Frequency Holdings, Inc 10-Q for FY2023 Q2
Frequency Holdings, Inc (FRQN)
About this 10-Q
Frequency Holdings, Inc filed this 10-Q on September 19, 2023, covering the quarter ended July 31, 2023 (FY2023 Q2).
Headline figures
Quarter ended July 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $20
- compared with $0 a year earlier
- Net loss
- $248.84K
- compared with a net loss of $66.35K a year earlier
- Diluted EPS
- $0.00
- compared with $0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _____________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act: None
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.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided 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 ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of as of September 18, 2023, there were shares of common stock outstanding.
TABLE OF CONTENTS
| Page No. | ||
| PART I. - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements. | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Plan of Operations. | 17 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 21 |
| Item 4 | Controls and Procedures. | 21 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 22 |
| Item 1A. | Risk Factors. | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 22 |
| Item 3. | Defaults Upon Senior Securities. | 22 |
| Item 4. | Mine Safety Disclosures. | 22 |
| Item 5. | Other Information. | 22 |
| Item 6. | Exhibits. | 22 |
| Signatures | 23 | |
| 2 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YUENGLING’S ICE CREAM CORPORATION
| 3 |
YUENGLING’S ICE CREAM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| July 31, 2023 | October 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid stock compensation | ||||||||
| Other receivable – related party | ||||||||
| Total Current Assets | ||||||||
| Other Assets: | ||||||||
| Property and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued compensation | ||||||||
| Notes payable | ||||||||
| Loans payable | ||||||||
| Convertible note payable, net of $ | ||||||||
| Derivative liability | ||||||||
| Line of credit | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Mezzanine Equity: | ||||||||
| Preferred stock to be issued | ||||||||
| Total mezzanine equity | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock, Series A; par value $; shares authorized, shares issued and outstanding | ||||||||
| Common stock: $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
YUENGLING’S ICE CREAM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended July 31, | For the Nine Months Ended July 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross margin | ( | ) | ( | ) | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Officer compensation | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Change in fair value of derivative | ||||||||||||||||
| Gain on conversion of debt | ||||||||||||||||
| Loss on conversion of debt | ( | ) | ( | ) | ||||||||||||
| Loss on issuance of convertible debt | ( | ) | ||||||||||||||
| Loss on impairment of property and equipment | ( | ) | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic, loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted weighted average shares | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
YUENGLING’S ICE CREAM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2022 AND 2023
(Unaudited)
| Common Stock | Series A Preferred Stock | Additional
Paid in | Common
Stock To Be | Accumulated | Total
Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Issued | Deficit | Deficit | |||||||||||||||||||||||||
| Balance, October 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Stock issued for cash | – | ( | ) | |||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, January 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, April 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock issued for cash | – | |||||||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, July 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Common Stock | Series A Preferred Stock | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance October 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock issued for conversion of debt | – | |||||||||||||||||||||||||||
| Stock issued for services | – | |||||||||||||||||||||||||||
| Stock issued for services – related party | – | |||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, January 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for conversion of debt | – | |||||||||||||||||||||||||||
| Contributed capital | – | – | ||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, April 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for conversion of debt | – | |||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, July 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
YUENGLING’S ICE CREAM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| July 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock compensation – related party | ||||||||
| Stock compensation | ||||||||
| Debt discount amortization | ||||||||
| Change in fair value of derivative | ( | ) | ||||||
| Loss on issuance of convertible debt | ||||||||
| Loss on conversion of debt | ||||||||
| Gain on conversion of debt | ( | ) | ||||||
| Loss on inventory impairment | ||||||||
| Loss on impairment of property and equipment | ||||||||
| Changes in assets and liabilities: | ||||||||
| Other receivable – related party | ( | ) | ||||||
| Accounts receivable | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued compensation – related party | ||||||||
| Accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Issuance of note receivable | ( | ) | ||||||
| Net cash used by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Net payments on the sale of preferred stock | ( | ) | ||||||
| Sale of common stock | ||||||||
| Payment on LOC | ( | ) | ||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from notes payable | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Net cash provided (used) by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Activity: | ||||||||
| Common stock issued for prepaid services | $ | $ | ||||||
| Common stock issued for conversion of debt | $ | $ | ||||||
| Collateral used to reduce LOC | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 7 |
YUENGLING’S ICE CREAM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2023
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS
Yuengling’s Ice Cream Corporation, (f/k/a Aureus, Inc.) (“Yuengling’s,” “YCRM,” “we,” “us,” or the “Company”) was incorporated in Nevada on April 19, 2013, under the name “Aureus Incorporated.” We were initially organized to develop and explore mineral properties in the state of Nevada. Effective December 15, 2017, we changed our name to “Hohme, Inc.,” and, effective February 7, 2019, we changed our name to “Aureus, Inc. and on September 14, 2021, the Company changed their name to Yuengling’s Ice Cream Corporation”. We are currently active in the state of Nevada.
The Company has been a food brand development company with the intention to build and represent popular food concepts throughout the United States and international markets. Management is highly experienced at business integration and re-branding potential. With little territory available for the older brands, we intend to bring to our customers fresh innovative brands that have great potential. All of our brands will be unique in nature as we focus on niche markets that are still in need of development.
We operate two lines of business. Through our subsidiary, YIC Acquisitions Corp. (“YICA”), we acquired the assets of Yuengling’s Ice Cream in June 2019. YICA produces and sells high-quality ice cream without artificial colors, flavoring, or preservatives and no added hormones.
In September 2020, we entered into the micro market segment and launched our second business line, Aureus Micro Markets (“AMM”). Closely tied to the vending machine industry, Micro Markets look and feel like modern convenience stores while functioning with the ease and efficiency of vending foodservice and refreshment services.
On December 9, 2022, the Company entered into an exclusive licensing agreement with GPO Plus, Inc. (OTCQB: GPOX). GPOX will develop a full line of CBD and other hemp derived cannabinoid products based on the iconic flavors of Yuengling’s Ice Cream. The initial term of the Agreement runs through November 30, 2027, with an option to extend for an additional five years. In consideration for the trademark license, GPOX will pay the Company a royalty of 5% of all gross wholesale revenue generated from the sale of Yuengling’s Ice Cream branded products. Additional details regarding products, flavors, launch date and where the product will be sold will be provided in the near future.
On August 29, 2023, the Company announced that is executed a binding letter of intent (“LOI”) with PickleJar Holdings, Inc (“PickleJar”), a Texas-based music and entertainment software company for a proposed business combination (the “Business Combination”). The entity resulting from the Proposed Transaction will continue to carry on the business of PickleJar as a content-driven media network and live entertainment technology services provider, unifying every touchpoint of the fan experience for emerging artists, mid-sized venues, and global brands. The initial term of the LOI runs through September 30, 2023, allowing for the parties to complete their due diligence requirement, with the intent of entering into a definitive agreement prior to September 30, 2023.
In 2022, the Company developed a reorganization plan to explore taking the ice cream business private to better allow the brand to advance. Upon the signing of the PickleJar definitive agreement, the Company has agreed to assign the ice cream assets to Mid Penn Bank in return for the cancellation of the bank debt. The Company also will cease its Aureus Micro Markets operations at the time the PickleJar definitive agreement is signed.
| 8 |
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown and are not necessarily indicative of the results to be expected for the full year ending October 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s financial statements for the year ended October 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with 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. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Restricted Cash
The Company has an obligation to transfer $
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. As of July 31, 2023 and 2022, there are and potentially dilutive shares, respectively, if the Preferred A were to be, converted. As of July 31, 2023, there are also approximately and potentially dilutive shares of common stock for convertible notes payable. As of July 31, 2023 and 2022, the Company’s diluted loss per share is the same as the basic loss per share, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary YIC Acquisitions Corp. All material transactions and balances have been eliminated on consolidation.
| 9 |
Derivative Financial Instruments
The Company evaluates its convertible notes to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. 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 uses a weighted-average Black-Scholes-Merton option pricing 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.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:
Level 1: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.
Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates.
Level 3: Level 3 inputs are unobservable inputs.
The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows: Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable. The items are generally short-term in nature, and accordingly, the carrying amounts reported on the consolidated balance sheets are reasonable approximations of their fair values.
The carrying amounts of Notes Payable approximate the fair value as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of July 31, 2023:
| Schedule of liabilities measured at fair value | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total Gains | ||||||||||||
| Derivative | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of October 31, 2022:
| Description | Level 1 | Level 2 | Level 3 | Total Gains | ||||||||||||
| Derivative | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 10 |
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the condensed consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying unaudited condensed 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. The Company has an accumulated deficit of $
NOTE 4 – INVENTORY
Inventories
are stated at the lower of cost or market. Cost is principally determined using the last-in, first-out (LIFO) method. The Company periodically
assesses if any of the inventory has expired or if the value has fallen below cost. When this occurs, the Company recognizes an expense
for inventory write down. During the current period we recognized $
NOTE 5 - PROPERTY & EQUIPMENT
Property and Equipment are first recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between three and five years.
Long lived assets, including property and equipment, to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Property and equipment stated at cost, less accumulated depreciation consisted of the following:
| Schedule of property and equipment | ||||||||
| July 31, 2023 | October 31, 2022 | |||||||
| Property and equipment | $ | $ | ||||||
| Less: accumulated depreciation | ||||||||
| Property and equipment, net | $ | $ | ||||||
Property and equipment consisted of shelving and
racks purchased for the Aureus Micro Markets business, which has been put on hold. Since the Company has yet to place the fixed assets
into service management determined that they should be fully impaired. The Company recognized impairment expense of $
| 11 |
NOTE 6 – NOTES PAYABLE
On September 9, 2015, the Company issued to Backenald
Corp. a promissory note in the principal amount of $
On
On
On
On
On
On
As of July 31, 2023, the Company was also indebted
to another third party for a total of $
On
NOTE 7 – LOANS PAYABLE
The Company has an SBA loan with monthly payments
that matures on
The Company has a line of credit requiring monthly
payments. On December 24, 2021, $106,201 from a CD was applied to the Line of Credit balance. On April 5, 2023, a property
pledged as collateral by David Yuengling was taken over by Mid Penn Bank. The property’s appraised value of $204,360 was applied
to the principal of the Line of Credit and credited to paid in capital. The balance due on this loan as of July 31, 2023 and October
31, 2022, is $
| 12 |
NOTE 8 – CONVERTIBLE NOTE PAYABLE
On March 2, 2022, the Company issued a convertible
promissory note to Quick Capital, LLC in the amount of $
On September 7, 2022, the Company issued a convertible
promissory note to 1800 Diagonal Lending LLC in the amount of $
On December 8, 2022, the Company issued a Convertible
Promissory Note to 1800 Diagonal Lending LLC in the amount of $
On February 3, 2023, the Company issued a convertible
promissory note to Quick Capital, LLC in the amount of $
The following table summarizes the convertible notes outstanding as of July 31, 2023:
| Schedule of convertible notes and related activity | ||||||||||||||||||||||||||
| Note Holder | Date | Maturity Date | Interest | Balance October 31, 2022 |
Additions | Conversions | Balance July 31, 2023 |
|||||||||||||||||||
| Quick Capital, LLC | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
| 1800 Diagonal Lending LLC | ( |
) | ||||||||||||||||||||||||
| 1800 Diagonal Lending LLC | ( |
) | ||||||||||||||||||||||||
| Quick Capital, LLC | ||||||||||||||||||||||||||
| Total | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
| Less Debt Discount | ( |
) | ( |
) | ||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
A summary of the activity of the derivative liability for the notes above is as follows:
| Schedule of derivative liability | ||||
| Balance at October 31, 2021 | $ | |||
| Increase to derivative due to new issuances | ||||
| Decrease to derivative due to repayments | ||||
| Derivative gain due to mark to market adjustment | ( | ) | ||
| Balance at October 31, 2022 | ||||
| Increase to derivative due to new issuances | ||||
| Decrease to derivative due to conversions | ( | ) | ||
| Derivative gain due to mark to market adjustment | ( | ) | ||
| Balance at July 31, 2023 | $ | |||
| 13 |
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy as of July 31, 2023 is as follows:
| Schedule of unobservable inputs for derivative liabilities | ||||||||
| Inputs | July 31 2023 | Initial Valuation | ||||||
| Stock price | $ | $ | ||||||
| Conversion price | $ |
$ |
||||||
| Volatility (annual) | ||||||||
| Risk-free rate | ||||||||
| Dividend rate | ||||||||
| Years to maturity | ||||||||
NOTE 9 – RELATED PARTY TRANSACTIONS
During the nine months ended July 31, 2023 and
2022, the Company paid Robert Bohorad, CEO, $
On January 14, 2023, the Company granted restricted common shares to Robert C. Bohorad. The Company signed a letter of intent with Mr. Green (Note 9) and Mr. Bohorad on October 26, 2022, where Mr. Bohorad will become Chief Operating Officer and Chief Financial Officer. The purpose of the issuance is to retain and incentivize the individuals in their efforts to manage the Company and foster its success. The shares were valued at $, the closing stock price on the date of grant, for total non-cash compensation of $. The amount is being recognized over a one-year period.
NOTE 10 – COMMON STOCK
During the nine months ended July 31, 2023, Quick
Capital LLC converted $
During the nine months ended July 31 2023, 1800
Diagonal Lending LLC, converted $
On January 14, 2023, the Company granted restricted common shares to Charles Green. The Company signed a letter of intent with Mr. Green and Mr. Bohorad on October 26, 2022, where Mr. Green will join the company as President and CEO. The purpose of the issuance is to retain and incentivize the individuals in their efforts to manage the Company and foster its success. The shares were valued at $, the closing stock price on the date of grant, for total non-cash compensation of $. The amount is being recognized over a one-year period.
| 14 |
NOTE 11 – PREFERRED STOCK
Series A Preferred
The Company has designated Ten Million () shares of Preferred Stock the Series A Convertible Preferred Stock with a par and stated value of $ per share. The holders of the Series A Convertible Preferred Stock are not entitled to receive any dividends.
Except as otherwise required by law or by the Articles of Incorporation and except as set forth below, the outstanding shares of Series A Convertible Preferred Stock shall vote together with the shares of Common Stock and other voting securities of the Corporation as a single class and, regardless of the number of shares of Series A Convertible Preferred Stock outstanding and as long as at least one of such shares of Series A Convertible Preferred Stock is outstanding shall represent Sixty Six and Two Thirds Percent (66 2/3%) of all votes entitled to be voted at any annual or special meeting of shareholders of the Corporation or action by written consent of shareholders. Each outstanding share of the Series A Convertible Preferred Stock shall represent its proportionate share of the 66 2/3% which is allocated to the outstanding shares of Series A Convertible Preferred Stock.
The entirety of the shares of Series A Convertible Preferred Stock outstanding as such time shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into two thirds of the after conversion outstanding fully paid and non-assessable shares of Common Stock. Each individual share of Series A Convertible Preferred Stock shall be convertible into Common Stock at a ratio determined by dividing the number of shares of Series A Convertible Stock to be converted by the number of shares of outstanding pre-conversion Series A Convertible Preferred Stock. Such initial Conversion Ratio, and the rate at which shares of Series A Convertible Preferred Stock may be converted into shares of Common Stock. As of July 31, 2023, there are shares of Series A preferred stock owned by the CEO.
On May 1, 2023, The Company entered into a Series A Preferred Stock Purchase Agreement with Device Corp., of up to $250,000. The Series A Preferred Stock is Convertible into shares of common stock at a 50% discount to the lowest close price of the common stock for the prior thirty trading days.
As of July 31, 2023, the Company has preferred
stock to be issued in the amount of $
Series B Preferred
The Series B preferred stock is convertible into shares of common stock at the option of the holder at a 35% discount to the lowest closing price for the thirty days prior to conversion.
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NOTE 12 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements other than the following.
Upon the signing of the PickleJar Definitive Agreement, the Company has agreed to assign the ice cream assets to Mid Penn Bank in return for the cancellation of the bank debt. The Company also will cease its Aureus Micro Markets operations at the time the PickleJar definitive agreement is signed
On September 15, 2023, Robert C. Bohorad and Charles Green returned a combined 60 million restricted common shares to the Company. These shares were originally issued on January 14, 2023.
On August 23, 2023, the Company entered into a binding Letter of Intent (LOI) with Pickle Jar Holdings Inc. The initial term of the LOI runs through September 30, 2023, allowing for the parties to complete their due diligence requirement, with the intent of entering into a definitive agreement prior to September 30, 2023.
Subsequent to July 31, 2023, Quick Capital LLC, converted $9,565 and $1,700 of principal and interest, respectively, into 36,443,955 shares of common stock.
On September 1, 2023, Quick Capital LLC accepted a payment of $22,000 settling the February 3, 2023, Convertible Promissory Note in full. The funds for the payment to Quick Capital were advanced to the Company by Pickle Jar Holdings Inc.
Subsequent to July 31, 2023, 1800 Diagonal Lending LLC converted $31,340 of principal into 73,672,016 shares of common stock.
On August 25, 2023, the Company Amended its Articles of Incorporation, to designate 5,000,000 of the Authorized preferred stock, par value $0.0001, as Series B Preferred Stock (“Series B”). The Series B is convertible into shares of common stock at the average price of the previous five trading days.
On August 25, 2023, the Company and Device Corp amended the January 18, 2019, and the May 1, 2023 Series A Preferred Stock Purchase Agreements, so that any purchased Series A preferred stock is now Series B preferred stock.
On August 25, 2023, Everett Dickson, Chairman of the Board, agreed to return 4,525,000 shares of Series A preferred Stock to the Company. The shares will be retired by the Company.
On September 1, 2023, 1800 Diagonal Lending LLC accepted a payment of $13,500, settling the December 13, 2022, Convertible Promissory Note in full, including a $10,640 default penalty. The funds for the payment to 1800 Diagonal were advanced to the Company by Mr. Dickson.
Subsequent to July 31, 2023, a third party forgave $5,000 and $6,131 of principal and interest, that was due to the Company.
Subsequent to July 31, 2023, the Company was able to extinguish approximately $99,120 and $48,360 of time barred debt.
On September 12, 2023, The Company amended its Articles of Incorporation, to change the par value of the Preferred stock form $0.001 to $0.0001.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.
Forward-looking Statements
There are “forward-looking statements” contained in this quarterly report. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to conform forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:
| · | Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; | |
| · | Our failure to earn revenues or profits; | |
| · | Inadequate capital to continue business; | |
| · | Volatility or decline of our stock price; | |
| · | Potential fluctuation in quarterly results; | |
| · | Rapid and significant changes in markets; | |
| · | Litigation with or legal claims and allegations by outside parties; and | |
| · | Insufficient revenues to cover operating costs. |
The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.
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Overview
Yuengling’s Ice Cream Corporation, (f/k/a Aureus, Inc.) (“Yuengling’s,” “YCRM,” “we,” “us,” or the “Company”) was incorporated in Nevada on April 19, 2013, under the name “Aureus Incorporated.” We were initially organized to develop and explore mineral properties in the state of Nevada. Effective December 15, 2017, we changed our name to “Hohme, Inc.,” and, effective February 7, 2019, we changed our name to “Aureus, Inc. and on September 14, 2021, the Company changed their name to Yuengling’s Ice Cream Corporation”. We are currently active in the state of Nevada.
We are a food brand development company that builds and represents popular food concepts throughout the United States and international markets. Management is highly experienced at business integration and re-branding potential. With little territory available for the older brands, we intend to bring fresh, innovative brands with great potential. Our brands will be unique as we focus on niche markets that are still in need of development.
We are a food brand development company that builds and represents popular food concepts throughout the United States and international markets. Management is highly experienced at business integration and re-branding potential. With little territory available for the older brands, we intend to bring fresh innovative brands that have great potential to our customers. Our brands will be unique in nature as we focus on niche markets that are still in need of development.
Results of Operations
The three months ended July 31, 2023 compared to the three months ended July 31, 2022
Revenue
For the three months ended July 31, 2023 and 2022, we had revenue of $20 and $0, respectively.
Cost of Revenue
For the three months ended July 31, 2023 and 2022, cost of revenue was $56,211 and $0. In the current period we recognized $56,190 for impairment of inventory.
Officer Compensation
We incurred $60,000 and $15,000 of officer compensation for the three months ended July 31, 2023 and 2022, respectively. The Company is compensating Robert Bohorad, CEO, $5,000 per month. In the current period we also recognized $45,000 of non-cash stock compensation expense as officer compensation.
General and administrative expenses
We had $48,356 of general and administrative expenses (“G&A”) for the three months ended July 31, 2023, compared to $11,334 for the three months July 31, 2022, an increase of $37,022 or 326.6%. The increase is primarily due to the amortization of $45,000 of non-cash stock compensation expense, offset with decreases in other G&A expenses.
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Professional fees
We incurred $8,409 of professional fees for the three months ended July 31, 2023, compared to $16,915 for the three months ended July 31, 2022, a decrease of $8,506 or 50.3%. Professional fees generally consist of audit, legal, accounting and investor relation service fees. The decrease is primarily due to an approximate $1,500 and $9,675 decrease in accounting and legal fees, respectively, offset by a small increase in audit fees.
Other income (expense)
For the three months ending July 31, 2023, we had total other expense of $75,879, compared to total other expense of $23,105 for the three months ended July 31, 2022. In the current period we incurred $47,233 of interest expense, which includes $16,201 of debt discount amortization and recognized a loss of $30,300 for the impairment of property and equipment not being used. In connection with our convertible notes, we also recognized a $2,314 gain for the change in fair value of derivatives, a $2,474 gain on conversion of debt, and a $3,134 loss on conversion of debt. For the three months ended July 31, 2022, we had $23,105 of interest expense which includes $3,431 of debt discount amortization.
Net loss
We incurred a net loss of $248,835 for the three months ended July 31 2023, compared to $66,354 for the three months ended July 31, 2022. Our increase in net loss is primarily due to the $90,000 of non-cash stock compensation and the inventory impairment.
The nine months ended July 31, 2023 compared to the nine months ended July 31, 2022
Revenue
For the nine months ended July 31, 2023 and 2022, we had revenue of $20 and $0, respectively.
Cost of Revenue
For the nine months ended July 31, 2023 and 2022, cost of revenue was $56,211 and $0. In the current period we recognized $56,190 for impairment of inventory.
General and administrative expenses
We had $113,837 of G&A expenses for the nine months ended July 31, 2023, compared to $79,820 for the nine months July 31, 2022, an increase of $34,017 or 42.6%. The increase is primarily due to an increase of consulting expense of $63,900, offset with decreases in other G&A expenses.
Officer Compensation
We incurred $142,500 and $48,000 of officer compensation for the nine months ended July 31, 2023 and 2022, respectively. The Company is compensating Robert Bohorad, CEO, $5,000 per month. In the current period we also recognized $97,500 of non-cash stock compensation expense as officer compensation.
Professional fees
We incurred $47,344 of professional fees for the nine months ended July 31, 2023, compared to $92,060 for the nine months ended July 31, 2022, a decrease of $44,716 or 48.6%. Professional fees generally consist of audit, legal, accounting and investor relation service fees. The decrease is primarily due to an approximate $6,250 and $14,625 decrease in accounting and legal fees, respectively, and a $16,000 decrease for investor relation expense.
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Other income (expense)
For the nine months ending July 31, 2023, we had total other expense of $168,280, compared to total other expense of $66,936 for the nine months ended July 31, 2022. In the current period we incurred $258,448 of interest expense, which includes $159,487 of debt discount amortization and recognized a loss of $30,300 for the impairment of property and equipment not being used. In connection with our convertible notes, we also recognized a $74,564 gain for the change in fair value of derivatives, a $57,234 gain on conversion of debt, a $3,134 gain on conversion of debt and a $38,496 loss for the issuance of convertible debt. For the nine months ended July 31, 2022, we had $67,110 of interest expense which includes $5,718 of debt discount amortization, and $174 of interest income.
Net loss
We incurred a net loss of $558,452 for the nine months ended July 31, 2023, compared to $286,816 for the nine months ended July 31, 2022. Our increase in net loss is primarily due to the $195,000 of non-cash stock compensation and the inventory impairment.
Liquidity and Capital Resources
Cash flow from operations
Cash used in operating activities for the nine months ended July 31, 2023, was $93,479 compared to $237,249 of cash used in operating activities for the nine months ended July 31, 2022.
Cash Flows from Financing
For the nine months ended July 31, 2023, we netted $89,675 from financing activities. We received $55,000 for the issuance of convertible promissory notes and $40,675 from other loans. We repaid $6,000 on a note payable. For the nine months ended July 31, 2022, we used $13,247 in financing activities. We received $187,520 from proceeds from the sale of common stock and $73,500 from the issuance of convertible notes. We repaid $128,738 on our notes payable, $106,201 towards our LOC and $39,328 back to preferred stock to be issued.
Going Concern
As of July 31 2023, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our operations.
We have suffered recurring losses from operations and have not yet generated any revenue. As a result of these and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.
Management’s plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency, and (ii) implementing our plan of operation to generate sales. Our continued existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.
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Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our 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
Refer to Note 2 of our financial statements contained elsewhere in this Form 10-Q for a summary of our critical accounting policies and to Note 2 our financial statements contained in our Form 10-K for a more complete summary of our critical accounting policies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Each of our principal executive and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, using the Internal Control – Integrated Framework (2013) developed by the Committee of Sponsoring Organizations of the Treadway Commission, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on their evaluation, each such person concluded that our disclosure controls and procedures were not effective as of July 31, 2023.
The following aspects of the Company were noted as potential material weaknesses:
| · | Due to our size and limited resources, we currently do not employ the appropriate accounting personnel to ensure (a) we maintain proper segregation of duties, (b) that all transactions are entered timely and accurately, and (c) we properly account for complex or unusual transactions; | |
| · | Due to our size and scope of operations, we currently do not have an independent audit committee in place; | |
| · | Due to our size and limited resources, we have not properly documented a complete assessment of the effectiveness of the design and operation of our internal control over financial reporting. |
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.
Changes in Internal Control over Financial Reporting.
Our management has evaluated whether any change in our internal control over financial reporting occurred during the last fiscal quarter. Based on that evaluation, management concluded that there has been no change in our internal control over financial reporting during the relevant period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Documents furnished as exhibits hereto:
| Exhibit No. | Description | |
| 31.1 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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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.
| YUENGLING’S ICE CREAM CORPORATION | ||
| Date: September 19, 2023 | By: | /s/ Robert C. Bohorad |
| Robert C. Bohorad | ||
| President and Chief Executive Officer | ||
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert C. Bohorad, Chief Executive of Yuengling’s Ice Cream Corporation (the “registrant”) certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: September 19, 2023
| By: | /s/ Robert C. Bohorad | |
| Robert C. Bohorad Chief Executive Officer (Principal Executive) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES—OXLEY ACT OF 2002
In connection with the Report of Yuengling’s Ice Cream Corporation (the “Company”) on Form 10-Q for the quarter ended July 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert C. Bohorad, Chief Executive Officer, certify, pursuant to 18 U.S.C. Sec. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: September 19, 2023
| By: | /s/ Robert C. Bohorad | |
| Robert C. Bohorad, Chief Executive Officer | ||
| (Principal Executive) |