Accredited Solutions, Inc 10-Q for FY2021 Q2
Accredited Solutions, Inc. (ASII)
About this 10-Q
Accredited Solutions, Inc filed this 10-Q on August 23, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $455.54K
- up 116.0% from $210.9K a year earlier
- Net loss
- $2.45M
- compared with a net loss of $652.67K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _________ to ___________
(Exact Name of Registrant as Specified in Its Charter) |
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(State of Incorporation) |
| (Commission File Number) |
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(Address of principal executive offices) (Zip code) |
| (Issuer's telephone number) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Not applicable. | Note applicable. | Not applicable. |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. Yes ☒ No ☐
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company | ☐ |
If an emerging growth company, indicate by checkmark 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
As of August 20, 2021, there were
GOOD HEMP, INC.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
| 2 |
| Table of Contents |
GOOD HEMP, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
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| June 30, 2021 |
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| December 31, 2020 |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable |
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Inventory |
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Prepaid expenses |
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Total current assets |
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Other assets |
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Property, plant and equipment, net |
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Branding agreement |
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Investment |
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Goodwill |
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Intellectual property |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities |
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Accounts payable |
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Accounts payable to related parties |
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Accrued liabilities |
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Interest payable |
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Interest payable to related parties |
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Notes payable |
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Convertible notes, net of discounts |
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Convertible notes to related parties, net of discounts |
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Derivative liabilities |
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Total current liabilities |
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Total liabilities |
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Stockholders' deficit |
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Preferred stock - Class A - |
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Common stock - |
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Additional paid in capital |
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Accumulated deficit |
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Total controlling interest |
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Non-controlling interest |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
| Table of Contents |
GOOD HEMP, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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| For the Three Months Ended |
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| For the Six Months Ended |
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| June 30, 2021 |
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| June 30, 2020 |
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| June 30, 2021 |
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| June 30, 2020 |
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Net sales |
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Cost of sales |
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Gross profit |
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Operating expenses |
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Operating loss |
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Other income (expense) |
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Interest income |
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Gain on write off of debt |
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Interest expense |
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Loss on derivative liabilities |
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Other expense |
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Total other income (expense) |
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Net loss |
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Net loss - non-controlling interest |
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Net loss - controlling interest |
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Net loss per share - basic and diluted |
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Weighted average number of common shares - basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
| Table of Contents |
GOOD HEMP, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT
(Unaudited)
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| Additional Paid-in |
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| Accumulated |
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| Shares |
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| Amount |
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| Shares |
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| Capital |
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| Deficit |
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| Interest |
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| Total |
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Balance, December 31, 2020 |
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Issuance of common stock for financing |
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Issuance of common stock for services |
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Issuance of common stock for conversion of notes payable |
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Net loss for the period |
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Balance, March 31, 2021 |
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Issuance of S-1 common stock at $1.25 for cash |
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Net loss for the period |
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Balance, June 30, 2021 |
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| Preferred Stock |
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| Additional Paid-in |
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| Accumulated |
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| Non-Controlling |
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| Shares |
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| Amount |
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| Interest |
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| Total |
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Balance, December 31, 2019 |
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Issuance of common shares - Branding Agreement |
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Shares issued to William Alessi |
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Shares issued to Chris Chumas |
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Net loss for the period |
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Balance, March 31, 2020 |
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Net loss for the period |
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Balance, June 30, 2020 |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
| Table of Contents |
GOOD HEMP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
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| For the Six Months Ended |
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| June 30, 2021 |
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Amortization of branding agreement |
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Non-cash interest expense |
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Stock-based compensation |
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Gain on write off of debt |
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Gain on derivative liabilities |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses |
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Inventory |
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Other receivable |
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Accounts payable |
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Accounts payable to related parties |
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Accrued liabilities |
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Interest payable |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Purchase of investments |
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Purchase of fixed assets |
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Net cash flows from investing activities |
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Cash flows from financing activities: |
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Proceeds from convertible notes payable to related parties, net of discounts |
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Procceeds from convertible notes payable, net of discounts |
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Repayment of convertible notes payable, net of discounts |
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Proceeds from issuance of common stock |
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Proceeds from investment in subsidiary |
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Net cash provided by financing activities |
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Net change in cash |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
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Supplemental non-cash information |
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Common stock issued for financing fees |
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Spire Branding Agreement for common stock |
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Conversion of notes payable into common stock |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
| Table of Contents |
GOOD HEMP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Good Hemp, Inc. (the “Company” or “Good Hemp”), formerly known as Keyser Resources, Inc., and Lone Star Gold, Inc., was incorporated in the State of Nevada on November 26, 2007.
The Company was involved in the exploration and development of mining properties until September 30, 2013, when it discontinued operations. In 2017, the Company was put into receivership and in 2018, it emerged from receivership. On September 11, 2019, the Company's Board of Directors, pursuant to Nevada Revised Statute 92A.280, amended the Company's Articles of Incorporation to change the name of the Company from Lone Star Gold, Inc. to Good Hemp, Inc. The amendment was filed with the Nevada Secretary of State on September 12, 2019.
The Company is now a North Carolina based company that is made up of industry veterans focused on exploiting niche markets in the hemp industry. Good Hemp® includes two lines of hemp-based beverages. Good Hemp® 2oh! is a hemp-derived, CBD-infused line of flavored waters, and Good Hemp® fizz! is a line of carbonated hemp oil infused sodas. Good Hemp® products have been sold throughout the United States since 2016 via Amazon.com, as well as local retailers.
By establishing a comprehensive distribution system, Good Hemp® has secured listings for its products with regional and national grocery and convenience chain stores.
On July 21, 2020, the Company filed with the State of Nevada a Certificate of Designation designating
Also, on July 21, 2020, the Company filed with the State of Nevada a Certificate of Designation designating
On February 9, 2021, the Company formed Good Hemp Wellness, LLC, a limited liability company formed under the laws of the State of North Carolina, to sell CBD products to customers through chiropractic offices.
On April 1, 2021, the Company entered into an agreement to purchase Diamond Creek Group, LLC, a North Carolina limited liability company which sells the Diamond Creek brand of high alkaline water products, for a total purchase price of $
The outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
| 7 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America and has a year-end of December 31.
Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Good Hemp, Inc. and its wholly owned subsidiary, Diamond Creek Group, LLC, and its controlling interest subsidiary, Good Hemp Wellness, LLC. (collectively, the “Company”). All intercompany accounts have been eliminated upon consolidation.
Condensed Financial Statements
The unaudited condensed financial statements of the Company for the six month periods ended June 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2020 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2021. These unaudited condensed financial statements should be read in conjunction with that report.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that 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 and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
| 8 |
| Table of Contents |
Impairment of Long-Lived Assets
Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. We believe such assumptions are also comparable to those that would be used by other marketplace participants. We evaluate a number of factors to determine whether an indefinite life is appropriate, including the competitive environment, market share, brand history, product life cycles, operating plans and the macroeconomic environment of the countries in which the brands are sold. When certain events or changes in operating conditions occur, an impairment assessment is performed and indefinite-lived brands may be adjusted to a determinable life. The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. Customer relationships, brands and other non-contractual intangible assets with determinable lives are amortized over periods generally ranging from 5 to 30 years. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.
Fair Value of Financial Instruments
The FASB issued ASC 820-10, Fair Value Measurements and Disclosures, for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:
- Level 1: Quoted prices in active markets for identical assets or liabilities
- Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
- Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include demand deposits, money market funds, and all highly liquid debt instructions with original maturities of three months or less.
The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
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Inventory
Inventory consisting of raw materials and finished product is stated at the lower of cost (first in, first out method) or net realizable value.
Concentration and Credit Risk
The Company does not have any financial asset and therefore is not exposed to any credit risks.
Cash - The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable consists of product sales to customers. Trade accounts receivable are generally due 30 days after issuance of the invoice. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on specific circumstances of the customer. At June 30, 2021, an allowance was not deemed necessary.
Derivative Financial Instruments
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Commitment and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
The Company follows ASC 440-10, Commitments, to report accounting for certain commitments.
Net Loss Per Common Share
The Company computes net income or loss per share in accordance with ASC 260 Earnings per Share. Under the provisions of the Earnings per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Income Taxes
The Company accounts for its income taxes in accordance with ASC 740 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 operations in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that would otherwise be recorded for income tax benefits primarily relating to operating loss carryforwards as realization cannot be determined to be more likely than not.
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The statement establishes a more-likely-than-not threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process for measuring those tax positions which meet the recognition threshold of being ultimately sustained upon examination by the taxing authorities. There are no uncertain tax positions taken by the Company on its tax returns and the adoption of the statement had no material impact to the Company’s financial statements. The Company files tax returns in the US and states in which it has operations and is subject to taxation. Tax years subsequent to 2013 remain open to examination by U.S. federal and state tax jurisdictions.
Revenue Recognition
Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company recognizes revenue upon completion of our performance obligations or expiration of the contractual time to use services such as professional service hours purchased in bulk for a given time period.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.
NOTE 3 – GOING CONCERN
The Company's unaudited condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has recurring operating losses, an accumulated deficit and a working capital deficiency. Management’s plans include raising capital in the debt and equity markets. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until its operations become established enough to be considered reliably profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the financial statements, the Company had a working capital deficit of $
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company is unable to continue as a going concern.
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NOTE 4 – INTANGIBLE ASSETS
On February 6, 2019, the Company, entered into an Intellectual Property Purchase Agreement (the “Agreement”) with S. Mark Spoone, a Colorado corporation (the “Seller”), to acquire all of Mr. Spoone’s intellectual property associated with Mr. Spoone’s “Good Hemp” hemp-derived CBD-infused line of consumer beverages, for a purchase price consisting of
On April 30, 2019, the Company acquired from S. Mark Spoone the CANNA HEMP and CANNA trademarks including all rights and trade secrets and related inventory for consideration totaling $
Effective February 28, 2020, the Company entered into a Branding Agreement (the “Branding Agreement”) with Spire Holdings, LLC (“Spire”), pursuant to which the Company would immediately issue Spire
On February 10, 2021, the Company and Spire entered into an Amendment to Branding Agreement amending the sponsorship dates to be during the 2021-2022 NASCAR Cup Series racing seasons instead of the 2020-2021 racing season.
The Company recorded an intangible asset in the amount of $
Gross Value of Branding Agreement |
| $ |
| |
Value Utilized |
|
| ( | ) |
Remaining |
| $ |
|
On April 1, 2021, the Company entered into an agreement to purchase Diamond Creek Group, LLC, a North Carolina limited liability company which sells the Diamond Creek brand of high alkaline water products, for a total purchase price of $
Purchase Price Allocation |
| Amount |
| |
Acquisition cost |
| $ |
| |
Assets acquired |
|
|
|
|
Cash and cash equivalents |
|
|
| |
Accounts receivable |
|
|
| |
Property and Equipment |
|
|
| |
Total assets acquired |
|
|
| |
|
|
|
|
|
Liabilities assumed |
|
|
|
|
Accounts payable and accrued liabilities |
|
|
| |
Note payable |
|
|
| |
Total liabilities assumed |
|
|
| |
Goodwill |
| $ |
| |
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NOTE 5 – NOTES PAYABLE
On March 14, 2019, the Company borrowed $
A
B = C
A
$1.20 = D
C – D = Number of additional shares to be issued to the note holder
Where:
A = The principal amount of the note previously converted by the note holder.
B = The price per share at which the Company’s common stock was sold or issued.
On March 15, 2019, the note holder exercised its option to convert the note into
On March 30, 2020, the Company entered into a securities purchase agreement (the “SPA”) with Power Up Lending Group Ltd., a Virginia corporation (the “Investor”), pursuant to which
The Note matures 12 months after the date of the Note on March 23, 2021.
Effective April 8, 2020, the Company and its lender, GS Capital Partners, LLC, entered into a forbearance agreement relating to the Lender’s promissory note dated October 8, 2019, in the original principal amount of $
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Effective May 8, 2020, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd., a Virginia corporation (“Power Up”), pursuant to which the Company agreed to issue to the Power Up an
On July 31, 2020, the Company issued a Convertible Promissory Note (the “JRF Note”) to JRF AZ Investments II, LP (the “JRF Investor”), in the principal amount of $
On August 4, 2020, the Company entered into a securities purchase agreement with DGF Services, Inc. The note is for $
On August 18, 2020, the Company entered into a securities purchase agreement with Power Up Lending Group pursuant to which the Company agreed to issue to the Investor an
On February 4, 2021, the Company entered into a securities purchase agreement with Power Up Lending Group pursuant to which the Company agreed to issue to the Investor an
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On February 16, 2021, the Company entered into a securities purchase agreement with Power Up Lending Group pursuant to which the Company agreed to issue to the Investor an
On March 26, 2021, the Company entered into a securities purchase agreement with Leonite Capital LLC (“Leonite”) pursuant to which the Company agreed to issue to the Investor an 8% Convertible Promissory Note, dated March 26, 2021, in the principal amount of $
On April 21, 2021, the Company entered into a securities purchase agreement (the “GS Capital SPA”) with GS Capital Partners, LLC, a New York limited liability company, pursuant to which the Company agreed to issue to the investor a 5% Convertible Redeemable Promissory Note (the “GS Capital Note”), dated April 21, 2021, in the principal amount of $
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On April 20, 2021, the Company entered into a securities purchase agreement (the “Power Up SPA”) with Power Up Lending Group Ltd., a Virginia corporation, pursuant to which the Company agreed to issue to the investor a 5% Convertible Promissory Note (the “Power Up Note”), dated April 20, 2021, in the principal amount of $
On May 4, 2021, the Company entered into a securities purchase agreement with Metrospaces, Inc., a Florida corporation, pursuant to which the Company agreed to issue to the investor a 5% Convertible Redeemable Note, dated April 4, 2021, in the principal amount of $
NOTE 6 – RELATED PARTY TRANSACTIONS
All related party transactions are recorded at the exchange amount which is the value established and agreed to by the related party. Mr. William Alessi, CEO, is the Principal Executive Officer and director of the Company. The JanBella Group is an entity controlled by Mr. Alessi. Chris Chumas is a director and a minority shareholder of the Company.
A payable to a related party of $
On February 6, 2019, Mr. William Alessi, the Company’s CEO and one of its directors, personally sold
During the quarter ended March 31, 2019, Mr. Alessi returned to treasury
On July 18, 2019, the Company issued promissory notes to Mr. Alessi, JanBella Group and Mr. Chumas to evidence the amounts they advanced to the Company. The notes are due on demand, bear interest at
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On or about July 22, 2019, the Company purchased shares of its Class A Preferred Shares from the following persons:
|
| Class A |
|
|
|
| ||
Name |
| Preferred Shares |
|
| Consideration |
| ||
William Alessi |
|
|
|
| $ | (1) | ||
|
|
|
|
|
|
|
|
|
Chris Chumas |
|
|
|
| $ | (1) | ||
____________
(1) Payment for the preferred shares was in the form of notes. The notes bear interest at
On or about July 22, 2019, S. Mark Spoone converted his
On January 29, 2020, the Company issued
The following table presents principal amounts due, and common and preferred shares held by William Alessi, Chris Chumas and S. Mark Spoone as of June 30, 2021:
|
|
|
| Interest |
|
| Common Shares |
|
| Preferred Shares | |||||
Name |
| Principal |
|
| rate |
|
| # |
|
| # | ||||
Chris Chumas |
| $ |
|
| % |
|
|
|
| nil | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
William Alessi |
|
|
|
| % |
|
| (1) |
| nil | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
JanBella Group (2) |
|
|
|
|
| % |
| nil |
|
| nil | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
S. Mark Spoone |
| nil |
|
|
|
|
|
|
|
|
| nil | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total |
| $ |
|
|
|
|
|
|
|
|
|
|
| ||
(1) Includes
(2) Mr. Alessi’s entity.
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See Part II – Unregistered Sales of Equity Securities and Use of Proceeds regarding the sale of unregistered securities and use of proceeds.
NOTE 7 – DERIVATIVE LIABILITIES
The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of June 30, 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.
For the six months ended June 30, 2021, the assumptions utilized in estimating fair values of the liabilities measured on a recurring basis are as follows:
|
| Six months ended |
| |
|
| June 30, 2021 |
| |
Expected term |
|
| ||
Expected average volatility |
|
| % | |
Expected dividend yield |
|
| - |
|
Risk-free interest rate |
|
| % | |
The fair value measurements of the derivative liabilities at June 30, 2021 is summarized:
Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The fair value measurements of the derivative liabilities at December 31, 2020 is summarized:
Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. As of August 16, 2021, the Company did not have any legal actions pending against it.
Commitments
The Company entered into various Seed Resale Agreements to sell Hemp seeds to growers. The Company is obligated to purchase from the growers’ minimum future quantities of hemp biomass.
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| Table of Contents |
NOTE 9 – CAPITAL STOCK
On January 29, 2020, the Company issued
On February 28, 2020, the Company entered into a Branding Agreement (the “Branding Agreement”) with Spire Holdings, LLC (“Spire”), pursuant to which the Company would immediately issue Spire
On July 29, 2020, the Company sold a third party investor (the “Investor”) the following securities (the “Securities”) for an aggregate purchase price of $
Effective July 1, 2020, Scott Shellady was appointed to serve as the Chief Strategic Officer of the Company. On June 24, 2020, the Company entered into a consulting services agreement with Mr. Shellady, pursuant to which Mr. Shellady would (i) render marketing, sales, distribution, and branding services to the Company; and (ii) would be paid $
Effective July 31, 2020, the Company issued a Convertible Promissory Note to JRF AZ Investments II, LP in the principal amount of $
On August 24, 2020, with an effective date of July 1, 2020, the Company entered into a joint venture agreement with Paul Hervey (“Hervey”), an individual, for the purpose of cultivating hemp. Hervey is a licensed hemp cultivator in good standing under the laws of North Carolina with approximately
On March 15, 2021, the Company issued
On March 23, 2021, the Company issued
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| Table of Contents |
On March 25, 2021, the Company issued
On June 16, 2021, the Company issued
See Part II – Unregistered Sales of Equity Securities and Use of Proceeds regarding the sale of unregistered securities and use of proceeds.
NOTE 10 – JOINT VENTURE
On August 24, 2020, with an effective date of July 1, 2020, the Company entered into a joint venture agreement with Paul Hervey (“Hervey”) for the purpose of cultivating hemp. Hervey is a licensed hemp cultivator in good standing under the laws of North Carolina with approximately
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the financial statements were available to be issued and there are no material subsequent events except as noted below.
On July 21, 2021, a third party investor (the “Investor”) exercised non-cashless warrants to purchase
On July 26, 2021, the Company issued
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| Table of Contents |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed on April 15, 2021, and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.
Company Overview and Product Brands
The Company was formed as a Nevada corporation on November 26, 2007. The Company was involved in exploration and development of mining properties until September 30, 2013, when it discontinued operations. In June 2017, the Company’s creditors filed a petition in the District Court of Harris County, Texas for the appointment of a receiver. In August of 2017, the court appointed a receiver (who was subsequently appointed as an officer and director of the Company), and in February 2018, the receiver appointed William Alessi as a director of the Company and then resigned as a director and officer of the Company.
On February 6, 2019, the Company acquired trademarks and intellectual property, which includes all rights and trade secrets to the hemp-derived CBD-infused line of consumer beverages sold under the “Good Hemp” brand. Since then, the Company has been conducting operations under the “Good Hemp” trade name and through the http://www.goodhemplivin.com/ website. Information on this website is not a part of this report on Form 10-Q.
On April 30, 2019, the Company acquired from Mr. Spoone the “CANNA HEMP” and “CANNA” trademarks including all rights and trade secrets and related inventory. At June 30, 2021, the Company had not attributed any value to these acquired trademarks.
On August 24, 2020, with an effective date of July 1, 2020, the Company entered into a joint venture agreement with Paul Hervey (“Hervey”), an individual, for the purpose of cultivating hemp on approximately 9 acres of farmland and in approximately 3,700 square feet of greenhouse space in North Carolina (referred to as “Olin Farms”).
On February 9, 2021, the Company formed Good Hemp Wellness, LLC, a limited liability company formed under the laws of the State of North Carolina, to sell CBD products to customers through chiropractic offices.
On April 1, 2021, the Company entered into an agreement to purchase Diamond Creek Group, LLC, a North Carolina limited liability company which sells the Diamond Creek brand of high alkaline water products, for a total purchase price of $643,000. On April 2, 2021, the Company closed the acquisition and paid the initial $500,000 portion of the purchase price, and on April 23, 2021, paid the $143,000 purchase price balance.
The Company is now a North Carolina based company that is made up of industry veterans focused on exploiting niche markets in the hemp and beverage industries. The Company’s products include high alkaline water products, hemp-based beverage products under Good Hemp® brand, and CBD softgels under the Good Hemp Wellness brand. Good Hemp® products include two lines of hemp-based beverages described below. Good Hemp® products have been sold throughout the United States since 2016 via Amazon.com, as well as local retailers.
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| Table of Contents |
Products
Good Hemp® 2oh!, CANNA HEMP and CANNA are a line-up of refreshing, all-natural, “good-for-you”, ready-to-drink waters in six flavors: blueberry-blast, island coco-lime, kiwi-strawberry, lemon-twist, mango-fandango and Q-cumbermint. Each Good Hemp® 2oh! beverage is 16.9 fluid ounces infused with 10 mg of hemp oil (CBD rich), 6g of prebiotic fiber, has 0 g of sugar, contains no artificial sweeteners or artificial flavors, is gluten free, vegan, and contains 0 net carbs.
Good Hemp® fizz is a line-up of carbonated refreshing, all-natural, “good-for-you”, “ready-to-drink carbonated beverages in three flavors: blueberry-bam, mango-tango and citrus-twist. Each Good Hemp® fizz beverage is 12 fluid ounces infused with 10 mg of hemp oil (CBD rich), 6 g of prebiotic fiber, contains no artificial sweeteners or artificial flavors, is gluten free and vegan.
Good Hemp Wellness is a line of CBD soft gels that uses a proprietary super absorption formula which minimizes the nutrients lost during the digestive process and allows consumers to absorb more CBD in smaller doses.
Diamond Creek High Alkaline Water is a 9.5pH high alkaline natural spring water, sourced from the highest quality, award winning springs. Diamond Creek is available in one gallon, one liter and half liter bottles and aids in balancing the body’s pH while providing superior hydration resulting from a proprietary ionization process.
As of June 30, 2021, Diamond Creek water was availablein over 1500 stores in the United States.
Our Growth Strategy
Expanding our US distribution reach to service national chain stores; increase awareness of our brand in the United States; securing additional chain, convenience and key account store listings for all our brands nationwide and internationally; increasing our warehouse direct to retail channel; focusing on full-service Class “A” distributors; and focusing on placing our products in produce, natural and cold sets as opposed to the grocery aisles.
We will be looking for strategic acquisitions and partnerships in the beverage and hemp sectors, such as Diamond Creek Group, LLC and Olin Farms, to strengthen our backend supply chain, distribution and relationships with retail customers.
Results of Operations
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
|
| Six Months Ended |
|
| Increase/ |
| ||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| (Decrease) |
| |||
Net Sales |
| $ | 529,341 |
|
| $ | 281,346 |
|
| $ | 247,995 |
|
Cost of Sales |
|
| 475,005 |
|
|
| 212,469 |
|
|
| 262,536 |
|
Gross Profit |
|
| 54,336 |
|
|
| 68,877 |
|
|
| (14,541 | ) |
Operating Expenses |
|
| 1,880,405 |
|
|
| 165,587 |
|
|
| 1,714,818 |
|
Operating Loss |
|
| (1,826,069 | ) |
|
| (96,710 | ) |
|
| (1,729,359 | ) |
Interest Income |
|
| 4 |
|
|
| - |
|
|
| 4 |
|
Gain on Write-off of Debt |
|
| 38,910 |
|
|
| - |
|
|
| 38,910 |
|
Interest Expense |
|
| (67,740 | ) |
|
| (17,168 | ) |
|
| (50,572 | ) |
Loss on Derivative Liabilities |
|
| (2,035,529 | ) |
|
| (727,344 | ) |
|
| (1,308,185 | ) |
Net Loss |
| $ | (3,890,424 | ) |
| $ | (841,222 | ) |
| $ | (3,049,202 | ) |
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| Table of Contents |
Revenue
During the six months ended June 30, 2021, the Company generated $529,341 in net sales compared to $281,346 for the same period in 2020. This is largely due to the acquisition of Diamond Creek, which had existing sales.
Cost of Sales
The Company had cost of sales of $475,005 for the six months ended June 30, 2021, compared to $212,469 for the same period in 2020. The increase was primarily due to increased sales of the Company’s products.
Operating Expenses
The Company incurred general and administrative expenses totaling $1,880,405 for the six months ended June 30, 2021, compared to $165,587 for the same period in 2020. The increase was primarily due to the amortization ($1,322,449) of the branding agreement in 2021. The remaining increase in the operating expenses is from the subsidiaries that were acquired during the current six-month period.
Net Loss
The Company had a net loss of $3,890,424 for the six months ended June 30, 2021, compared to a net loss of $841,222 for the same period in 2020. This increase was primarily due to the amortization ($1,322,449) of the branding agreement and the change in derivative liabilities of $2,035,529.
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
|
| Three Months Ended |
|
| Increase/ |
| ||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| (Decrease) |
| |||
Net Sales |
| $ | 455,537 |
|
| $ | 210,903 |
|
| $ | 244,634 |
|
Cost of Sales |
|
| 419,551 |
|
|
| 144,592 |
|
|
| 274,959 |
|
Gross Profit |
|
| 35,986 |
|
|
| 66,311 |
|
|
| (30,325 | ) |
Operating Expenses |
|
| 482,345 |
|
|
| 86,149 |
|
|
| 396,196 |
|
Operating Loss |
|
| (446,359 | ) |
|
| (19,838 | ) |
|
| (426,521 | ) |
Interest Income |
|
| 4 |
|
|
| - |
|
|
| 4 |
|
Interest Expense |
|
| (50,554 | ) |
|
| (3,366 | ) |
|
| (47,188 | ) |
Loss on Derivative Liabilities |
|
| (1,950,700 | ) |
|
| (629,782 | ) |
|
| (1,320,918 | ) |
Other Expenses |
|
| - |
|
|
| 315 |
|
|
| (315 | ) |
Net Loss |
| $ | (2,447,609 | ) |
| $ | (652,671 | ) |
| $ | (1,794,938 | ) |
Revenue
During the three months ended June 30, 2021, the Company generated $455,537 in net sales compared to $210,903 for the same period in 2020. This is largely due to the acquisition of Diamond Creek, which had existing sales.
Cost of Sales
The Company had cost of sales of $419,551 for the three months ended June 30, 2021, compared to $144,592 for the same period in 2020. The increase was primarily due to increased sales of the Company’s products.
Operating Expenses
The Company incurred general and administrative expenses totaling $482,345 for the three months ended June 30, 2021, compared to $86,149 for the same period in 2020. The increase was primarily due to the amortization $220,408 of the branding agreement in 2021. The remaining increase in the operating expenses is from the subsidiaries that were acquired during the current three-month period.
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| Table of Contents |
Net Loss
The Company had a net loss of $2,447,609 for the three months ended June 30, 2021, compared to a net loss of $652,782 for the same period in 2020. This increase was primarily due to the amortization $220,408 of the branding agreement and the change in derivative liabilities of $1,950,700.
Liquidity and Capital Resources
We had cash used in operations of $438,179 for the six months ended June 30, 2021, compared to $1,543,409 for the six months ended June 30, 2020. The increase in cash used in operating activities for the six months ended June 30, 2021 is attributable to the amortization of the branding agreement of $1,322,449 compared to $0 for the six months ended June 30, 2021 and 2020, respectively.
We had cash used in investing activities of $736,055 for the six months ended June 30, 2021, and $0 for the six months ended June 30, 2020.
We had cash provided by financing activities of $1,219,682 for the six months ended June 30, 2021, compared to cash provided by $1,531,461 for the six months ended June 30, 2020.
As of June 30, 2021, the Company had cash and cash equivalents of $105,316. We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $200,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, inventory purchases, legal and accounting fees.
As of June 30, 2021, and 2020, the Company has primarily been funded by Mr. Alessi and Mr. Chumas. In addition, the Company has issued convertible notes to unrelated third parties. As of June 30, 2021, and December 31, 2020, related party notes totaled $510,575 and $400,575, net of discounts, respectively, and third-party notes totaled $1,137,782 and $306,010, net of discounts, respectively.
The Company does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way.
The Company does not know of any significant changes in expected sources and uses of cash.
The Company does not have any commitments or arrangements from any person to provide it with any equity capital.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the financial statements, the Company had a working capital deficit of $5,165,822 at June 30, 2021 and had a loss of $3,890,424 for the six months ended June 30, 2021, which raises substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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| Table of Contents |
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
Reclassification of Certain Expenses
The results of operations as of June 30, 2021 were prepared on a consistent basis with prior periods.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
Item 4. Control and Procedures.
Evaluation of Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a 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 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 chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a 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 the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.
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| Table of Contents |
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, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:
| • | The Company does not have a majority of independent directors; |
| • | Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions; |
| • | Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting; and |
| • | Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes. |
| • | To remediate our internal control weaknesses, management intends to implement the following measures: as funding permits, the Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements; the Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting; and upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures. |
The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management hopes to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
Changes in Internal Control over Financial Reporting
During the fiscal quarter covered by this Quarterly Report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is 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.
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| Table of Contents |
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
Item 1A. Risk Factors
Not required.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 15, 2021, the Company issued 30,000 shares of common stock to a consultant for services. These shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation, and the transaction did not involve a public offering.
On March 23, 2021, the Company issued 17,405 shares of common stock to DGF Services, Inc. for a conversion of $77,952 in convertible debt. These shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation, and the transaction did not involve a public offering.
On March 25, 2021, the Company issued 65,000 shares of common stock to Leonite Capital LLC in conjunction with financing. These shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation, and the transaction did not involve a public offering.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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| Table of Contents |
Item 6. Exhibits
The following exhibits are filed with this Form 10-K or incorporated by reference:
Exhibit |
| Description |
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|
101 INS ** |
| XBRL Instance Document |
101 SCH ** |
| XBRL Taxonomy Extension Schema Document |
101 CAL ** |
| XBRL Taxonomy Calculation Linkbase Document |
101 DEF ** |
| XBRL Taxonomy Extension Definition Linkbase Document |
101 LAB ** |
| XBRL Taxonomy Labels Linkbase Document |
101 PRE ** |
| XBRL Taxonomy Presentation Linkbase Document |
*Filed herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
| 28 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements 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.
GOOD HEMP, INC. |
| ||
|
|
|
|
Date: August 23, 2021 |
| /s/ William Alessi |
|
|
| William Alessi |
|
|
| Chief Executive Officer |
|
|
|
|
|
Date: August 23, 2021 |
| /s/ Rodney Sperry |
|
| Rodney Sperry |
| |
|
| Chief Financial Officer |
|
| 29 |