High Sierra Technologies, Inc 10-K/A, filed Jul 27, 2021
High Sierra Technologies, Inc. (HSTI)
About this 10-K/A
High Sierra Technologies, Inc filed this 10-K/A on July 27, 2021, covering the fiscal year ended December 31, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 000-52036
HIGH SIERRA TECHNOLOGIES, INC.
(Exact Name of registrant as specified in its Charter)
| Colorado | 84-1344320 |
| (State or other Jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
1495 Ridgeview Drive, Suite 230A
Reno, NV 89519
(Address of Principal Executive Offices)
(775) 410-4100
(Registrant’s Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition 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 [ ] |
| Non-accelerated filer [X] | Smaller reporting company [X] |
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| Emerging Growth company [X] |
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Aggregate Market Value of Non-Voting Common Stock Held by Non-Affiliates
The market value of the voting and non-voting common stock held by non-affiliates at such date (June 30, 2020) was $14,672,666.34, based on 8,289,642 shares then held by non-affiliates, and a closing bid price of $1.77 per share on June 30, 2020. All of the Company’s outstanding shares are voting shares.
Outstanding Shares
As of April 14, 2021 the Registrant had 20,326,309 shares of common stock outstanding.
Documents Incorporated by Reference
See Part IV, Item 15.
EXPLANATORY NOTES
This Annual Report is being amended to correct a typographical error on the date on the audit report.
Except as otherwise indicated by context, references to the “Company,” “we,” “our,” “us,” “Gulf & Orient” and words of similar import refer to “High Sierra Technologies, Inc.,” a Colorado corporation (formerly known as Gulf & Orient Steamship Company, Ltd.), which is the Registrant, and its wholly-owned subsidiaries, High Sierra Technologies, Inc., a Nevada corporation, and Gulf Acquisition, Inc., a Nevada corporation (“Gulf Acquisition”), which was formed as an acquisition subsidiary.
CAUTIONARY STATEMENTS
There has been no established trading market in our common stock for many years. Additionally, many of the approximately 8,289,642 shares issued to non-affiliates in the acquisition of our wholly-owned subsidiary became saleable under Rule 144 in January 2020, and may now be sold into any trading market that may develop for our shares. These factors may result in uncertainty and volatility in the trading price of our common stock that may not have any relation to our current or future prospects.
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report. These factors include, among others:
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our ability to raise capital;
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our ability to identify suitable acquisition targets;
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our ability to successfully execute acquisitions on favorable terms;
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declines in general economic conditions in the markets where we may compete;
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unknown environmental liabilities associated with any companies we may acquire; and
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significant competition in the markets where we may operate.
You should read any other cautionary statements made in this Annual Report as being applicable to all related forward-looking statements wherever they appear in this Annual Report. We cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this Annual Report completely. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
JUMPSTART OUR BUSINESS STARTUPS ACT DISCLOSURE
We qualify as an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended (the “Securities Act”), as amended by the Jumpstart Our Business Startups Act (the “JOBS Act”). An issuer qualifies as an “emerging growth company” if it has total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year, and will continue to be deemed an emerging growth company until the earliest of:
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| • | the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.0 billion or more; |
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| • | the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement; |
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| • | the date on which the issuer has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or |
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| • | the date on which the issuer is deemed to be a “large accelerated filer,” as defined in Section 240.12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”). |
As an emerging growth company, we are exempt from various reporting requirements. Specifically, we are exempt from the following provisions:
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| • | Section 404(b) of the Sarbanes-Oxley Act of 2002, which requires evaluations and reporting related to an issuer’s internal controls; |
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| • | Section 14A(a) of the Exchange Act, which requires an issuer to seek shareholder approval of the compensation of its executives not less frequently than once every three years; and |
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| • | Section 14A(b) of the Exchange Act, which requires an issuer to seek shareholder approval of its so-called “golden parachute” compensation, or compensation upon termination of an employee’s employment. |
Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. We have elected to use the extended transition period for complying with these new or revised accounting standards. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
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PART I
ITEM 1. BUSINESS
Business Development
We were incorporated in the State of Colorado on May 9, 1996, with an authorized capital of 55,000,000 shares, comprised of 50,000,000 shares of common stock, and 5,000,000 shares of non-voting preferred stock, both with no par value per share. We were formed for the primary purpose of engaging in the business of marine transportation and to provide ocean going shipping of goods internationally.
In May of 1996, we issued “restricted securities” (common stock) at our inception, and conducted an offering under Rule 504 of Regulation D of the Securities and Exchange Commission (the “SEC”). This offering was also conducted in accordance with Section 11-51-308(1)(p) of the Colorado Revised Statutes that allowed “public solicitation” of “accredited investors.” Our proposed business operations were unsuccessful, and we had no material business operations from March 7, 1997 through December 31, 2018.
Copies of our Articles of Incorporation and our By-Laws were attached to our Form 10-SB Registration Statement that was filed with the SEC on June 7, 2006, and were attached to our Form 10-K Annual Report for the period ended December 31, 2013. See Part IV, Item 15.
We voluntarily filed our Form 10-SB Registration Statement so that we could become a “reporting issuer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
On December 31, 2018 (the “Closing Date” or “Closing”), we entered into a Share Exchange Agreement (the “Agreement”) with High Sierra Technologies, Inc., a Nevada corporation (“High Sierra”) and all of the shareholders of High Sierra, pursuant to which we acquired 100% of the issued and outstanding shares of common stock of High Sierra (the “Share Exchange” or “Acquisition”). The Acquisition of High Sierra was consummated on the same date, and High Sierra is now a wholly-owned subsidiary of the Company. The names of the shareholders of High Sierra are listed in the Agreement, a copy of which is attached to our Form 8-K Current Report filed with the SEC on January 2, 2019 as Exhibit 2.1. As consideration for the Share Exchange, we issued a total of 15,433,025 shares of our common stock to the High Sierra shareholders.
The Share Exchange was treated as a recapitalization of the Company for financial accounting purposes. High Sierra is considered the acquirer for accounting purposes, and our historical financial statements before the Share Exchange will be replaced with the historical financial statements of High Sierra.
The issuance of shares of the Company’s common stock to holders of High Sierra’s capital stock in connection with the Share Exchange was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D and/or Regulation S promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.
In connection with the Acquisition of High Sierra, we also issued 1,087,525 shares of our common stock to Michael Vardakis, the former President and director of the Company, for a cash payment of $21,750.50, 120,000 shares of our common stock to Melissa Ladakis, the former Secretary and director of the Company, for services rendered which were valued at $0.02 per share, 30,000 shares of our common stock to Lynette Kelch, for services rendered which were valued at $0.02 per share; and 1,800,000 shares of our common stock to Biored, N.V., a Belgian corporation (“Biored”). Biored loaned the Company $500,000 in early June 2018 at five percent (5.0%) interest per annum. Biored converted the principal amount of its loan ($500,000) and accrued interest of approximately $14,500 to the 1,800,000 shares of our common stock which it received, at a conversion price of approximately $0.2858 per share.
Similarly, the issuance of our shares of common stock to Biored, Mr. Vardakis, Ms. Ladakis and Ms. Kelch was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and Regulation D and/or Regulation S promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.
Under the terms of the Agreement, as consideration for the Acquisition, the shareholders of High Sierra who collectively owned 15,433,025 shares of common stock of High Sierra, received one (1) share of our common stock for each one (1) share of High Sierra common stock exchanged in the transaction. As a result, the High Sierra shareholders, as a group, received 15,433,025 shares of our common stock in the exchange, which represented
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approximately 76.44% of the 20,189,642 issued and outstanding shares of our common stock immediately following the Acquisition.
The Agreement provided that at the Closing the Company would cause its Board of Directors to elect Vincent C. Lombardi to the Company’s Board of Directors to serve together with Michael Vardakis, that the pre-Closing officers of the Company (Michael Vardakis and Melissa Ladakis) would resign, and that the Board of Directors would appoint Vincent C. Lombardi as Chief Executive Officer and President, and Gregg W. Koechlein as the Chief Financial Officer, Secretary and Treasurer of the Company. Mr. Koechlein was also appointed as the Chief Operating Officer. This all occurred on the Closing Date.
On March 25, 2019 a Special Meeting of the Company’s Stockholders was held at which the stockholders voted to change the Company’s name to High Sierra Technologies, Inc., and to approve certain other changes in the Company’s Articles of Incorporation which are described in the Company’s Definitive Proxy Statement. These changes became effective on April 1, 2019. A copy of our Amended and Restated Articles of Incorporation is attached to the Company’s Annual Report for the year ended December 31, 2018 as Exhibit 3.2.
On March 25, 2019 following the shareholder meeting, Michael Vardakis resigned as a director of the Company. On March 26, 2019, Vincent C. Lombardi, as the only remaining director of the Company, appointed Gregg W. Koechlein as a director of the Company to fill the vacancy left by Mr. Vardakis’ resignation.
Description of Business
The Company’s business is now focused on the business of its wholly-owned subsidiary, High Sierra Technologies, Inc. (“High Sierra”). High Sierra was incorporated in the State of Nevada in August of 2018. It was formed with the intention that it would become the assignee, owner and licensor of certain Intellectual Property that was, prior to assignment, the property of Vincent C. Lombardi, Ph.D. (the “Intellectual Property”) who is an officer, director and co-founder of High Sierra. High Sierra was further formed with the goal that it would continue to develop and expand its intellectual property portfolio with an emphasis on the recreational cannabis industry as well as the industrial hemp industry.
The current Intellectual Property portfolio consists of all of the rights, title and interest that Dr. Lombardi had in certain two Provisional Patent Applications (collectively, the “Applications”). Assignments of both of these applications, which assign their ownership to High Sierra, have been filed with the United States Patent & Trademark Office. The Applications have since been incorporated into and converted into two all-encompassing Utility Patent Applications which have been filed with numerous governmental agencies in the United States, Canada and multiple other countries in Europe as is discussed below (collectively the “Utility Patent Applications”). As of the date hereof, there have been two United States Patents issued based on the Utility Patent Application as is also discussed below.
The Intellectual Property
High Sierra now owns two provisional patent applications which it acquired from Dr. Lombardi. The first Application describes a new and novel cannabis product that is produced by removing or significantly reducing the naturally occurring compliment of volatile organic molecules from cannabis, which primarily consist of terpenes, and are collectively known as the essential oils. This new and novel cannabis product embodies any product produced from any of the flowering plants of the genus Cannabis, using any convenient method for removing or significantly reducing the naturally occurring compliment of essential oils, and, which at the same time, generally preserves the naturally occurring compliment of cannabinoids in a product that retains the naturally occurring physical structure of cannabis plant material that is normally consumed by way of smoking (combustion and subsequent inhalation) and also leaves the modified harvested cannabis plant material undamaged and still in a condition that it can be smoked in the same manner as before it was modified by the process and/or processes described herein. As used herein, the term “cannabis” includes industrial hemp which is defined as the plant Cannabis sativa L. having a Δ9-tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis (“Hemp”).
The second Application describes a new and novel cannabis product that is produced by further modifying a cannabis product based on the first Application containing cannabis plant material that has been previously modified by removing or significantly reducing the naturally occurring compliment of volatile organic molecules, which primarily consist of terpenes, and are collectively known as the essential oils, so as to create a low, or no, odor and reduced flavor form of cannabis product. The previously modified cannabis product is then subjected to additional modification, or modifications, consisting of the addition of volatile organic molecules, either naturally occurring or synthetically produced, including, but not limited to, essential oils, flavorings or terpenes and terpenoids so as to cause it to have new and unique odors and flavors.
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By using the techniques and processes covered by the two Applications, High Sierra can create a low, or no, odor and reduced flavor form of cannabis, which can be used in that state or modified to have new and unique odors and flavors.
High Sierra’s Intellectual Property encompasses the dried cannabis plant material, or flower, that is intended to be smoked, as well as any dried cannabis plant material that is intended to be smoked and to which flavoring is added. It should be noted that this technology is also applicable to the use of hemp-based products that are to be smoked both in non-flavored and flavored forms.
The Applications and the Utility Patent Applications are based on the premise that cannabis (also known as marijuana) which is a preparation of the cannabis plant that encompasses at least three genera of flowering plant in the family of Cannabaceae including Cannabis sativa, Cannabis indica and Cannabis ruderalis has a distinct odor and flavor, primarily as a result of several volatile small molecules known as terpenes. These terpenes are also present in the genus of the flowering plant commonly known as hemp. Although the odor and flavor that results from the presence of these terpenes is desirable to many users of cannabis and/or hemp, the strong and pungent odor, as well as the distinctive flavor, is undesirable by others especially due to the fact that the odor lingers after use of cannabis and/or hemp. Additionally, the characteristic odor makes it obvious that a given individual has recently used cannabis and/or hemp. Since a user of hemp is doing so for solely medicinal purposes, High Sierra believes this negative characteristic is of even greater importance to a user of a hemp-based product. Furthermore, the strong and pervasive odor, as well as the distinctive flavor, that results from the presence of these terpenes represents an obstacle for creating a flavored form of cannabis and/or hemp which High Sierra believes to be desirable.
High Sierra has engaged the law firm of Oliff PLC to prosecute its Provisional Patent Applications and its Utility Patent Applications. In January 2019, the two provisional patent Applications were combined into one broad and all-encompassing Utility Patent Application which was filed with the United States Patent and Trademark Office, the Canadian Intellectual Property Office and under the provisions of the Patent Cooperation Treaty (“PCT”) which will afford High Sierra additional temporary protection in an additional 152 other countries.
High Sierra’s current Intellectual Property Applications are specific to the dried cannabis plant material where the characteristic odor and flavor have been removed or significantly reduced as well as products that utilizes the first product. High Sierra believes that its intellectual property may be able to be expanded to include other opportunities in the cannabis and industrial hemp markets. High Sierra is currently attempting to develop such products, independently, and through joint venture arrangements. However, the Company can offer no assurance that High Sierra will be successful in this effort.
High Sierra believes that it is likely that its Provisional Patent Applications and the Utility Patent Applications will be converted into full Utility Patents in due course in both the United States, Canada and numerous countries in Europe. During the time allowed under the provisions of the PCT, High Sierra intends to determine in which foreign countries it will be appropriate to file additional utility patent applications.
The Company’s Patent Pending products and the processes by which they are generated are specific to modified forms of cannabis which have little or none of the characteristic odors common to cannabis, as well as any modified or flavored products produced with the previously modified cannabis products. The Company believes that these products and processes may also be applicable to industrial hemp as defined in the Hemp Farming Act of 2018.
On March 25, 2020, the Company received an International Preliminary Report of Patentability for its Patent Cooperation Treaty Application Number PCT/US2019/014778, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, in which Claims Numbered 1-84 were characterized as novel and Claims Numbered 1-17, 63-70, 83 and 84 were characterized as inventive steps.
On June 5, 2020, the United States Patent and Trademark Office, by way of an Office Action dated May 29, 2020, notified the Company that Claims Numbered 1-17, 63-70 and 83-84 of Patent Application Number 16/255,157, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, were now allowed. These are four of the seven main claims in Patent Application Number 16/255,157. In response to this, the Company’s outside Patent Counsel, Oliff PLC, has filed an Amendment to Patent Application Number 16/255,157 so that these Claims can be issued a formal Notice of Allowance which would then lead to the issuance of a Utility Patent for these Claims. As a result of this action by our attorneys at Oliff PLC, on June 19, 2020, the United States Patent and Trademark Office issued a formal Notice of Allowance and Fee(s) Due which will allow the Utility Patent to be issued once the fees are paid. This Patent was issued as United States Patent Number 10,737,198 on August 11, 2020. The Company’s attorneys at Oliff PLC also prepared a Continuation Application for Claims Numbered 18-62 and 71-82 so that the Company can continue to prosecute these Claims separately. This Continuation Application has resulted in the issuance of United States Patent Number 10,835,829 on November 17, 2020.
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On July 23, 2020, the Company received an Issue Notification from the United States Patent and Trademark Office stating that, on August 11, 2020, the United States Patent and Trademark Office will issue United States Patent Number 10,737,198 to the Company as assignee of Application Number 16/255.157, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, filed by Vincent Lombardi, one of the founders of the Company and its current President and Chief Executive Officer.
Now United States Patents Numbers 10,737,198 and 10,835,839 have been formally issued, the Company intends to begin actively marketing and licensing its patented technologies in both the cannabis and hemp market spaces as well as pursuing its own uses of its patented technologies in relation to various end user products that can benefit from its patented technologies. In regards to the issuance of United States Patents Numbered 10,737,198 and 10.835,839, Vincent C. Lombardi, President and Chief Executive Officer of the Company, has stated that “we believe the effect of the issuance of Patents Numbered 10,737, 198 and 10, 835,839 is that it will allow the Company to be able to effectively control the marketplace for low, or no, odor cannabis and hemp products in the United States which will allow the Company to start generating licensing revenue from the technology disclosed in United States Patents Numbered 10,737,198 and 10,835,839.”
The Company has received a First Office Action on its Canadian Patent Application Number 3,031,123, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, and its attorneys at Oliff PLC and Bereskin & Parr in Canada have responded to it. The Company has also recently amended its Canadian Patent Application so that it accurately reflects the claims embodied in United States Patents Numbered 10, 737, 198 and 10,835,839 as well as the Continuation Application Number 17,098/539 filed on November 16, 2020.
The Company’s outside Patent Counsel, Oliff PLC has completed the Application to the European Patent Office (“EPO”) based on Patent Cooperation Treaty Application Number PCT/US2019/014778, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS. It has been filed as European Patent Office Application Number 19743904.5. The Company has also recently amended its EPO Application so that it accurately reflects the claims embodied in United States Patents Numbered 10, 737, 198 and 10,835,839 as well as the Continuation Application Number 17,098/539 filed on November 16, 2020. This EPO Application, as amended, will allow the Company to simultaneously prosecute its PCT Application in a total of 38 different countries in Europe and the surrounding areas as well as Hong Kong.
Marketing Plans to License the Intellectual Property
High Sierra is now marketing the licensing of its technology in states in the U.S. where cannabis and/or hemp has been legalized both for medicinal and/or recreational use. It also plans to use a similar marketing strategy in all provinces in Canada which has legalized both the medicinal and recreational uses of cannabis as of October 17, 2018. Hemp has long been legal in Canada. High Sierra is targeting entities that are licensed to produce, process and/or manufacture cannabis and/or hemp related products. High Sierra also believes that its technology will be of interest to tobacco companies in the United States, Canada and other places if those companies choose to enter the cannabis and/or hemp marketplaces as the legalization of cannabis and/or hemp progresses.
High Sierra considers every manufacturer of cannabis and/or hemp products a potential customer. Because each is registered with its respective State and are of public record, High Sierra has begun to identify each manufacturer for a direct marketing campaign. High Sierra plans to aggressively exploit what it believes to be niche areas of the cannabis and/or hemp markets that are not currently being addressed.
Presently, manufacturers of cannabis and/or hemp products are limited to selling low-odor cannabis and/or hemp for smoking, as an extract, and are limited to selling flavored product either as an extract for smoking or edibles. While it is possible to produce a flavored dried plant form without first removing the natural complement of terpenes, High Sierra believes that the strong natural smell and flavor makes it impractical to add additional flavoring other than additional terpenes.
Because low odor or no odor cannabis and/or hemp plant material products for smoking are novel and currently do not exist, it is High Sierra’s goal to create a market for such products by demonstrating their utility and desirability. Low-odor cannabis and/or hemp plant material allows one to smoke cannabis and/or hemp without its use being apparent due to the residual smell on the user. It also allows the user the convenience of smoking cannabis and/or hemp in the form of a rolled cigarette or a pipe. Because low-odor and flavored cannabis and/or hemp plant material can be conveniently made into cigarettes, it is High Sierra’s belief that as cannabis and/or hemp gain acceptance according to local and Federal laws, that the large tobacco companies will want to enter the cannabis and/or hemp
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market spaces and will rely on their present business model of selling cigarettes that are pre-packaged. These companies are all potential clients to license High Sierra’s technology.
On October 14, 2020, we entered into an exclusive Letter Agreement with Artemis Holdings, LLC pursuant to which Artemis Holdings, LLC is to assist us in maximizing the value of our patents and patents pending for odorless cannabis. Artemis is to provide a detailed market analysis of the patents and to assist with any licensing or sale of the patents. The agreement is for a period of nine months, and then it automatically renews for additional one month periods until either party terminates it. The Company will pay Artemis a fee of $5,000 per month during the term, and a transaction fee of 7.5% of the gross proceeds of any transaction (sale, license, etc.) arranged by Artemis. A copy of the Letter Agreement is attached to our Quarterly Report on Form 10-Q for the period ended September 30, 2020 as Exhibit 10.22.
Consulting Agreement
On August 14, 2020, we entered into a non-exclusive Consulting Agreement with Stanley Berk/Steven Leatherman (“SBSL Consultants”) and Jeff Baclet/Tom Prutzman (“Consultants”) pursuant to which the SBSL Consultants and other Consultants agreed to review short term and long term business forecasts for the Company, review documents for due diligence purposes, seek out private and public funding for the Company, and seek out potential licensing partners and potential buyers of the Company’s intellectual property. They referred the Company to Artemis Holdings, LLC. See above. The term of the Agreement was for six months. The Company agreed to pay a consulting fee of $7,500 per month (to be deferred until the Company has raised at least $500,000), and 5.0% of funds raised from any source brought to the Company by the Consultants. The Consultants were also granted warrants to purchase 5.0% of the securities sold in such fundraising at the same price, which is exercisable for a period of 5 years. This August 14, 2020 Consulting Agreement was amended on December 28, 2020 to now be effective as of January 1, 2021. Under the terms of this amendment the term of the Agreement became one year ending on December 31, 2021. The consulting fees were reduced to $1,200.00 per month, a potential bonus of $45,000 was incorporated, the referral fees were reduced to 2% and the warrants to be issued were set at to 2.5% of the value of certain transactions caused by Admiral Investment Banking and 2% of the value of certain transactions caused by Artemis Holdings Group, LLC. A copy of this Amended Consulting Agreement is attached hereto as Exhibit 10.8.
Admiral Investment Banking Agreement
On December 28, 2020 the Company entered into an Agreement with Admiral Investment Banking (“Admiral”) to market our Private Placement Offering of 2,000,000 shares of common stock to accredited investors. The Agreement is for the period of one year and has certain renewal provisions. The Agreement provides for commissions of 8% of monies generated by Admiral to be paid to Admiral. It also provides for an override of 2% to be payable to Admiral in the event of the inclusion of another broker/dealer in a transaction. The Agreement also provides for the issuance of warrants to Admiral or its principals in certain instances if so designated by Admiral. The warrants are exercisable at $0.01 per share for a period of five (5) years after the issuance date and cover a total of 50,000 shares.
Failure of Industrial Hemp Farming Crop and Activities
In 2019 High Sierra entered into a Lease Agreement for the use of 200 acres of land in McDermitt, Nevada to be used as an experiment for determining the viability of operating a large-scale hemp farming concern. Concurrently with the execution of the Lease Agreement, High Sierra also entered into a Consulting Agreement with the owner of the land for his services in managing the farming activities. In approximately November 2019, management determined that it was not in the best interest of High Sierra to continue to spend money on the farm due to the failure of the crop. The failure of the crop was, largely due to inconsistencies in the quality of seeds that are commercially available as well as logistical issues with respect to managing farming activities. The hemp seeds purchased and planted by the Company had the following three basic problems: (a) too many male plants were produced and male plants produce little or no CBD; (b) one-third of the crop was too high in its THC content and had to be destroyed; and (c) the resulting crop that could be harvested had very little biomass with a very low CBD content.
High Sierra is now in the process of determining the best use of the equipment that was purchased for use in the farming activities.\
High Sierra has identified a growing market place for hemp cigarettes especially those that can benefit from High Sierra’s patented and patent pending technologies. It is the intention of High Sierra to enter into this market place as soon as possible after it receives sufficient funding from its Private Placement Offerings. The Company can offer no assurance that it will successfully raise the funds needed to enter into this market place.
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General Information Concerning Cannabis and Hemp and Related Regulatory Laws
Currently, cannabis is consumed in three forms. The dried plant material that is smoked, extracts of cannabis that are smoked using devices such as e-cigarettes, and cannabis consumables. Hemp based products may also be consumed by these same three methods as well as being used as a topical application to the skin. High Sierra’s Intellectual Property is currently specific for dried cannabis plant material, including hemp, which is intended to be consumed by smoking which High Sierra believes to be the largest segment of the cannabis related market.
Recreational cannabis is now currently legal in eleven states and the District of Columbia and medicinal cannabis is legal in 33 states, the District of Columbia, Guam and Puerto Rico. Thirteen states and the U.S. Virgin Islands have passed laws decriminalizing cannabis in some form. In addition, Canada has legalized both medicinal and recreational cannabis in all provinces as of October 17, 2018. Hemp, which is defined as cannabis, with a tetrahydrocannabinol (THC) content of less than 0.3%, has long been legalized in Canada. It should be noted that cannabis continues to be illegal at the Federal level in the United States. It should be further noted that, with the President’s signature on the Hemp Farming Act of 2018 that was passed overwhelmingly by Congress, the non-psychoactive components of cannabis, such as cannabidiol will become legal in all states and will cease to be controlled substances that come under the authority of the Food and Drug Administration.
With the enactment on December 20, 2018 of the Hemp Farming Act of 2018, hemp and/or cannabidiol based products are no longer classified as controlled substances. High Sierra believes that its technology will also be readily applicable to hemp and/or cannabidiol based products that may be consumed via combustion and subsequent inhalation and/or ingestion in various forms. Because there are currently known uses of hemp and/or cannabidiol products that use combustion and subsequent inhalation as a method of consumption, High Sierra believes that such producers and users of these products will see a similar advantage to the use of High Sierra’s technologies as do the producers and users of medical and recreational cannabis products that are consumed via combustion and subsequent inhalation and/or ingestion in various forms.
Because High Sierra’s business model is based on (1) the licensing of its technology, and (2) the production and marketing of hemp cigarettes using its various patented and patent pending technologies, it is not necessary for High Sierra to handle, sell or distribute cannabis in order to benefit from the rapidly expanding cannabis market. Accordingly, High Sierra is not directly subject to the limitations imposed by these existing Federal laws in the United States as they may relate to cannabis. With the enactment on December 20, 2018 of the Hemp Farming Act of 2018, hemp-based products have ceased to be controlled substances that come under the authority of the Drug Enforcement Administration thus providing High Sierra an opportunity in a new marketplace that is not subject to the same level of Federal regulation as is the marijuana form of cannabis. This puts High Sierra in a unique position to benefit from the rapidly expanding cannabis and hemp industries, while at the same time, not being directly subject to the Federal controlled substance laws of the United States.
Market Place Overview
According to a report by the Brightfield Group, the global cannabis market is currently estimated to be worth $7.7 billion and will likely experience a compound annual growth rate of 60 percent as other countries liberalize their marijuana laws. It should also be noted that Wall Street analysts have projected that the change in the laws related to cannabis in Canada could create as much as $5 billion in additional sales. The international market for cannabis is projected to hit $31.4 billion by 2021, according to a report from the Brightfield Group. Cowen & Co. has estimated that U.S. cannabis sales could reach $75 billion by 2030. Furthermore, a report by the European investment bank Bryan, Garnier & Co., projects legal global cannabis market will grow by more than 1,000% over the next decade and could reach $140 billion by 2027.
According to 2016 statistics reported by the State of Washington, sales of cannabis flower represented 61% of total cannabis product sales. Because of the new and novel nature of High Sierra’s product, it’s difficult to estimate the potential market; however, if one assumes that cigarette sales statistics are a reflection of potential cannabis sales, methanol cigarette sales are estimated to represent 30% of total tobacco sales (Lorillard, Inc. 2012 Form 10-K, p. 40. U.S. Securities and Exchange Commission). High Sierra believes that cannabis products that employ its technology (with respect to utilizing unflavored product as the starting material to make a flavored product) will create a significant addition to the existing cannabis markets. High Sierra further believes that it is reasonable to project a similar percentage of flavored cannabis sales as opposed to non-flavored cannabis sales. If trends for tobacco cigarettes are an indication of future cannabis cigarette sales, flavored cannabis cigarettes could represent a market of $1.4 billion (based on $7.7 billion total 2016 cannabis sales, 61% cannabis flower sales, and 30% flavored cannabis sales). High Sierra believes that it may earn significant licensing revenue from licensing its existing technology, based on its proposed 10% licensing fee. If large tobacco companies enter the cannabis marketplace, they are likely to represent a new and highly significant licensing revenue source for High Sierra.
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Of the five Western states that have legalized cannabis, the first-year sales for each state were significant. Nevada had first year sales of approximately $425 million (based on only 6 months of sales in 2017), Colorado had first year sales of approximately $303 Million, Washington had first year sales of approximately $259 million and Oregon had first year sales of approximately $241 million. According to BDS Analytics, it is projected that California will have sales in excess of $3.7 billion it its first year of legalization (2018). Additionally, Colorado reported 2017 sales of approximately $1.5 billion, Washington reported 2017 sales of approximately $1.3 billion and Oregon reported 2017 sales of approximately $500 million (based on recreational dispensary sales only. According to projections by BDS Analytics and Acrview Market Research, the market for cannabis-based products approached nearly $10 billion in 2017 which represents a 33% increase over 2016. Both companies indicate that this percentage of annual increase will continue to grow based on more states legalizing cannabis for recreational use and the recent change in the laws in Canada that went into effect on October 17, 2018.
Currently, companies such as Canopy Growth, Cronos Group and Tilray which are based in Canada have begun to be traded both on the NASDAQ and the New York Stock Exchange. Constellation Brands has recently invested $4 billion in Canopy Growth based on its belief in the strong future for the market place for cannabis.
It should be noted that none of these statistics or projections include products based on the non-psychoactive components of cannabis, such as hemp and/or cannabidiol. These are markets that Statista has estimated will grow from $108 million in 2014 to $1.5 billion in 2022. In 2016, Forbes predicted that these markets are likely to grow 700% by 2020. High Sierra believes that its opportunities will be increased with its proposed entrance into the non-psychoactive components of cannabis, such as hemp and/or cannabidiol marketplaces.
Competition
High Sierra is not aware of any other companies that are working on similar technology that can be applied to cannabis and/or hemp flower products to remove or significantly reduce the odor and flavor of such products which are consumed by smoking and/or ingestion. However, High Sierra believes that eventually there may be competitors. High Sierra believes that it will have an early competitive advantage being the first to enter this line of business and file for patent protection as has been discussed in other places herein. It believes that its Provisional Patent Applications and its Utility Patent Applications, if granted, will give High Sierra some significant protection from competing companies.
There are numerous other companies and individuals that compete in the hemp cigarette market place. Some of those companies are substantially larger than we are and some may have much greater financial resources than we do. We can offer no assurance that we will be able to compete successfully against our competitors in this line of business.
Employees
As of the date of this Report, we have only four part-time employees who are our officers Vincent C. Lombardi, Gregg W. Koechlein, Jeffrey M. Pogol and Glenn C. Miller, and no full time employees. Mr. Lombardi, Mr. Koechlein and Mr. Pogol each devote approximately sixteen (16) hours per week to the business of the Company, and Mr. Miller devotes approximately eight (8) hours per week to the business of the Company. They may be compensated for their part time services on an as needed basis. For example, on February 26, 2021, we issued 10,000 shares of our restricted common stock to Jeffrey M. Pogol and 10,000 shares of our restricted common stock to another service provider for services rendered valued in the amount of $2,000 each, and on January 1, 2021 Gregg W. Koechlein was paid $7,500 for services. We have no written employment agreements. We have never experienced a work stoppage and believe our relationship with our employees is good.
Effect of Existing or Probable Governmental Regulations on our Business
We are subject to the following regulations of the SEC and applicable securities laws, rules and regulations:
Smaller Reporting Company
We are subject to the reporting requirements of Section 13 of the Exchange Act, and subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting company.” That designation will relieve us of some of the informational requirements of Regulation S-K applicable to larger companies.
Sarbanes/Oxley Act
We are also subject to the Sarbanes/Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthen auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for
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financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; auditor attestation to management’s conclusions about internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act will substantially increase our legal and accounting costs.
Exchange Act Reporting Requirements
Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders at special or annual meetings thereof or pursuant to a written consent will require us to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.
We are also required to file Annual Reports on SEC Form 10-K and Quarterly Reports on SEC Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on SEC Form 8-K.
Emerging Growth Company
We are and we will remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012(the “JOBS Act”), until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of the completion of this primary offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed a "large accelerated filer" (with at least $700 million in public float) under the Exchange Act.
As an "emerging growth company", we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
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only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis” disclosure;
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reduced disclosure about our executive compensation arrangements;
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no requirement that we hold non-binding advisory votes on executive compensation or golden parachute arrangements; and
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exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
We have taken advantage of some of these reduced burdens, and thus the information we provide stockholders may be different from what you might receive from other public companies in which you hold shares. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time as we cease being an “emerging growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act (“SOX”) requiring that
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independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports.
Start-up Stage
The Company is in the start-up stage and has generated no revenue as of the date hereof. In the past three (3) years, we have been funded primarily through loans from non-related third parties, our officers, directors and our shareholders.
Cost and Effects of Compliance with Environmental Laws
Our current business operations are not subject to any material environmental laws, rules or regulations that would have an adverse material effect on our business operations or financial condition or result in a material compliance cost.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to provide risk factors; however, for information on risk factors, see the Risk Factors section of our Form 8-K Current Report dated December 31, 2018 and previously filed with the SEC on January 2, 2019.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2: PROPERTIES
The Company’s only place of business is located at 1495 Ridgeview Drive, Suite 230A, Reno, Nevada 89519. The space rented by the Company consists of office space with a fixed monthly payment for utilities.
ITEM 3: LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding and, to the knowledge of our management; no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than 5% of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.
ITEM 4: MINE SAFETY DISCLOSURES
None; not applicable.
PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
There is no “established trading market” for our shares of common stock. Our shares of common stock are listed on the OTC Bulletin Board of the Financial Industry Regulatory Authority, Inc. (“FINRA”) under the symbol “GLFO;” however, management does not expect any established trading market to develop in our shares of common stock unless and until we have material operations. In any event, no assurance can be given that any market for our common stock will develop or be maintained. If a public market ever develops in the future, the sale of shares of our common stock that are deemed to be “restricted securities” pursuant to Rule 144 of the SEC by members of management or others may have a substantial adverse impact on any such market. See the heading “Rule 144” below for requirements of resales of shares of our common stock under Rule 144.
There has been no established trading market in our common stock for many years. Additionally, many of the approximately 8,289,642 shares issued to non-affiliates in the acquisition of our wholly-owned subsidiary became saleable under Rule 144 in January 2020, and may now be sold into any trading market that may develop for our shares. These factors may result in uncertainty and volatility in the trading price of our common stock that may not have any relation to our current or future prospects.
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Set forth below are the high and low closing bid prices for our common stock for each quarter of 2020 and 2019. These bid prices were obtained from OTC Markets, Inc. All prices listed herein reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.
| Period | High | Low |
| January 1, 2020 through March 31, 2020 | $1.57 | $1.00 |
| April 1, 2020 through June 30, 2020 | $2.02 | $1.57 |
| July 1, 2020 through September 30, 2020 | $3.87 | $1.77 |
| October 1, 2020 through December 31, 2020 | $4.57 | $3.87 |
| January 1, 2098 through March 31, 2019 | $1.25 | $1.25 |
| April 1, 2019 through June 30, 2019 | $1.25 | $1.25 |
| July 1, 2019 through September 30, 2019 | $1.25 | $1.25 |
| October 1, 2019 through December 31, 2019 | $1.25 | $1.25 |
Rule 144
The following is a summary of the current requirements of Rule 144:
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| Affiliate or Person Selling on Behalf of an Affiliate | Non-Affiliate (and has not been an Affiliate During the Prior Three Months) |
| Restricted Securities of Reporting Issuers | During six-month holding period – no resales under Rule 144 Permitted. After Six-month holding period – may resell in accordance with all Rule 144 requirements including: · Current public information, · Volume limitations, · Manner of sale requirements for equity securities, and · Filing of Form 144. | During six- month holding period – no resales under Rule 144 permitted. After six-month holding period but before one year – unlimited public resales under Rule 144 except that the current public information requirement still applies. After one-year holding period – unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements. |
| Restricted Securities of Non-Reporting Issuers | During one-year holding period – no resales under Rule 144 permitted. After one-year holding period – may resell in accordance with all Rule 144 requirements including: · Current public information, · Volume limitations, · Manner of sale requirements for equity securities, and · Filing of Form 144. | During one-year holding period – no resales under Rule 144 permitted. After one-year holding period – unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements. |
Shell Companies
Rule 144 is generally unavailable for the resale of shares of stock of publicly reporting shell companies. After such a company ceases to be a shell company, then Rule 144 may become available for the resale of its outstanding shares beginning 12 months after it files “Form 10 information” with the SEC. We believe that we are no longer a shell company following the closing of our acquisition of our High Sierra subsidiary, and that Rule 144 became available one (1) year following the filing of our Current Report on Form 8-K which was filed on January 2, 2019. We believe that many of the approximately 8,289,642 shares issued to non-affiliates in the acquisition of our wholly-owned subsidiary became saleable under Rule 144 in January 2020, and may now be sold into any trading market that may develop for our shares.
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Section 4(a)(1) of the Securities Act
Since we were a shell company as defined in subparagraph (i) of Rule 144 up until December 31, 2018 when we acquired our High Sierra subsidiary, our shares of common stock that were issued while or after we became a shell company were not able to be publicly resold under Rule 144 until approximately January 2, 2020, one (1) year following the filing of our Current Report on Form 8-K which was filed on January 2, 2019.
Holders
We currently have approximately 69 stockholders, not including an indeterminate number who may hold shares in “street name”.
Dividends
We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty, and if and until we determine to engage in any business or we complete any acquisition, reorganization or merger, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.
Securities Authorized for Issuance under Equity Compensation Plans
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) |
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| (a) | (b) | (c) |
| Equity compensation plans approved by security holders | None | None | None |
| Equity compensation plans not approved by security holders | None | None | None |
| Total | None | None | None |
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
During the last two (2) years, we have not issued any unregistered securities other than the following:
1.
The Company issued 100,000 shares of its common stock for consulting services on May 26, 2019 valued at $100,000, which was the fair market value of the stock. The shares were not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering. The shares received a restricted legend. The agreement was later rescinded and the shares of common stock were returned on December 30, 2019 and cancelled.
2.
The Company issued 100,000 shares of its common stock for product (seeds) on May 26, 2019 valued at $100,000, which was the fair market value of the stock. The shares were not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering. The shares received a restricted legend. The agreement was later rescinded and the shares of common stock were returned on December 30, 2019 and cancelled.
3.
In the three month period ended September 30, 2020, we sold 73,333 shares of our restricted common stock to a total of three investors for total proceeds of $110,001. In the three months ended December 31, 2020 we sold 33,334 shares of our restricted common stock to one investor for total proceeds of $50,000. The shares were sold in reliance on the exemption in Section 4(2) of the Securities Act of 1933 for transactions not involving any public offering. The certificates representing the shares bear a restricted legend, and the persons acquiring the shares represented that they acquired the shares with investment intent.
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4.
In the three months ended December 31, 2020, we sold three Series 2 Senior Convertible Secured Promissory Notes in the respective amounts of $10,000 (on October 23, 2020), $10,000 (on October 23, 2020) and $30,000 (on November 2, 2020) to three investors. A form of the Series 2 Senior Convertible Secured Promissory Note is attached hereto as Exhibit 10.09. The Notes bear interest at 8.0% per annum, have a three year term, and the Maturity Dates are automatically extended for successive six month periods in the event the Company has not raised gross proceeds from its October 1, 2020 private offering or financing from any other source or sources of at least $1,000,000. Each Note is secured on a pro rata basis with the other Notes by the assets of the Company. Each Note is automatically converted into shares of our common stock at a price of $1.50 per share once we have generated gross proceeds of $1,000,000 from the October 1, 2020 private offering or financing from any other source or sources. The holders of the Notes may also voluntarily convert the balances owed under the Notes at an earlier time at the same conversion price of $1.50 per share. Each Note holder will also be issued warrants to purchase shares of our restricted common stock at $1.50 per share at the time of conversion in an amount equal to 50% of the face amount of the Note, which are exercisable for a period of three years.
5.
On February 26, 2021, the Company issued 10,000 shares of its restricted common stock to its Vice President Jeffrey M. Pogol, and 10,000 shares of its restricted common stock to another service provider, for services rendered which were valued at $2,000 each. On the same day, the Company issued 10,000 shares of its restricted common stock to Mark Beloyan, a principal of Tradespot Markets and Admiral Investment Banking, pursuant to the exercise of a warrant at an exercise price of $0.01 per share. The shares were sold in reliance on the exemption in Section 4(2) of the Securities Act of 1933 for transactions not involving any public offering. The certificates representing the shares bear a restricted legend, and the persons acquiring the shares represented that they acquired the shares with investment intent.
Use of Proceeds of Registered Securities
There were no proceeds received during the calendar year ended December 31, 2020, from the sale of registered securities.
Purchases of Equity Securities by Us and Affiliated Purchasers
Except as described above under the heading “Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities,” during the last three fiscal years, there were no purchases of any equity securities of ours by us or any person on our behalf; nor were there any purchases of our equity securities by any affiliate of ours during the last three fiscal years.
ITEM 6: SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
Statements made in this Annual Report, which are not purely historical, are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
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Plan of Operation
Our plan of operation for the next 12 months is to: (i) market the licensing of the Company’s technology in states in the U.S. where cannabis and/or hemp has been legalized both for medicinal and/or recreational use, and in the Canadian provinces; and (ii) seek to raise additional equity funding so that the Company may pursue the construction and operation of a facility to produce and market hemp cigarettes to be located in Northern Nevada. During the next 12 months, our cash requirements include expenses to market our technology; expenses to construct and operate a facility to produce and market hemp cigarettes to be located in Northern Nevada; the payment of our SEC reporting and filing expenses, including associated legal and accounting fees; and costs incident to maintaining our good standing as a corporation in our state of organization. We anticipate that we will need to raise additional equity funds to successfully commence and operate a facility to produce and market hemp cigarettes. We have no commitments to raise any additional funds at the present time, and we can offer no assurance that we will be able to raise additional funds on terms acceptable to the Company.
Liquidity and Capital Resources
We had total current assets of $41,770 consisting entirely of cash and $469,893 in total current liabilities as of December 31, 2020. Our total current liabilities of $469,983 consisted of notes payable $375,500, notes payable-related party of $23,306, accounts payable and accrued expenses of $58,373 and accounts payable and accrued expenses-Related party of $12,714. See our Plan of Operation above for information about our cash requirements for the next 12 months.
The Company also has $125,695 in property, plant and equipment, net, and $50,000 in long term liabilities which are in notes payable. All of the $50,000 in long term liabilities are convertible.
For a description of the various loans that the Company has received during the year ended December 31, 2020, and subsequent to December 31, 2020, see footnotes 5, 6 and 8 to the Company’s financial statements included herein. The Company intends to repay these loans from selling the Company’s hemp farming equipment and from raising additional capital. The Company can offer no assurance that it will be successful in its efforts to raise additional capital.
See the Exhibit Index below to determine where copies of the various promissory notes are located. The Company may seek additional loans from third parties on the same or similar terms in the near future on an as needed basis, but the Company can offer no assurance that additional funds will be available to the Company.
Results of Operations
Year Ended December 31, 2020 Compared Year Ended December 31, 2019
We had no revenues during the year ended December 31, 2020. We hope to start earning revenues during the present fiscal year ending December 31, 2021.
We incurred general and administrative expenses of $222,561 for the year ended December 31, 2020, an increase of $22,531 over the $200,030 of general and administrative expenses incurred during the year ended December 31, 2019. We incurred depreciation of $35,350 in the year ended December 31, 2020 as compared to $15,705 incurred in the year ended December 31, 2019. We sustained a crop loss of $246,914 in the year ended December 31, 2019 due to the poor quality of the seeds that were purchased. We had no crop loss expense in the year ended December 31, 2020.
We incurred interest expense of $42,955 in the year ended December 31, 2020, an increase of $29,926 from the $13,029 of interest expense incurred in the year ended December 31, 2019. The increase is due to the increase in aggregate principal balance of the Notes Payable in the later period from increased borrowings, and increases in interest rates in some of the Notes Payable in the later period. We also incurred interest expense - related party of $4,645 in the year ended December 31, 2020, an increase of $4,076 from the $569 of interest expense - related party incurred in the year ended December 31, 2019. The increase is due to the increase in aggregate principal balance of the Notes Payable-Related Party in the later period from increased borrowings, and increases in interest rates in some of the Notes Payable-Related Party in the later period.
We incurred a net loss of $305,511, or approximately $0.02 per share, in the year ended December 31, 2020, which is $170,736 less than the net loss of $476,247 incurred in the year ended December 31, 2019. The decrease in the net loss incurred in the later period is largely attributable to the reduction of $246,914 in crop loss in the later period, partially offset by increases of $22,531 in general and administrative expenses and increases in interest expense, interest expense-related party and depreciation incurred in the later period.
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Capital Resources
The cash flows from operating activities during the year ended December 31, 2020 consisted of the following: The net loss of $305,511 partially offset by $35,350 in depreciation, $74,500 in warrant expense, a $12,145 increase in accounts payable and accrued expenses – related party, and a decrease of $4,171 in accounts payable and accrued expenses resulting in net cash used in operating activities of $187,687.
The cash flows from operating activities during the prior year ended December 31, 2019 consisted of the following: The net loss of $476,247 partially offset by $15,705 in depreciation, an increase of $37,120 in accounts payable and accrued expenses and an increase of $569 in accounts payable and accrued expenses – related party, resulting in net cash used in operating activities of $422,853.
We had no net cash used in investing activities in the year ended December 31, 2020, as compared to $176,750 net cash used in the year ended December 31, 2019 from the purchase of property, plant and equipment.
The cash flows from financing activities during the year ended December 31, 2020 consisted of the following: We received cash proceeds from the sale of common stock of $160,001, proceeds from notes payable of $25,500, proceeds from convertible notes payable of $50,000, proceeds from notes payable – related party of $18,749, and repayments on notes payable – related parties of $30,000, resulting in net cash provided by financing activities of $224,250.
The cash flows from financing activities during the year ended December 31, 2019 consisted of the following: We received cash proceeds from notes payable of $350,000 and cash proceeds from notes payable – related parties of $34,577, resulting in net cash provided by financing activities of $384,557.
Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has sustained operating losses during the current year-to-date and may not achieve the level of profitable operations to sustain its activities. These factors raise substantial doubt as to its ability to obtain debt and/or equity financing and achieve profitable operations.
Management intends to raise additional operating funds to fund operations for the next 12 months through proceeds to be received from the planned sale of our hemp farming equipment, and through raising funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company it may be required to curtail its operations.
Emerging Growth Company Critical Accounting Policy Disclosure
The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging grown company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company may elect to take advantage of the benefits of this extended transition period in the future.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements of any kind for the year ended December 31, 2020.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
17
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HIGH SIERRA TECHNOLOGIES, INC.
AND SUBSIDIARIES
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and December 31, 2019
18
HIGH SIERRA TECHNOLOGIES, INC.
CONTENTS
|
| PAGE |
|
|
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 20 |
|
|
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| CONSOLIDATED BALANCE SHEETS | 21 |
|
|
|
| CONSOLIDATED STATEMENTS OF OPERATIONS | 22 |
|
|
|
| CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) | 23 |
|
|
|
| CONSOLIDATED STATEMENTS OF CASH FLOWS | 24 |
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|
|
| NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS | 25 |
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
High Sierra Technologies, Inc.
Reno, Nevada
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of High Sierra Technologies, Inc. (the Company) as of December 31, 2020 and 2019, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has minimal operations which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since 2015.
Pinnacle Accountancy Group of Utah
(a dba of Heaton & Company, PLLC)
Farmington, Utah
April 14, 2021
20
| HIGH SIERRA TECHNOLOGIES, INC. | ||||||
| Consolidated Balance Sheets | ||||||
| December 31, 2020 and 2019 | ||||||
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|
|
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| December 31, | ||
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|
|
|
| 2020 |
| 2019 |
| ASSETS | ||||||
|
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
| |
|
|
| Cash |
| $ 41,770 |
| $ 5,207 |
|
|
|
|
|
|
|
|
|
|
| Total Current Assets |
| 41,770 |
| 5,207 |
|
|
|
|
|
|
|
|
|
| Property, Plant and Equipment, net |
| 125,695 |
| 161,045 | |
|
|
|
|
|
|
|
|
|
|
| Total Assets |
| $ 167,465 |
| $ 166,252 |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||
|
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
| |
|
|
| Notes payable |
| $ 375,500 |
| $ 350,000 |
|
|
| Notes payable-Related party |
| 23,306 |
| 34,557 |
|
|
| Accounts payable and accrued expenses |
| 58,373 |
| 62,544 |
|
|
| Accounts payable and accrued expenses-Related party |
| 12,714 |
| 569 |
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
| 469,893 |
| 447,670 |
|
|
|
|
|
|
|
|
|
| Long Term Liabilities |
|
|
|
| |
|
|
| Convertible notes payable |
| 50,000 |
| - |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities |
| 519,893 |
| 447,670 |
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
| - |
| - | |
|
|
|
|
|
|
|
|
|
| Stockholders’ (Deficit) |
|
|
|
| |
|
|
| Preferred stock, no par value, non-voting, 5,000,000 shares |
|
|
|
|
|
|
| authorized, 0 shares issued and outstanding |
| - |
| - |
|
|
| Common stock, no par value, 50,000,000 shares authorized; |
|
|
|
|
|
|
| 20,296,309 and 20,189,642 issued and outstanding at |
|
|
|
|
|
|
| December 31, 2020 and 2019 |
| 471,849 |
| 237,348 |
|
|
| Accumulated (Deficit) |
| (824,277) |
| (518,766) |
|
|
| Total Stockholders' (Deficit) |
| (352,428) |
| (281,418) |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities and Stockholders' (Deficit) |
| $ 167,465 |
| $ 166,252 |
The accompanying footnotes are an integral part of these consolidated financial statements.
21
HIGH SIERRA TECHNOLOGIES, INC.
Consolidated Statements of Operations
|
|
|
| Years Ended | ||
|
|
|
| December 31, | ||
|
|
|
| 2020 |
| 2019 |
|
|
|
|
|
|
|
| Revenues |
| $ - |
| $ - | |
|
|
|
|
|
|
|
|
| Total revenues |
| - |
| - |
|
|
|
|
|
|
|
| Operating Expenses |
|
|
|
| |
|
| Depreciation |
| 35,350 |
| 15,705 |
|
| Crop loss |
| - |
| 246,914 |
|
| General and administrative |
| 222,561 |
| 200,030 |
|
|
|
|
|
|
|
|
| Total operating expenses |
| 257,911 |
| 462,649 |
|
|
|
|
|
|
|
| (Loss) from operations |
| (257,911) |
| (462,649) | |
|
|
|
|
|
|
|
| Other (expense) |
|
|
|
| |
|
| Interest (expense) |
| (42,955) |
| (13,029) |
|
| Interest (expense)-Related party |
| (4,645) |
| (569) |
|
|
|
|
|
|
|
|
| Total other (expense) |
| (47,600) |
| (13,598) |
|
|
|
|
|
|
|
| (Loss) before income taxes |
| (305,511) |
| (476,247) | |
|
| Income taxes |
| - |
| - |
|
|
|
|
|
|
|
| Net (loss) |
| $ (305,511) |
| $ (476,247) | |
|
|
|
|
|
|
|
| (Loss) per share-Basic and diluted |
| $ (0.02) |
| $ (0.02) | |
|
|
|
|
|
|
|
| Weighted average shares outstanding- |
|
|
|
| |
|
| Basic and diluted |
| 20,215,453 |
| 20,309,094 |
The accompanying footnotes are an integral part of these consolidated financial statements.
22
| HIGH SIERRA TECHNOLOGIES, INC. | ||||||||||||
| Consolidated Statements of Stockholders' (Deficit) | ||||||||||||
| For the Years Ended December 31, 2020 and 2019 | ||||||||||||
|
| ||||||||||||
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| ||||||||||||
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|
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|
|
|
|
| Preferred Stock |
| Common Stock |
| Accumulated |
| Stockholders' | ||||
|
|
| Shares |
| Amount |
| Shares |
| Amount |
| (Deficit) |
| (Deficit) |
| Balance-January 1, 2019 |
| - |
| $ - |
| 20,189,642 |
| $ 237,348 |
| $ (42,519) |
| $ 194,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) for the year ended December 31, 2019 |
| - |
| - |
| - |
| - |
| (476,247) |
| (476,247) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance-December 31, 2019 |
| - |
| - |
| 20,189,642 |
| 237,348 |
| (518,766) |
| (281,418) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued for cash |
| - |
| - |
| 106,667 |
| 160,001 |
| - |
| 160,001 |
| Warrants issued for consulting expenses |
| - |
| - |
| - |
| 74,500 |
| - |
| 74,500 |
| Net (loss) for the year ended December 31, 2020 |
| - |
| - |
| - |
| - |
| (305,511) |
| (305,511) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance-December 31, 2020 |
| - |
| $ - |
| 20,296,309 |
| $ 471,849 |
| $ (824,277) |
| $ (352,428) |
The accompanying footnotes are an integral part of these consolidated financial statements.
| HIGH SIERRA TECHNOLOGIES, INC. | |||
| Consolidated Statements of Cash Flows | |||
|
| |||
|
| Years Ended | ||
|
| December 31, | ||
|
| 2020 |
| 2019 |
|
|
|
|
|
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
| Net (loss) | $ (305,511) |
| $ (476,247) |
| Adjustments to reconcile net loss to net cash used |
|
|
|
| in operating activities: |
|
|
|
| Depreciation | 35,350 |
| 15,705 |
| Warrants issued for consulting expenses | 74,500 |
| - |
| Changes in operating assets and liabilities: |
|
|
|
| Increase (decrease) in accounts payable and accrued expenses | (4,171) |
| 37,120 |
| Increase in accounts payable and accrued expenses-Related party | 12,145 |
| 569 |
|
|
|
|
|
| Net cash used in operating activities | (187,687) |
| (422,853) |
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
| Purchase of property, plant and equipment | - |
| (176,750) |
|
|
|
|
|
| Net cash used in investing activities | - |
| (176,750) |
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
| Proceeds from sale of common stock | 160,001 |
| - |
| Proceeds from notes payable | 25,500 |
| 350,000 |
| Proceeds from convertible notes payable | 50,000 |
|
|
| Proceeds from notes payable – related party | 18,749 |
| 34,557 |
| Repayments on notes payable-related party | (30,000) |
| - |
|
|
|
|
|
| Net cash provided by financing activities | 224,250 |
| 384,557 |
|
|
|
|
|
| Net increase (decrease) in cash | 36,563 |
| (215,046) |
|
|
|
|
|
| CASH AT BEGINNING OF PERIOD | 5,207 |
| 220,253 |
|
|
|
|
|
| CASH AT END OF PERIOD | $ 41,770 |
| $ 5,207 |
|
|
|
|
|
| SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
| Cash paid for interest | $ 14,500 |
| $ 2,250 |
| Cash paid for income taxes | $ - |
| $ - |
The accompanying footnotes are an integral part of these consolidated financial statements.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
NOTE 1- Summary of History and Significant Accounting Policies
Nature of Operations
Gulf & Orient Steamship Company, LTD. (“Gulf” or the “Company”) was incorporated in the State of Colorado on May 9, 1996. Gulf originally intended to engage in the business of marine transportation.
On December 31, 2018, Gulf entered into a Share Exchange Agreement with High Sierra Technologies, Inc., a Nevada corporation (“High Sierra”), and all of its shareholders. The shareholders of High Sierra were issued shares of the Gulf’s common stock on a one for one share basis in exchange for their shares of High Sierra’s common stock. High Sierra became a wholly-owned subsidiary of Gulf in the business combination. The Share Exchange was treated as a reverse merger and recapitalization, and as a result, the consolidated financial statements are presented under successor entity reporting, with an inception date of August 6, 2018. Subsequently Gulf’s name was changed to High Sierra Technologies, Inc.
High Sierra Technologies, Inc., the wholly-owned subsidiary, was incorporated in the State of Nevada on August 6, 2018. It was formed with the intention that it would become the assignee, owner and licensor of certain Intellectual Property (the “Intellectual Property”) that was, prior to assignment, the property of Vincent C. Lombardi, Ph.D., who is an officer, director and co-founder of the subsidiary. The subsidiary was further formed with the goal that it would continue to develop and expand its intellectual property portfolio with an emphasis on the recreational cannabis industry as well as the industrial hemp industry.
Through its subsidiary, the Company is a start-up that develops patents and other products used in the processing of cannabis, including industrial hemp, and will license these technologies to companies in the industry. The Company will likely incur research and development expenses in the future and intends to develop a policy regarding the same. The Company was growing industrial hemp on a 200-acre property it leased in McDermitt, Nevada and incurred expenses in relation to this project and the failure of the crop during 2019 (see Note 3).
Basis of Presentation and Consolidation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.
The Company consolidates its subsidiaries in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, "[t]he usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50% of the outstanding voting shares of another entity is a condition pointing toward consolidation." All inter-company transactions have been eliminated during consolidation.
Concentration of Risk
The Company places its cash and temporary cash investments with established financial institutions. At times, such cash and investments may be in excess of the FDIC insurance limit.
25
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation - Stock Based Compensation which requires the measurement and recognition of compensation expense based on grant date fair values for all share-based awards made to third parties, employees and directors, including stock options. Effective January 1, 2019, the Company adopted ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
ASC 718 requires companies to estimate the fair value of share-based awards to employees and directors on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by the Company's stock price as well as assumptions regarding a number of subjective variables. These subjective variables include but are not limited to the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.
Upon the adoption of ASU 2018-07, the Company measures the fair value of equity instruments for non-employee payment awards on the grant date.
Investment in Growing Crops
The Company’s Investment in Growing Crops represented the total cost of the crop inputs in the ground. These were recorded at cost and were to be expensed to cost of goods sold once the crops were harvested and sold.
The crop harvest failed and the Company incurred a $246,914 loss from the preparation, planting and harvesting of the crop during 2019.
Long-lived Assets
Long-lived assets are stated at cost. Maintenance and repairs are expensed as incurred. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, which is five years.
Where an impairment of a property’s value is determined to be other than temporary, impairment for the estimated potential loss is recorded to adjust the property to its net realizable value.
When items of building or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. The Company does not have any long-lived tangible assets, which are considered impaired as of December 31, 2020 and 2019.
The Company applies the provisions of ASC 360-10, Property, Plant and Equipment, where applicable to all long-lived assets. ASC 360-10 addresses accounting and reporting for impairment and disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360-10. ASC 360-10 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
26
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Intangible Assets
Goodwill and intangible assets are reviewed for potential impairment in accordance with ASC 350, Intangibles - Goodwill and Other, whenever events or circumstances indicate that their carrying amounts may not be recoverable. The Company had no such intangibles at December 31, 2020 and 2019, and recorded no impairment losses during the years ended December 31, 2020 and 2019. The Company currently writes off all costs related to any intangible assets it has or is acquiring to current operating expenses.
Revenue Recognition
The Company applies ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company will recognize revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue as each performance obligation is satisfied.
Advertising
Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2020 and 2019 were $0.
Fair Value of Financial Instruments
The Company adopted ASC 820, Fair Value Measurements and Disclosures, which provides a framework for measuring fair value under GAAP. 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. The standard also expands disclosures about instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 — Quoted prices for identical assets and liabilities in active markets;
Level 2 — Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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 periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.
27
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Emerging Growth Company Critical Accounting Policy Disclosure
The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging grown company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has chosen to “opt out” of such extended transition period, and as a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.
Income Taxes
The Company accounts for income taxes under ASC 740-10-30, Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. 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 the statements of operations in the period that includes the enactment date.
The Company adopted ASC 740-10-25, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. ASC 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of ASC 740-10-25.
Loss Per Share
Net loss per common share is computed pursuant to ASC 260-10-45, Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period, unless their effect is anti-dilutive due to continuing losses. As of December 31, 2020, the Company had a total of 83,333 (50,000 from outstanding warrants and 33,333 from convertible notes payable) potentially dilutive shares outstanding. As of December 31, 2019, there were no potentially dilutive shares outstanding.
Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations or financial position.
28
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
NOTE 2 – Financial Condition and Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has sustained operating losses during the current year and may not achieve the level of profitable operations to sustain its activities. These factors raise substantial doubt as to its ability to obtain debt and/or equity financing and achieve profitable operations.
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. Ultimately, the Company will need to achieve profitable operations in order to continue as a going concern.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be required to curtail its operations.
NOTE 3 – Investment in Growing Crops
Investment in growing crops consisted of the cost of the crop inputs in the ground at December 31, 2019 and were recorded at cost and were expensed to Crop Loss on the statement of operations during the fourth quarter of 2019 since the crop harvest and related farming activities failed. The Company incurred a loss from the crop activities in the amount of $246,914 during 2019. The Company is continuing to pursue opportunities in the recreational and industrial cannabis industries, but is not currently engaging in the growing of crops.
NOTE 4 – Property and Equipment
At December 31, 2020 and 2019, property and equipment consisted of the following:
|
| Useful Lives | December 31, 2020 |
| December31, 2019 |
|
|
|
|
|
|
| Equipment | 5 | $ 176,750 |
| $ 176,750 |
| Less: accumulated depreciation |
| (51,055) |
| (15,705) |
|
|
| $ 125,695 |
| $ 161,045 |
Depreciation expense was $35,350 and $15,702 for the years ended December 31, 2020 and 2019, respectively.
29
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
NOTE 5 – Notes Payable
The Company’s debt consists of the following:
|
| December 31, 2020 | December 31, 2019 |
| Notes payable, 12-16% interest, interest and principal due June 6, 2021 through August 12, 2021, unsecured(1)(2) | $ 375,500 | $ 350,000 |
|
|
|
|
| Notes payable-Series 2 Senior Convertible Secured Promissory Notes, 8% interest, interest and principal due October 21, 2023 through November 2, 2023(3) | 50,000 | - |
|
|
|
|
| Total due | 425,500 | 350,000 |
| Current Portion | 375,500 | 350,000 |
| Long-term portion | $ 50,000 | $ - |
(1)
One note for $50,000 includes as an additional return on the debt a 3% interest in the Gross Crop Yield from the Company’s hemp crop in McDermitt, NV. No accrual has been made for this interest due to failure of crop and no proceeds received from a Gross Crop Yield. This note was purchased by another note holder and the additional return from a Gross Crop Yield was eliminated.
(2)
All notes that have become due to the date of this report have been extended to a future due date, as per above date ranges.
(3)
The Series 2 Notes contain certain automatic and voluntary conversion provisions. The Payee shall have the option to voluntarily convert this Note to shares of the common stock of the Company, at any time during the Term of this Note, or any extension of the note. The shares so converted shall be at the price of the securities being currently offered in the Offering, or $1.50. The Payee shall also be issued Warrants for the purchase of common stock in the Company with a value equal to fifty percent (50%) of the face amount of this Note and effective as of the date of any Conversion to shares of common stock in the Company. Such Warrants shall be priced at $1.50 per share during the three-year term of this Note or any extension of this Note.
The Company has incurred an interest expense of $42,955 and $13,029 during the years ended December 31, 2020 and 2019. The Company has interest accrued on the above notes in the amount of $31,985 and $29,819 at December 31, 2020 and 2019.
NOTE 6 – Notes Payable-Related Party
The Company’s related party debt consists of the following:
|
| December 31, 2020 | December 31, 2019 |
| Notes payable, 12% interest, interest and principal due June 30, 2021, unsecured(1) | $ 23,306 | $ 34,557 |
|
|
|
|
| Total due | 23,306 | 34,557 |
| Current Portion | 23,306 | 34,557 |
| Long-term portion | $ - | $ - |
(1)
All notes that have become due to the date of this report have been extended to a future due date as per the date range listed above.
30
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
During the years ended December 31, 2020 and 2019, the Company borrowed $18,749 and $34,557, respectively, from our current President and director, Vincent C. Lombardi, in order to cover expenses being incurred in connection with the Company’s commercial hemp farming activities and general and administrative expenses as detailed below. A repayment of $30,000 on these related party notes was made in 2020 and none during the year ended December 31, 2019.
The Company has incurred an interest expense of $4,645 and $569 during the years ended December 31, 2020 and 2019, respectively. The Company has interest accrued on the above notes in the amount of $5,214 and $569 at December 31, 2020 and 2019.
NOTE 7 – Income Taxes
The Company adopted the provisions of ASC 740-10. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740-10 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The application of income tax law is inherently complex. Laws and regulation in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding the income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.
The Company has no unrecognized tax benefit, which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit during the year ended December 31, 2020.
We classify interest and penalties arising from the underpayment of income taxes in the statement of income under general and administrative expenses. As of December 31, 2020, we had no accrued interest or penalties related to uncertain tax positions.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
31
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
The components of deferred income tax assets (liabilities) at December 31, 2020 and 2019, were as follows:
As of December 31, 2020:
|
|
|
|
|
|
| Balance | Rate | Tax |
| Federal loss carryforward | $749,777 | 21% | $ 157,453 |
| Valuation allowance |
|
| (157,453) |
| Deferred tax asset |
|
| $ - |
As of December 31, 2019:
|
| Balance | Rate | Tax |
| Federal loss carryforward | $518,957 | 21% | $ 108,941 |
| Valuation allowance |
|
| (108,941) |
| Deferred tax asset |
|
| $ - |
Due to the passage of the “Tax Cuts and Jobs Act” on December 20, 2017 the rate of the U.S. Federal Income Tax dropped from 34% to 21%, which is a flat percentage tax rate used for the calculation of the deferred income tax assets.
The new law also changes the rules on NOL carry forward. The 20-year limitation was eliminated, giving the taxpayer the ability to carry forward losses indefinitely. However, utilization of NOL carry forwards arising after January 1, 2018, will now be limited to 80 percent of taxable income.
The income tax provision differs from the amount on income tax determined by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations for the years ended December 31, 2020 and 2019 due to the following:
|
|
| 2020 |
| 2019 | |
|
|
|
|
|
| |
| Income tax (benefit) expense | $ | (64,157) | $ | (100,012) | |
| Non-deductible expenses |
| 15,645 |
| - | |
| Increase in valuation allowance |
| 48,512 |
| 100,012 | |
| Provision for income taxes | $ | - | $ | - | |
NOTE 8 – Capital Changes
Offering of Securities
Common stock
We are offering a maximum of 2,000,000 Shares of common stock (“Shares”) exclusively to “accredited investors”. There is no minimum number of Shares to be sold pursuant to this offering other than the minimum purchase requirement. The offering price is $1.50 per Share ($3,000,000). This offering became effective February 4, 2020.
The Company has sold and issued 106,667 shares of its common stock under this offering to independent investors for gross proceeds of $160,001.
32
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
Secured Convertible Notes
Additionally, we are offering up to $1,000,000 in Series 2 Senior Convertible Secured Promissory Notes exclusively to “accredited investors”. The Notes will be in a minimum face amount/increment of $10,000 for a term of three years and shall bear interest at a rate at eight Percent (8%) per annum. The Notes will automatically convert to Common Stock of the Company if the Company has received $1,000,000 from its offering or any other source or sources at a conversion price of $1.50 per share. The Notes can also be voluntarily converted by the holder. The Payee shall also be issued Warrants for the purchase of common stock in the Company with a value equal to fifty percent (50%) of the face amount of the Note and effective as of the date of any Conversion to shares of common stock in the Company. Such Warrants shall be priced at $1.50 per share during the three-year term of the Note or any extension of the Note.
The Company has sold $50,000 of the Series 2 Senior Convertible Secured Promissory Notes in 2020.
These securities have not been registered with the United States Securities and Exchange Commission or with any state securities agency. These securities are being offered pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended pursuant to Rule 506 of Regulation D, and from the registration requirements of the securities laws of the states in which the securities will be offered. The securities are subject to certain restrictions on resale and may be resold only as permitted under applicable federal and state securities laws.
Warrants
Under an Investment Banking Agreement, the Company issued 50,000 warrants. The exercise price per share of the Common Stock under this Warrant is $.01 and is fully vested on the Issue Date and is non-cancellable nor non-redeemable.
Common Stock Purchase Warrants
As of December 31, 2020 and 2019, the following common stock purchase warrants were outstanding:
|
|
| Warrants |
|
|
| Weighted Average Exercise Price |
| ||
| Outstanding – December 31, 2018 |
|
| - |
|
|
| $ | - |
|
| Granted |
|
| - |
|
|
|
| - |
|
| Canceled/forfeited |
|
| - |
|
|
|
| - |
|
| Exercised |
|
| - |
|
|
|
| - |
|
| Outstanding – December 31, 2019 |
|
| - |
|
|
|
| - |
|
| Granted |
|
| 50,000 |
| (1) |
|
| .01 |
|
| Canceled/forfeited |
|
| - |
|
|
|
| - |
|
| Exercised |
|
| - |
|
|
|
| - |
|
| Outstanding – December 31, 2020 |
|
| 50,000 |
|
|
| $ | .01 |
|
(1) The Company granted 50,000 common stock purchase warrants in December 2020 to exercise at a purchase price of $.01. During 2020, none of the purchase warrants were exercised.
33
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
The fair value of the outstanding common stock purchase warrants was calculated using the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
|
|
| Measurement date |
| |
| Dividend yield |
|
| 0% |
|
| Expected volatility |
| 97.90~172.75% |
| |
| Risk-free interest rate |
| 0.16~1.72% |
| |
| Expected life (years) |
| 2.71~5.00 |
| |
| Stock Price |
|
| $1.50 |
|
| Exercise Price |
|
| $0.01 |
|
The Company recorded $74,500 to general and administrative expense for the value of the warrants granted in 2020.
NOTE 9 – Contingencies, Commitments, Legal Matters and Consulting Agreements
Management of the Company has conducted a diligent search and concluded that there were no commitments, contingencies, or legal matters pending at the balance sheet dates, other than what has been disclosed below. The Company has entered into several Consulting Agreements for the marketing of its securities, all of which will terminate in the year 2021.
On May 13, 2019, the Company entered into an Agricultural Lease for approximately 200 acres in Northern Nevada to plant its Hemp Grow for 2019. The Company is no longer operating under this Agricultural Lease. Thus there are no contingent liabilities thereunder.
The term of the lease is for five years commencing May 18, 2019 through May 17, 2024.
There are no minimum fixed monthly payments due on this lease, but an annual participation bonus in an amount equal to fifteen percent of the gross crop yield from the leasehold properties. The Gross Crop Yield is defined by the actual amount received from the crop harvest less all expenses derived from the growing, processing and sale of the crop harvested from the Property.
The Company is solely responsible for all crop care, labor, irrigation, insurance, taxes, repairs and maintenance of the crop, equipment and other costs of planting, raising and harvesting of crops. The Company is responsible for all other miscellaneous cost to grow and take it to market. As the Company is no longer engaged in the activities contemplated by the Agricultural Lease, the Company is no longer subject to any such liabilities.
Due to the lease payments being variable, the Company has not recorded a right of use asset or lease liability on the balance sheet and will recognize the variable lease payments in the period when the obligation for those payments has occurred in accordance with ASC 842, Leases.
No gross crop yields have been achieved by the Company to date, and therefore no lease payments have been made or required under the lease terms. The Hemp Grow farming activities were ceased at the end of 2019 and the leased property is not currently being used by the Company.
34
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
NOTE 10 – Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2020 through the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described immediately below.
In 2021, the Company issued 20,000 shares total of its common stock to two unrelated parties. 10,000 of the shares were issued for $2,000 of services rendered, and the other 10,000 shares were issued pursuant to the exercise of a warrant at an exercise price of $0.01 per share. Also in 2021, the Company issued 10,000 shares of its common stock to its Vice President, Jeffrey M. Pogol, for $2,000 of services rendered.
35
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None; Not applicable.
ITEM 9A: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer concluded that our disclosure controls and procedures were not effective. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management evaluated the effectiveness of our internal controls over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO” - 2013) in Internal Control – Integrated Framework. Based on this evaluation, our management, with the participation of the Chief Executive Officer and our Chief Financial Officer, concluded that, as of December 31, 2020, our internal controls over financial reporting were not effective.
Our internal controls are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives, (ii) the Company does not have an audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.
In order to mitigate the foregoing material weakness, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will continue to reassess this matter to determine whether improvement in segregation of duty is feasible. In addition, we would need to expand our board to include independent members.
36
This Annual Report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None; not applicable.
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Identification of Directors and Executive Officers
Below are the names of and certain information regarding the Company’s current executive officers and directors. All of these persons were appointed effective as of the closing of the acquisition of High Sierra:
|
|
|
|
|
| Date Named to Board of Directors/as Executive Officer | |
| Name |
| Age |
| Position | ||
| Vincent C. Lombardi |
| 56 |
| Director, Chief Executive Officer and President |
| December 2018 |
| Gregg W. Koechlein |
| 72 |
| Chief Financial Officer, Chief Operating Officer, Treasurer, Secretary and Director |
| December 2018 as an officer and March 2019 as a Director |
| Glenn C. Miller |
| 70 |
| Chief Scientific Officer |
| December 2018 |
| Jeffrey M. Pogol |
| 62 |
| Vice President |
| December 2019 |
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.
The authorized number of directors to constitute our Board of Directors is presently two. Pursuant to the terms of the Share Exchange Agreement, High Sierra and the Company agreed that the Company’s Board of Directors, as of the Closing of the Share Exchange, would consist of two members. Our Board of Directors is now comprised of Messrs. Lombardi and Koechlein. Executive officers are appointed by the Board of Directors and serve at its pleasure.
The principal occupation and business experience during the past five years for our executive officers and directors is as follows:
Vincent C. Lombardi, Ph.D., President, Chief Executive Officer and Director
Dr. Lombardi has served as the Company’s Chief Executive Officer, President and as a Director since December 31, 2018. He has served in those capacities for High Sierra since its inception in August 2018 and continues to do so.
37
For the past five years, Dr. Lombardi has managed a basic and clinical research program. He received his Ph.D. in Biochemistry from the University of Nevada, Reno in 2006. He has previously served as the Director of Research for the Nevada Center for Biomedical Research and is also an Adjunct Assistant Professor of Biochemistry with the University of Nevada, College of Agriculture, Biotech, Natural Resources. While Dr. Lombardi is a classically trained Biochemist, he has extensive research experience in the field of Immunology and specifically, in studying the innate immune system and how it relates to chronic disease. He also has substantial experience in clinical research, has authored dozens of peer-reviewed scientific publications. Prior to his career in science, Dr. Lombardi worked in the investment industry from 1983 to 1999 as a securities broker, an over-the-counter securities trader and as an investment banker. Dr. Lombardi is the inventor of High Sierra’s intellectual property and will guide the Company as its President and Chief Executive Officer.
Gregg W. Koechlein, Esq., Chief Operating Officer, Chief Financial Officer, Secretary, Treasurer, General Counsel and Director
Mr. Koechlein has served as the Company’s Chief Operating Officer, Chief Financial Officer, Secretary, Treasurer and General Counsel since December 31, 2018. He has served as a Director since March 2019. He has served in those capacities for High Sierra since its inception in August 2018 and continues to do so. Mr. Koechlein has maintained an active law practice for the last five years focusing mainly on transactional work, state and federal court litigation and federal appellate work. He has also provided consulting services to various clients in the medical, clinical laboratory and restaurant sectors. Mr. Koechlein received his Juris Doctor degree from the Loyola Law School in Los Angeles, California in 1984. He brings to the Company over 33 years of legal experience and over 45 years of business experience. From 1987 to 1989 Mr. Koechlein was Vice President of Manufacturing and General Counsel of Super Shops, Inc. He served as its President, Chief Operating Officer and General Counsel from 1989 to 1997. As President, he was responsible for all operational and strategic aspects of a chain of 165 retail stores in 31 states, employing nearly 2000 people. These operations included a mail order sister company startup that had first year annual revenues of $35 million. During his tenure, Super Shops, Inc. grew from 53 to 165 stores, one to four warehouses and the annual consolidated revenues grew from $80 million to approximately $250 million. During this same time period, the Mallory, Inc. subsidiary nearly tripled its annual revenues.
Jeffrey M. Pogol, Vice President
Mr. Pogol was elected as a Vice President of the Company in December 2019. Mr. Pogol has over 30 years of experience in the field of sales and marketing. In 1985 he served as a sales closer at the Tahoe Sands Resort in Tahoe Vista, California. From 1988 to 1992 Mr. Pogol was the head of High Technology Sales for Migent Software Company located in Incline Village, Nevada. From 1992 to 1995 Mr. Pogol served as a High Technology Sales Representative for the Market Broadcasting Corporation. From 1995 to 1998 Mr. Pogol was an owner/partner in a clothing retailer known as Name Brand Liquidators in Truckee, California. Since that time, Mr. Pogol has worked in the Mortgage Banking Industry. During this period, Mr. Pogol has earned numerous awards and honors for excellence in sales and team leadership.
Glenn C. Miller, Ph.D., Chief Scientific Officer
Dr. Miller serves as the Company’s Chief Scientific Officer. He has served in those capacities for High Sierra since its inception in August 2018 and continues to do so. For the past five years, Dr. Miller has managed a basic research program. Dr. Miller is a Professor of Natural Resources and Environmental Science at the University of Nevada, Reno. He received his B.S. in Chemistry from the University of California, Santa Barbara and a Ph.D. in Agricultural and Environmental Chemistry (1977) from the University of California at Davis. Following graduate studies, he spent a year of postdoctoral study at the EPA’s Environmental Research Laboratory in Athens, Georgia. He has been on the UNR faculty since 1978 and was Director of the Graduate Program in Environmental Sciences and Health from 1996-2006 and Director of the Center for Environmental Sciences and Engineering from 1999-2003. Dr. Miller also currently serves on the State of Nevada’s Medical Marijuana Independent Laboratory Advisory Committee. As a member of the Scientific Advisory Committee, Dr. Miller brings over 40 years of scientific experience to the Company.
38
Scientific Advisory Committee
The Company’s Scientific Advisory Committee consists of Karen Schlauch, Ph.D., Timothy Bailey, Ph.D. and Ruben Dagda, Ph.D. Its purpose is to advise the Board of Directors concerning scientific matters related to the development and application of existing and new technologies. Persons may be elected to, and removed from, the committee by vote of the Company’s Board of Directors. Certain information concerning the persons who serve on the committee follows:
Karen Schlauch, Ph.D.
Dr. Schlauch received a B.S. Mathematics / Computer Science from the University of Illinois in 1989. She received a M.A. in Mathematics in 1991 from Eastern Illinois University as well as a M.S. in Mathematics from New Mexico State University in 1994. Dr. Schlauch received her Ph.D. in Mathematics from New Mexico State University in 1998. She completed her Post-Doctoral Fellowship in 2000 at the National Center for Genome Resources in Santa Fe, New Mexico. Her interest in the fields of human biostatistics and bioinformatics began with research at the human genetics research institute at DeCODE Genetics in Reykyavik, Iceland, and continued with genomics research in obesity and liver disease at George Mason University and INOVA Fairfax Hospital, as well as at the genotyping facility at the Boston University School of Medicine. Her current work is centered on providing developing new and robust mathematical and (bio)statistical tools to analyze large whole-genome datasets for researchers state-wide, including GWAS studies, next-generation experiments, and Mass Spectrometry studies.
Timothy Bailey, Ph.D.
Dr. Bailey received a B.S. in Mathematical Science in 1977 from Stanford University. He received both a M.S. in 1991 and a Ph.D. in Computer Science from the University of California, San Diego. He completed a Post-Doctoral Fellowship at the San Diego Supercomputer Center in 2000 and a second Post-Doctoral Fellowship at the Karolinska Institute in Stockholm, Sweden in 2001. From 2002 to 2015, Dr. Bailey was a Professor and held various Research Fellowships at the University of Queensland, Brisbane, Old, Australia. Dr. Bailey was the creator of the sequence motif discovery algorithm “MEME”. This is one of the most heavily used software tools in bioinformatics and has been used to discover and characterize patterns in DNA, RNA and protein sequences. These patterns encode biological signals such as transcription binding sites, splice junctions and the active sites of enzymes. The discovery and characterization of motifs has been important in the study of many biological processes including the regulation of gene expression. MEME has been used and cited over 7000 times. MEME was one of the first algorithms introduced to attack the problem of motif discovery in unaligned sets of sequences, and continues to be used by thousands of biologists each year. In addition to motif discovery tools, Dr. Bailey’s research has also developed several widely-used tools used for scanning DNA, RNA or protein sequences for motifs represented as weight matrices. These tools can look for sequences enriched in a set of motifs (MAST), individual motif occurrences (FIMO and GLAM2Scan), and sequences containing clusters of motifs characteristic of gene regulatory modules (MCAST).
Ruben Dagda, Ph.D.
Dr. Dagda received his Ph.D. in pharmacology from the University of Iowa and his postdoctoral training in neuropathology at the University of Pittsburgh School of Medicine. He is currently investigating the molecular mechanisms that lead to mitochondrial dysfunction and oxidative stress in cell culture, tissue and animal models of Parkinson’s disease. He has authored over 42 research manuscripts and review articles in the areas of toxicology, mitochondrial function, autophagy, neurodegeneration, neuropathology and neurobiology. As an Associate Professor at the University of Nevada, Reno School of Medicine, he is currently investigating the pathological mechanisms by which neurons degenerate in models of Parkinson’s disease and Alzheimer’s disease. He currently holds a provisional patent to develop intranasal formulations that can restore brain energy, and reverse neurodegeneration and motor symptoms as shown by in vivo animal models of Parkinson’s disease. In addition, he is the director of the Cell Imaging and Metabolic Core that is equipped with state-of-the art automated fluorescent imager and several metabolic analyzers to screen for compounds that can reverse neurodegeneration and mitochondrial dysfunction at the University of Nevada, Reno School of Medicine.
39
Directorships Held in Other Reporting Companies
None of our directors or executive officers is a director of a company that is required to file reports under Sections 15 or 13(d) of the Exchange Act.
Director Independence
We have no independent directors at the present time. We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.”
Family Relationships
There are no family relationships among our Directors or executive officers.
Involvement in Certain Legal Proceedings
During the past 10 years, no director, promoter or control person of the Company:
·
has filed a petition under federal bankruptcy laws or any state insolvency laws, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
·
was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting the following activities:
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
Engaging in any type of business practice; or
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
·
was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in the preceding bullet point, or to be associated with persons engaged in any such activity;
·
was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
·
was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding
40
by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
·
was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
any Federal or State securities or commodities law or regulation; or
any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
any law or regulation prohibiting mail or wire fraud in connection with any business activity; or
·
was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, or any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Promoters and control persons.
See the heading “Transactions with Related Persons” in Part III, Item 13, below.
Compliance with Section 16(a) of the Exchange Act
Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review during the fiscal year ended December 31, 2020, Mr. Pogol did not file an initial Form 3 Report when he became an officer of the Company, nor did he file a Form 4 report when he acquired 10,000 shares of the Company’s common stock on February 26, 2021. He is in the process of completing and filing those reports now.
Code of Ethics
We have adopted a Code of Ethics for our principal executive and financial officers. Our Code of Ethics was filed as an Exhibit to Amendment No. 2 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 7, 2019.
Corporate Governance
Nominating Committee
We have not established a Nominating Committee because of our limited operations; and because we have only two directors and executive officers, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee. Following the entry into any business combination or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated and undertaken by new management.
Audit Committee
We have not established an Audit Committee because of our limited operations; and because we have only two directors and executive officers, we believe that we are able to effectively manage the issues normally considered by an Audit Committee. Following the entry into any business combination or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated and undertaken by new management.
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ITEM 11: EXECUTIVE COMPENSATION
The following tables disclose certain compensation information concerning the Company’s officers and directors during the past two fiscal years. Please note that Michael Vardakis resigned as an officer on December 31, 2018 and as a director on March 25, 2019, and Jeffrey M. Pogol became a Vice President in December 2019.
SUMMARY COMPENSATION TABLE
| Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d) | Stock Awards ($) (e) | Option Awards ($) (f) | Non-Equity Incentive Plan Compensation ($) (g) | Nonqualified Deferred Compensation ($) (h) | All Other Compensation ($) (i) | Total Earnings ($) (j) |
| Vincent C. Lombardi CEO, President & Director | 12/31/2020 12/31/2019 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 |
| Gregg W. Koechlein CFO, COO, Sec./Treas. & Director | 12/31/2020 12/31/2019 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 |
| Jeffrey M. Pogol, Vice President | 12/31/2020 12/31/2019 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 | 0 0 |
| Michael Vardakis Former President & Director | 12/31/2019 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
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Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | ||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Vested Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Vincent C. Lombardi | None | None | None | None | None | None | None | None | None |
| Gregg W. Koechlein | None | None | None | None | None | None | None | None | None |
| Jeffrey M. Pogols | None | None | None | None | None | None | None | None | None |
Compensation of Directors
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
| Vincent C. Lombardi | None | None | None | None | None | None | None |
| Gregg W. Koechlein | None | None | None | None | None | None | None |
Mr. Koechlein was paid $7,500 for services in January 2021, and Mr. Pogol received 10,000 shares of the Company’s common stock in February 2021 as compensation for services rendered. Mr. Lombardi and Mr. Koechlein have indicated that they do not intend to draw salaries from the Company until such time as the Company has sufficient funds to support one year’s operating expenses.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners
The following tables set forth the shareholdings of those persons who were principal shareholders of our common stock as of December 31, 2020:
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Ownership of Principal Shareholders
| Title Of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Owner (1) | Percent of Class |
| Common | Vincent C. Lombardi 979 Westcliff Lane Reno, Nevada 89523 | 8,280,000 | 40.80% |
| Common | Gregg W. Koechlein 2560 Greensboro Drive Reno, Nevada 89509 | 3,250,000 | 16.01% |
| Common | Kenny L. De Meirleir Stuivenbergbaan 89 2800 Mechelen Belgium | 1,800,000 | 8.87% |
| Common | Biored, N.V. De Tyraslaan 111 1120 Brussels Belgium | 1,800,000 | 8.87% |
| Common | Michael Vardakis 601 South State Street Salt Lake City, Utah 84111 | 1,450,000 | 7.14% |
| Totals |
| 16,580,000 | 81.69% |
(1)
Unless indicated otherwise, all share ownership is direct.
SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. At the present time there are no outstanding options or warrants.
Security Ownership of Management
The following table sets forth the shareholdings of our directors and executive officers as of December 31, 2020:
Ownership of Officers and Directors
| Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Owner | Percent of Class |
| Common | Vincent C. Lombardi | 8,280,000 | 40.80% |
| Common | Gregg W. Koechlein | 3,250,000 | 16.01%. |
| Common | Jeffrey M. Pogol | 0 | 0.0% |
| Common | Glenn C. Miller | 100,000 | 0.50% |
| Totals |
| 11,630,000 | 57.30% |
(1)
Unless indicated otherwise, all share ownership is direct.
SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding
44
for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. At the present time there are no outstanding options or warrants.
Changes in Control
A change in control occurred December 31, 2018 when we acquired our wholly-owned subsidiary, High Sierra Technologies, Inc. To the best knowledge of management, there are no present arrangements or pledges of our securities which may result in a change in control of us.
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plan Information
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) |
|
| (a) | (b) | (c) |
| Equity compensation plans approved by security holders | None | None | None |
| Equity compensation plans not approved by security holders | None | None | None |
| Total | None | None | None |
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE
Transactions with Related Persons
During the years ended December 31, 2020 and 2019, the Company borrowed $18,749 and $34,557, respectively, from our current President and director, Vincent C. Lombardi, in order to cover expenses being incurred in connection with the Company’s commercial hemp farming activities and general and administrative expenses as detailed below. A repayment of $30,000 on these related party notes was made in 2020 and none during the year ended December 31, 2019.
The Company has incurred an interest expense – related party of $4,645 and $569 during the years ended December 31, 2020 and 2019 on the amounts owed to our current President and director, Vincent C. Lombardi. The Company has interest accrued – related party on the above notes in the amount of $5,214 and $569 at December 31, 2020 and 2019.
Promoters and Certain Control Persons
See the heading “Transactions with Related Persons” above.
Parents of the Smaller Reporting Company
We have no parents.
Director Independence
We do not have any independent directors serving on our Board of Directors, and we are not required to have
independent directors.
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ITEM 14: PRINCIPAL ACCOUNTANTING FEES AND SERVICES
The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended December 31, 2020, and 2019:
| Fee Category |
| 2020 |
| 2019 | |
| Audit Fees | $ | 9,750 |
| $ | 9,500 |
| Audit-related Fees | $ | 0 |
| $ | 0 |
| Tax Fees | $ | 0 |
| $ | 0 |
| All Other Fees | $ | 0 |
| $ | 0 |
| Total Fees | $ | 9,750 |
| $ | 9,500 |
Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.
Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”
Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,” “Audit-related fees,” and “Tax fees” above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
We have not adopted an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided to us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.
PART IV
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)(2) Financial Statements. See our audited consolidated financial statements for the year ended December 31, 2017, contained in Part II, Item 8, above, which are incorporated herein by this reference.
(a)(3) Exhibits. The following exhibits are filed as part of this Annual Report:
46
Exhibit No. Exhibit Description
| 3.1* | Articles of Incorporation filed May 9, 1996 |
| 3.2* | Amended and Restated Articles of Incorporation |
| 3.3* | By-Laws |
| 10.1* | Promissory Note with Larry Mamey dated June 6, 2019 |
| 10.2* | Promissory Note with Biored N.V., a Belgian corporation, dated July 30, 2019 |
| 10.3** | Promissory Note with Kenny L. DeMeirleir dated August 12, 2020 |
| 10.4*** | Promissory Note with Michael Vardakis dated December 31, 2020 |
| 10.5*** | Promissory Note with Vincent C. Lombardi dated December 31, 2020 |
| 10.6*** | Promissory Note with Michael Vardakis dated December 31, 2020 |
| 10.7** | Letter Agreement with Artemis Holdings Group, LLC dated October 14, 2020 |
| 10.8*** | Amended Consulting Agreement with Stanley Berk/Steven Leatherman (SBSL Consultants) and Jeff Baclet/Tom Prutzman (Consultants) dated December 28, 2020 |
| 10.9*** | Form of Series 2 Senior Convertible Secured Promissory Note |
| 10.10*** | Sixth Amendment to Promissory Note with Larry Mamey dated March 5, 2021 |
| 14* | Code of Ethics |
| Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | |
| Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | |
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
101 INS
XBRL Instance Document
101 PRE
XBRL Taxonomy Extension Presentation Linkbase Document
101 LAB
XBRL Taxonomy Extension Label Linkbase Document
101 DEF
XBRL Taxonomy Extension Definition Linkbase Document
101 CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101 SCH
XBRL Taxonomy Extension Schema Document
* Incorporated by reference from the Company’s Amendment No. 2 to its Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 7, 2019.
** Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2020 filed with the Securities and Exchange Commission on November 20, 2020.
*** Incorporated by reference from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on April 14, 2021.
ITEM 16: FORM 10-K SUMMARY.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HIGH SIERRA TECHNOLOGIES, INC.
| Date: | July 26, 2021 |
| By: | /s/ Vincent C. Lombardi |
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|
|
|
| Vincent C. Lombardi |
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|
|
|
| Chief Executive Officer, President and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
HIGH SIERRA TECHNOLOGIES, INC.
| Date: | July 26, 2021 |
| By: | /s/ Vincent C. Lombardi |
|
|
|
|
| Vincent C. Lombardi |
|
|
|
|
| Chief Executive Officer, President and Director |
| Date: | July 26, 2021 |
| By: | /s/ Gregg W. Koechlein |
|
|
|
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| Gregg W. Koechlein |
|
|
|
|
| Chief Operating Officer, Chief Financial Officer, Secretary, Treasurer and Director |
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Exhibit 31-2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gregg W. Koechlein, certify that:
1. I have reviewed this Annual Report on Form 10-K/A of High Sierra Technologies, Inc.;
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 Rule 13a-15(f) and 15d-15(f)) for the Registrant and 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 consolidated 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 or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | July 26, 2021 |
| By: | /s/ Gregg W. Koechlein |
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|
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| Gregg W. Koechlein, Chief Financial Officer, Chief Operating Officer, Secretary, Treasurer and Director |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of High Sierra Technologies, Inc. (the “Registrant”) on Form 10-K/A for the period ending December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), we, Vincent C. Lombardi, Chief Executive Officer and President, and Gregg W. Koechlein, Chief Financial Officer, Chief Operating Officer, Secretary and Treasurer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Annual Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.
| Date: | July 26, 2021 |
| By: | /s/ Vincent C. Lombardi |
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|
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| Vincent C. Lombardi, Chief Executive Officer, President and Director |
| Date: | July 26, 2021 |
| By: | /s/ Gregg W. Koechlein |
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|
| Gregg W. Koechlein, Chief Financial Officer, Chief Operating Officer, Secretary, Treasurer and Director |