanek related to this agreement. As of July 31, 2021, Mr. Romanek
has allowed the Company to defer a total of $485,434 in
compensation earned to date related to his employment agreements
with the Company.
Stock Option Plan and other Employee Benefits
Plans
The Company does not maintain a Stock Option Plan or other Employee
Benefit Plans.
Overview of Compensation Program
We
currently do not maintain a Compensation Committee of the Board of
Directors. Until a formal committee is established, our entire
Board of Directors has responsibility for establishing,
implementing and continually monitoring adherence with the
Company’s compensation philosophy. The Board of Directors ensures
that the total compensation paid to the executives is fair,
reasonable, and competitive.
Compensation Philosophy and Objectives
The Board of Directors believes that the most effective executive
compensation program is one that is designed to reward the
achievement of specific annual, long-term and strategic goals by
the Company and that aligns executives’ interests with those of the
stockholders by rewarding performance above established goals, with
the ultimate objective of improving stockholder value. As a result
of the size of the Company, the Board evaluates both performance
and compensation on an informal basis. Upon hiring additional
executives, the Board intends to establish a Compensation Committee
to evaluate both performance and compensation to ensure that the
Company maintains its ability to attract and retain superior
employees in key positions and that compensation provided to key
employees remains competitive relative.
Role of Executive Officers in Compensation
Decisions
The Board of Directors makes all compensation decisions for, and
approves recommendations regarding equity awards to, the executive
officers and directors of the Company.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following tables set forth, as of February 9, 2022, certain
information concerning the beneficial ownership of our voting
capital stock, including our common stock, and Series A Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock,
by:
|
|
·
|
each stockholder known by us to own beneficially 5% or more of any
class of our outstanding voting stock;
|
|
|
·
|
each director;
|
|
|
·
|
each named executive officer;
|
|
|
·
|
all of our executive officers and directors as a group; and
|
|
|
·
|
each person, or group of affiliated persons, who is known by us to
beneficially own more than 5% of any class of our outstanding
stock.
|
As of February 9, 2022, the Company had authorized 500,000,000
shares of common stock and 10,000,000 shares of preferred stock,
with 3,000,000 shares of preferred stock designated as Series A
Preferred Stock, 165,000 shares of preferred stock designated as
Series B Preferred Stock, and 300 shares of preferred stock
designated as Series C Preferred Stock. There were 34,117,671
shares of common stock, 226,000 shares of Series A Preferred Stock,
0 shares of Series B Preferred Stock, and 300 shares of Series C
Preferred Stock outstanding as of February 9, 2022. Each share of
Series A Preferred Stock is convertible into 100 shares of common
stock, and each share entitles the holder thereof to 100 votes per
share. Each share of Series B Preferred Stock is convertible one
year following issuance at a variable conversion rate equal to the
stated price of $1.00 divided by the prior day’s closing price of
the Company’s common stock as quoted on the OTC Link, LLC, operated
by OTC Markets Group, Inc. Each share of Series C Preferred Stock
is convertible into at a variable conversion rate equal to 80% of
the lowest volume-weighted average price of the Common Stock during
the twenty (20) trading days immediately preceding, but not
including, the date that a holder elects to convert the Series C
Preferred Stock into common stock, and entitles the holder thereof
to voting rights on an as-converted basis, subject to a 4.99%
beneficial ownership limitation.
Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with
respect to our common stock. Shares of our common stock subject to
options that are currently exercisable or exercisable within 60
days of February 9, 2022, are considered outstanding and
beneficially owned by the person holding the options for the
purpose of calculating the percentage ownership of that person but
not for the purpose of calculating the percentage ownership of any
other person. Except as otherwise noted, we believe the persons and
entities included in the below table have sole voting and investing
power with respect to all of the shares of our common stock
beneficially owned by them, subject to community property laws,
where applicable, and their address is c/o the Company at 11700 W
Charleston Blvd. #73, Las Vegas, Nevada, 89135.
Security Ownership of Certain Beneficial Owners &
Management
|
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Amount and nature of beneficial ownership
|
|
|
Percent of Class
|
|
|
Common Stock
|
|
Brandon Romanek
|
|
|
30,531,632 |
(1) |
|
|
56.7 |
% |
|
Common Stock
|
|
All Directors and Officers as a Group
|
|
|
30,531,632 |
(1) |
|
|
56.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred Stock
|
|
Brandon Romanek
|
|
|
200,000 |
|
|
|
88.5 |
% |
|
Series A Preferred Stock
|
|
Brunson Chandler
Jones
|
|
|
15,000 |
|
|
|
6.8 |
% |
|
%Series A Preferred Stock
|
|
All Directors and Officers as a Group
|
|
|
200,000 |
|
|
|
88.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred Stock
|
|
GHS Investments, LLC (2)
|
|
|
200,000 |
|
|
|
88.5 |
% |
|
Series C Preferred Stock
|
|
All Directors and Officers as a Group
|
|
|
- |
|
|
|
- |
|
|
(1)
|
Includes 10,531,632 shares of common stock issued to Mr. Romanek,
as well as 20,000,000 of common stock issuable to Mr. Romanek upon
conversion to common stock of his 200,000 shares of Series A
Preferred Stock.
|
|
(2)
|
The Company believes that Matt Schissler and Mark Grober share
voting and dispositive power over shares held in the name of GHS
Investments, LLC, and that they therefore are deemed to be the
beneficial owner of shares held in the name of GHS Investments,
LLC.
|
Item 13.
Certain Relationships and Related Transactions, and Director
Independence.
Transactions with Related Persons
ADVANCES FROM RELATED PARTIES
Our Chief Executive Officer and Harvey Romanek, father of our Chief
Executive Officer, previously agreed to advance funds to the
Company from time to time to support the ongoing operations of the
Company. Advances are due within ten days of demand and bear
interest at 5% annually.
Advances from related parties consist of the following as of July
31, 2021 :
|
|
|
Principal as of
|
|
|
Year ending
July 31, 2021
|
|
|
Principal as of
|
|
|
Accrued
interest balance
As of
|
|
|
|
|
July 31,
2020
|
|
|
Funds
advanced
|
|
|
Funds
repaid
|
|
|
July 31,
2021
|
|
|
July 31,
2021
|
|
|
B. Romanek, President and CEO
|
|
$ |
13,267 |
|
|
$ |
91,081 |
|
|
$ |
(78,428 |
) |
|
$ |
25,920 |
|
|
$ |
7,909 |
|
|
Shareholder Relative of our President and CEO
|
|
|
70,393 |
|
|
|
- |
|
|
|
- |
|
|
|
70,393 |
|
|
|
11,942 |
|
|
TOTAL
|
|
$ |
83,660 |
|
|
$ |
91,081 |
|
|
$ |
(78,428 |
) |
|
$ |
96,313 |
|
|
$ |
19,851 |
|
On November 1, 2017, we entered into an employment agreement with
Brandon Romanek, our Chief Executive Officer. In accordance with
this agreement, Mr. Romanek provides services to the Company in
exchange for $78,000 per year plus vacation and bonuses as approved
annually by the board of directors, as well as reimbursement of
expenses incurred. On February 1, 2019, we amended the employment
agreement with Brandon Romanek, our Chief Executive Officer. In
accordance with this agreement, Mr. Romanek provides services to
the Company in exchange for $178,000 per year plus vacation and
bonuses as approved annually by the board of directors, as well as
reimbursement of expenses incurred.
During the year ending July 31, 2021, the Company accrued $187,748
due to Mr. Romanek related to this agreement. As of July 31, 2021,
Mr. Romanek has allowed the Company to defer a total of $485,434 in
compensation earned to date related to his employment
agreements.
On June 15, 2019, the Company entered into an employment agreement
with Joshua Halford, a business development analyst for the
Company, under the agreement Mr. Halford earns (i) $3,000 in
compensation every other week, payable at the Company’s election in
cash or in the form of common stock registered with the SEC on Form
S-8 with a 50% bonus for stock issuances made in lieu of cash
payments at the time of issuance (for example, if the Company filed
a registration statement on Form S-8 in the future, the Company
could elect to pay Mr. Halford the $3,000 biweekly payment by
issuing Mr. Halford $4,500 of S-8 registered Company common stock
at the then-current common stock price instead of making a $3,000
cash payment to Mr. Halford), and (ii) 10% sales commissions. On
February 18, 2020 the employment agreement was amended to $1,000 in
compensation every other week to be paid in cash. During the year
ended July 31, 2021 Mr. Halford earned $72,000.
CONVERTIBLE NOTES PAYABLE RELATED PARTY
On May 1, 2019, we entered into a convertible promissory note
pursuant to which we borrowed $200,000 from Harvey Romanek, the
father of the Company’s Chief Executive Officer, Brandon Romanek.
Interest under the convertible promissory note is 10% per annum,
and the principal and all accrued but unpaid interest is due on May
1, 2021. The note is convertible six months after the issuance date
at the noteholder’s option into shares of our common stock at a
Variable Conversion Price of 65% multiplied by the lowest Trading
Price for the Common Stock during the ten (10) Trading Day period
ending on the last complete Trading Day prior to the Conversion
Date.
The Company recorded a debt discount in the amount of $200,000 in
connection with the original issuance discount, offering costs and
initial valuation of the derivative liability related to the
embedded conversion option of the Note to be amortized utilizing
the effective interest method of accretion over the term of the
Note. The aggregate debt discount has been accreted and charged to
interest expenses as a financing expense in the amount of $75,069
during the year ending July 31, 2021.
Further, the Company recognized a derivative liability of $387,232
and an initial loss of $187,232 based on the Black-Scholes pricing
model.
As
of July 31, 2021, convertible notes due to related parties net of
unamortized debt discounts of $0, was $200,000
Promoters and Certain Control Persons
None.
List of Parents
None.
Director Independence
The Company currently has two directors, and neither of the
directors is independent under either board or committee
independence standards. The Company does not have a compensation,
nominating or audit committee.
Item 14.
Principal Accounting Fees and Services.
The following table sets forth the fees billed by our principal
independent accountants for the years indicated, for the categories
of services indicated.
|
|
|
Years Ended July 31,
|
|
|
Category
|
|
2021
|
|
|
2020
|
|
|
Audit Fees
|
|
$ |
19,500 |
|
|
$ |
10,000 |
|
|
Audit Subsequent Related Fees
|
|
|
– |
|
|
|
– |
|
|
Tax Fees
|
|
|
– |
|
|
|
– |
|
|
All Other Fees
|
|
|
– |
|
|
|
– |
|
|
Total
|
|
$ |
19,500 |
|
|
$ |
10,000 |
|
Audit fees. Consists of fees billed for the audit of our
annual consolidated financial statements and review of our interim
financial information and services that are normally provided by
the accountant in connection with year-end and quarter-end
statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees billed for services
relating to review of other regulatory filings including
registration statements, periodic reports and audit related
consulting.
Tax fees. Consists of professional services rendered by
our principal accountant for tax compliance, tax advice and tax
planning.
Other fees. Other services provided by our
accountants.
PART
IV
Item 15.
Exhibits, Financial Statement Schedules.
EXHIBIT INDEX
|
Exhibit
|
|
Description
|
|
|
|
|
3.1
|
|
Bylaws (incorporated by reference to Registration Statement on Form
10 filed on October 19, 2018; File No. 000-55994; Exhibit 3.1
thereto)
|
|
|
|
|
3.2
|
|
Articles of Incorporation filed May 1, 2007 (incorporated by
reference to Registration Statement on Form 10 filed on October 19,
2018; File No. 000-55994; Exhibit 3.2 thereto)
|
|
|
|
|
3.3
|
|
Articles of Amendment filed January 23, 2017 (incorporated by
reference to Registration Statement on Form 10 filed on October 19,
2018; File No. 000-55994; Exhibit 3.3 thereto)
|
|
|
|
|
3.4
|
|
Articles of Amendment filed January 17, 2018 (incorporated by
reference to Registration Statement on Form 10 filed on October 19,
2018; File No. 000-55994; Exhibit 3.4 thereto)
|
|
|
|
|
3.5
|
|
Certificate of Designation for Series A Preferred Stock filed
January 24, 2017 (incorporated by reference to Registration
Statement on Form 10 filed on October 19, 2018; File No. 000-55994;
Exhibit 3.5 thereto)
|
|
|
|
|
3.6
|
|
Certificate of Designation for Series B Preferred Stock May 12,
2017 (incorporated by reference to Registration Statement on Form
10 filed on October 19, 2018; File No. 000-55994; Exhibit 3.6
thereto)
|
|
|
|
|
3.7
|
|
Amended Certificate of Designation for Series B Preferred Stock
filed June 5, 2017 (incorporated by reference to Registration
Statement on Form 10 filed on October 19, 2018; File No. 000-55994;
Exhibit 3.7 thereto)
|
|
|
|
|
3.8
|
|
Articles of Amendment filed September 28, 2018 (incorporated by
reference to Registration Statement on Form 10 filed on October 19,
2018; File No. 000-55994; Exhibit 3.8 thereto)
|
|
|
|
|
10.1
|
|
Asset Purchase Agreement with Brandon Romanek dated January 20,
2017 (incorporated by reference to Registration Statement on Form
10 filed on October 19, 2018; File No. 000-55994; Exhibit 10.1
thereto)
|
|
|
|
|
10.2
|
|
Patent Assignment by and between Harvey Romanek and Brandon Romanek
dated November 7, 2016 (incorporated by reference to Registration
Statement on Form 10/A filed on October 4, 2019; File No.
000-55994; Exhibit 10.2 thereto)
|
|
|
|
|
10.3
|
|
Patent Assignment Confirmation and Release by Brandon Romanek
(incorporated by reference to Registration Statement on Form 10/A
filed on October 4, 2019; File No. 000-55994; Exhibit 10.3
thereto)
|
|
|
|
|
10.4
|
|
Patent Assignment Confirmation and Release by Harvey Romanek
(incorporated by reference to Registration Statement on Form 10/A
filed on October 4, 2019; File No. 000-55994; Exhibit 10.4
thereto)
|
|
|
|
|
10.5
|
|
Asset Purchase Agreement with Urban Oasis Float Center, LLC dated
June 1, 2017 (incorporated by reference to Registration Statement
on Form 10/A filed on April 8, 2019; File No. 000-55994; Exhibit
10.2 thereto)
|
________________
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
/s/ Brandon Romanek
|
|
March 30, 2022
|
|
|
Brandon Romanek, Chief Executive Officer & President
|
|
Date
|
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
/s/ Brandon Romanek
|
|
March 30, 2022
|
|
|
Brandon Romanek, Director
|
|
Date
|
|
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