HWKE 10-K
Hawkeye Digital, Inc. (HWKE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Year Ended
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:
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices (Zip Code)
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Ex- change 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 Act). Yes
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $
The number of shares of registrant’s common stock outstanding as of October 13, 2023 was
TABLE OF CONTENTS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This annual report on Form 10-K, the other reports, statements, and information that we have previously filed or that we may subsequently file with the Securities and Exchange Commission, or SEC, and public announcements that we have previously made or may subsequently make include, may include, incorporate by reference or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to enjoy the benefits of that act. Unless the context is otherwise, the forward-looking statements included or incorporated by reference in this Form 10-K and those reports, statements, information and announcements address activities, events or developments that Hawkeye Systems, Inc. (hereinafter referred to as “we,” “us,” “our,” “our Company” or “Hawkeye”) expects or anticipates, will or may occur in the future. Any statements in this document about expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “will continue,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” and similar expressions. Accordingly, these statements involve estimates, assumptions, and uncertainties, which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document. All forward-looking statements concerning economic conditions, rates of growth, rates of income or values as may be included in this document are based on information available to us on the dates noted, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results may differ materially from those in such forward-looking statements due to fluctuations in interest rates, inflation, government regulations, economic conditions and competitive product and pricing pressures in the geographic and business areas in which we conduct operations, including our plans, objectives, expectations and intentions and other factors discussed elsewhere in this Report.
Certain risk factors could materially and adversely affect our business, financial conditions and results of operations and cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, and you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. The risks and uncertainties we currently face are not the only ones we face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that we currently believe are immaterial to our business. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, you may lose all or part of your investment.
The industry and market data contained in this report are based either on our management’s own estimates or, where indicated, independent industry publications, reports by governmental agencies or market research firms or other published independent sources and, in each case, are believed by our management to be reasonable estimates. However, industry and market data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. We have not independently verified market and industry data from third-party sources. In addition, consumption patterns and customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be verifiable or reliable.
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Item 1. Description of Business
General
We were incorporated on May 15, 2018 in the State of Nevada. We are currently pursuing opportunities to invest in, acquire, merge or consolidate with a target business participating in diversified industries, such as affordable housing development, and technology applications to mitigate the effects of climate change. Our previous focus was on pandemic management products and services. Our business office is located at 6605 Abercorn, Suite 204, Savannah, GA 31405. Our telephone number is 912-388-6720 and our website is www.hawkeyesystemsinc.com.
Business Description
From inception and until July of 2021, the Company focused on selling personal protective equipment (“PPE”). In July 2021, the Company’s management determined to cease the Company’s operations as a seller of PPE, deeming that continuing operations in that sector was not a productive use of the Company’s resources.
Our current business plan is to acquire, merge or consolidate with another company (a “target business”). We intend to use capital stock, debt or a combination of these to effect a business combination with a target business with significant growth potential.
We will not restrict our search for target businesses to any particular industry. Rather, we may investigate businesses of essentially any kind or nature and participate in any type of industry that may, in our management’s opinion, meet our business objectives as described in this annual report. We emphasize that the description in this report of our business objectives is extremely general and is not meant to restrict the discretion of our management to search for and enter into potential business opportunities. We have identified the modular construction industry and targeted North America’s housing shortage in the single-family and multi-family homes. We have not conducted any market studies with respect to this industry. To the extent we enter into a business combination with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, to the extent that we effect a business combination with an entity in an industry characterized by a high level of risk, we will become subject to the currently unascertainable risks of that industry. An extremely high level of risk frequently characterizes certain industries that experience rapid growth. In addition, although we will endeavor to evaluate the risks inherent in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
Sources of target businesses
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including securities broker-dealers, investment bankers, venture capitalists, bankers, and other members of the financial community, who may present solicited or unsolicited proposals. Our officers and directors and their affiliates may also bring to our attention target business candidates. While we do not presently anticipate engaging the services of professional firms that specialize in business acquisitions on any formal basis, we may engage such firms in the future, in which event, we may pay a finder’s fee or other compensation for such introductions if they result in consummated transactions. These fees are customarily between 5% and 25% of the size of the overall transaction, based upon a sliding scale of the amount involved and a variety of other factors.
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Selection of a target business and structuring of a business combination
Our management will have significant flexibility in identifying and selecting a prospective target business. In evaluating a prospective target business, our management will consider, among other factors, the following:
| · | the financial condition and results of operation of the target; |
| · | the growth potential of the target and that of the industry in which the target operates; |
| · | the experience and skill of the target’s management and availability of additional personnel; |
| · | the capital requirements of the target; |
| · | the competitive position of the target; |
| · | the stage of development that the target’s products, processes, or services are at; |
| · | the degree of current or potential market acceptance of the target’s products, processes, or services; |
| · | proprietary features and the degree of intellectual property or other protection of the target’s products, processes, or services; |
| · | the regulatory environment of the industry in which the target operates; |
| · | the prospective equity interest in, and opportunity for control of, the target; and |
| · | the costs associated with effecting the business combination. |
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in connection with effecting a business combination consistent with our business objective. In connection with our evaluation of a prospective target business, we anticipate that we will conduct an extensive due diligence review that will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as a review of financial or other information that will be made available to us.
We will endeavor to structure a business combination to achieve the most favorable tax treatment to us, the target business and both companies’ stockholders. We cannot assure you, however, that the Internal Revenue Service or appropriate state tax authority will agree with our tax treatment of the business combination.
Until we are presented with a specific opportunity for a business combination, we are unable to ascertain with any degree of certainty the time and costs required to select and evaluate a target business and to structure and complete the business combination. We have two full-time employees devoting their time to our affairs. Any costs incurred in connection with the identification and evaluation of a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital otherwise available to complete a business combination.
Limited ability to evaluate the target business’ management
Although we intend to scrutinize the management of a prospective target business before effecting a business combination, we cannot assure you that our assessment of the target’s management will prove to be correct, especially considering the possible inexperience of our officers and directors in evaluating certain types of businesses. In addition, we cannot assure you that the target’s future management will have the necessary skills, qualifications, or abilities to manage a public company. Furthermore, the future role of our officers and directors, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our officers and directors will remain associated in some capacity with us following a business combination, it is unlikely that any of them will devote their full efforts to our affairs after a business combination. Moreover, we cannot assure you that our officers and directors will have significant experience or knowledge relating to the operations of the target business.
We may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you, however, that we will be able to recruit additional managers who have the requisite skills, knowledge, or experience necessary to enhance the incumbent management.
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Investment Company Act
The Investment Company Act of 1940 (the “Investment Company Act”) defines an “investment company” as any issuer which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities. We may participate in a business or opportunity by purchasing, trading, or selling the securities of a business. However, as we do not intend to engage primarily in these activities, we believe that we do not fall under the Investment Company Act’s definition of investment company, and we do not intend to register the Company as an “investment company” under the Investment Company Act. We do not believe that registration under the Investment Company Act is required based upon our proposed activities. We intend to conduct our activities so as to avoid being classified as an “investment company” and avoid application of the costly and restrictive registration and other provisions of the Investment Company Act and its regulations.
The Investment Company Act may, however, also be deemed to be applicable to a company that does not intend to be characterized as an “investment company” but that, nevertheless, engages in activities that may be deemed to be within the definition and scope of certain provisions of the Investment Company Act. While we do not believe that our anticipated principal activities will subject us to regulation under the Investment Company Act, we cannot assure you that we will not be deemed to be an “investment company,” especially during the period prior to a business combination. In the event we are deemed to be an “investment company,” we may become subject to certain restrictions relating to our activities and regulatory burdens, including:
| · | restrictions on the nature of our investments; and |
| · | the issuance of securities, |
and have imposed upon us certain requirements, including:
| · | registration as an investment company; |
| · | adoption of a specific form of corporate structure; and |
| · | compliance with certain burdensome reporting, recordkeeping, voting, proxy and disclosure requirements and other rules and regulations. |
In the event we are characterized as an “investment company,” we would be required to comply with these additional regulatory burdens, which would require additional expense.
Intellectual Property
The Company currently does not own any intellectual property, and directly acquiring the intellectual property of a third party is not part of our current strategy.
Regulation
In our current business we are subject to local, state, federal and foreign governmental laws and regulations. Upon completion of an acquisition, we may have significant additional regulation based on the nature of the business.
Investment in HIE LLC
On July 17, 2020, the Company entered into a membership agreement with Eagle Equities LLC (“Eagle”) and Ikon Supplies (“Ikon”) for the purpose of procuring, funding the purchase of and sale of PPE (the “Membership Agreement”). To pursue this objective, the parties agreed to form a Nevada limited liability company, HIE, LLC (“HIE”). According to the terms and conditions of the Membership Agreement, HIE would be terminated and dissolved upon the earliest to occur of: (i) the sale of HIE’s interest in the procurement, financing, transportation, sale and disposition of PPE; (ii) the refusal or inability of any party to comply with the requirements, obligations or stipulations of the Membership Agreement; (iii) the unanimous agreement of the parties; or (iv) the order of a court of competent jurisdiction. Eagle, Ikon and the Company would participate each in 33% of any net profits generated by HIE. Eagle contributed to HIE by providing and arranging to procure a loan (the “Origination Loan”), sufficient to cover all capital needed for each PPE purchase (a “Deal”); and additional funds, as needed, to cover additional expenses towards the costs of goods (“Additional Contribution”). The Company contributed by assigning its agreement to purchase gloves and agreed to issue convertible promissory notes to Eagle to secure the Origination Loan and any Additional Contribution. The parties agreed to pay an equal portion of all administrative expenses incurred by HIE. In the event of a loss of capital, all parties would contribute to repay the Origination Loan and Additional Contribution with each paying 33.3% of the loss.
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The proceeds of each Deal shall be first distributed to Eagle, as repayment for any Additional Contribution. The next proceeds will be allocated to the repayment of the Origination Loan. After the Origination Loan is repaid, net proceeds will be distributed as follows: (i) Eagle shall receive the greater of $0.25 per box of gloves or 33.3% of the net proceeds. If net proceeds are more than $0.25, but less than $0.75 per box, once the first $0.25 is paid to Eagle, the Company and Ikon will share in the remaining profits equally. If the net profits are more than $0.75 per box, all the parties will receive 33.3% of the net profits. Net losses shall be allocated between the parties which each being allocated 33.3%.
HIE is managed by a manager appointed by the parties in accordance with a policy established by the policy committee. Each of the Company and Ikon will have 25 votes in the policy committee and Eagle will have 50 votes.
HIE has no activities and has been wound up in fiscal year 2023. The Company has recorded a net gain/loss of $0 and a net gain of $59,208 during fiscal years 2023 and 2022, respectively, of which the Company has recorded a gain/loss on investment of $0 and a gain on investment of $19,736, in fiscal year ended of June 30, 2023, and 2022, respectively.
Investment in CNTNR USA, Inc.
On February 27, 2023, the Company as “Lender” and CNTNR USA, Inc., a Delaware corporation (“CNTNR”), as “Borrower” executed a promissory note (the “Original CNTNR Note”). CNTNR borrowed $200,000 from the Company under the Original CNTNR Note.
On April 6, 2023, the Company as “Lender” and CNTNR as “Borrower” executed a restated promissory note (the “Restated Note”). The principal amount of the Restated Note is $1,000,000, accruing annual interest at a rate of 12%, the Restated Note takes into account the $200,000 borrowed under the Original CNTNR Note. The maturity date of the Restated Note is: (i) the closing of a material debt or equity financing by CNTNR; or (ii) September 30, 2023, whichever occurs first. The Restated Note includes warrant coverage of one warrant issued for every one share of CNTNR issued in repayment of the principal amount of the Restated Note. The warrants shall be exercised with a 30% discount over the fair market value of the shares of CNTNR and expire 36 months after April 6, 2023. Pursuant to the terms of the Restated Note, CNTNR paid a commitment fee to the Company equivalent to 5% of the principal amount of the Restated Note; and a consulting fee of $5,000 per month, beginning on March 1, 2023. Upon maturity of the Restated Note, CNTNR shall pay all principal and interest due under the Restated Note and issued the equivalent of 10% of its issued and outstanding shares to the Company. If CNTNR defaults on repayment at maturity, then it shall issue 15% of its issued and outstanding shares to the Company. Warrant coverage applies over the shares issued at repayment, either over 10% of CNTNR’s outstanding shares if the Restated Note is repaid on or before its maturity date, or 15% of CNTNR's outstanding shares if the Borrower is in default.
To fund the Company’s investment in CNTNR, the Company and Steve Hall, a Company shareholder holding 37% of the issued and outstanding shares of the Company’s Common Stock, executed a promissory note on March 29, 2023 (the “Hall Note”). The principal amount under the Hall Note was $1,000,000, accruing interest at a rate of 12% per year. The maturity date of the Hall Note was: (i) the closing of a debt financing, or (ii) May 31, 2023, whichever occurs first. At the maturity date, the Company shall pay Steve Hall all accrued principal and interest under the Hall Note, and transfer to Steve Hall 90% of the shares of CNTNR issued to the Company and 90% of the warrants issued under the Restated Note. As on the date of this report, the Company and Steve Hall are currently working towards a restructuring of the Hall Note.
Company Policies
The Company has adopted the following policies: (i) code of conduct policy; (ii) information security policy; and (iii) public company communication policy.
Employees
The Company currently has no employees.
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Legal Proceedings
The Company is not currently a party to any material legal proceedings and is not aware of any material threatened litigation.
Offices
Our current executive offices are provided by the management of the Company. We do not pay any rent, and there is no agreement to pay any rent in the future.
Item 1A. Risk Factors.
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 1B. Unresolved Staff Comments
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 2. Properties.
We own no properties related to our operations. We operate from business offices provided by our executive officers.
Item 3. Legal Proceedings.
We are not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this report, no director, officer, or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. We are not aware of any other legal proceedings pending or that have been threatened against us or our properties.
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims, other than those disclosed above, are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on its business and financial condition.
Item 4. Mine Safety Disclosures.
Not applicable
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PART II
Item 5. Market for Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Our common stock is quoted on the OTC Bulletin Board under the symbol “HWKE”. On June 12, 2019, the Company obtained clearance to trade on OTC Markets and on September 12, 2019, the Company’s stock began trading on the OTCQB market maintained by OTC Markets. Quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not represent actual transactions. The closing sale price of our common stock on October 13, 2023 was $0.17 per share.
Below is a table indicating the range of high and low closing price information for the common stock as reported by the OTC Markets Group for the periods listed. These prices do not necessarily reflect actual transactions.
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| High |
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| Low |
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Quarter ended June 30, 2023 |
| $ | 0.35 |
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| $ | 0.35 |
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Quarter ended March 31, 2023 |
| $ | 0.12 |
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| $ | 0.12 |
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Quarter ended December 31, 2022 |
| $ | 0.21 |
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| $ | 0.18 |
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Quarter ended September 30, 2022 |
| $ | 0.22 |
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| $ | 0.22 |
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Quarter ended June 30, 2022 |
| $ | 0.28 |
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| $ | 0.25 |
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Holders
As of October 13, 2023, there were approximately 41 record holders of our common stock. This does not include the holders of our common stock who held their shares in street name as of that date.
Dividends
We have never paid or declared any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future but rather intend to retain future earnings, if any, for reinvestment in our future business. Any future determination to pay cash dividends will be in compliance with our contractual obligations and otherwise at the discretion of the board of directors and based upon our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.
Transfer Agent
Our registrar and transfer agent is VStock Transfer, LLC.
Recent Sales of Unregistered Securities
Restricted Common Stock – Steve Hall
On April 6, 2020, and December 15, 2020, the Company issued two convertible notes payable of $250,000 each to Steve Hall. Both notes have one year term with simple interest at 10% per annum if repaid within 90 days, and simple interest at 20% per annum thereafter. At the option of holder, this note is convertible at any time which is six months from the date of issuance through that date which is one year from the date of issuance at a conversion price of $0.25 per share. In consideration for the loans, the Company also granted to the Lender 200,000 stock options exercisable at $0.25 for a two-year term. The options vested upon issuance. On November 2, 2021, the Company issued 160,000 shares of common stock for cashless exercise of 200,000 shares of stock option. Both notes and the accrued interests totaling $594,344 have been converted on September 1, 2021, and issued on July 28, 2022 for the aggregate total of 16,666,667 shares of common stock. On February 9, 2023, the 16,666,667 shares of common stock were reduced to 1,666,667 shares to reflect the 1-for-10 reverse stock split.
Restricted Common Stock - Richard Cutler
On May 23, 2022, the Company granted 500,000 shares of restricted common stock as compensation to Richard Cutler, a director until August 11, 2022. The shares were valued at $20,000 and were granted in lieu of cash compensation, contingent upon completion of an acquisition or reverse takeover. The 500,000 shares were issued on February 10, 2023, and later 450,000 shares were cancelled on June 15, 2023 due to the recognition of the Company’s reversed stock split. See further discussion on Note 13 – Reversed Stock Split to the Financial Statements.
Restricted Common Stock - Christopher Mulgrew
On May 23, 2022, the Company granted 250,000 shares of restricted common stock as compensation to Christopher Mulgrew, the Company’s Chief Financial Officer. The shares were valued at $10,000 and were granted in lieu of cash compensation, contingent upon completion of an acquisition or reverse takeover. The stocks were issued on February 10, 2023, and later 225,000 shares were cancelled on June 15, 2023 due to the recognition of the reverse stock split. See further discussion on Note 13 – Reversed Stock Split to the Financial Statements.
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On April 9, 2023, the Company granted 500,000 shares of restricted common stock with a fair market value of $0.142 per share to Christopher Mulgrew, the Company’s Chief Financial Officer, as performance bonus for calendar years 2021 and 2022, and recognizing that Mr. Mulgrew agreed to defer a significant portion of contractually obligated compensation payments. The shares were issued on April 24, 2023 in the amount of $71,000.
Restricted Common Stock - Corby Marshall
On February 9, 2023, the Company granted 750,000 shares of restricted common stock at the fair market value of $0.142 per share to Corby Marshall, the Company’s Chief Executive Officer, as performance bonus for calendar years 2021 and 2022, and recognizing that Mr. Marshall agreed to defer a significant portion of contractually obligated compensation payments. The shares were issued on April 24, 2023 in the amount of $106,500.
Common Stock issued for Rounding
On February 22, 2023, the Company issued 139 shares of common stock for rounding to reflect the 1 for 10 reverse stock splits. See further discussion on Note 13 – Reversed Stock Split to the Financial Statements.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion relates to the historical operations and financial statements of Hawkeye Systems, Inc. for the fiscal year ended June 30, 2023.
Forward-Looking Statements
The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this annual report. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this annual report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risks Factors” in our various filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this annual report.
The Company is currently looking for investment opportunities into target businesses in diversified industries, such as affordable housing development, and technology applications to mitigate the effects of climate change. From the date of our previous filing, we entered into a convertible promissory note with CNTNR providing them with $1,000,000 in financing, as described in Notes 8 and 10 to the Financial Statements.
Financial Condition and Results of Operations
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operations.
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We expect we will require additional capital to develop our business plan. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Results of Operations
Fiscal Years Ended June 30, 2023 and 2022
The Company had $0 operating revenues for both fiscal years of 2023 and 2022 after the Company ceased operations of its PPE business in July 2021. The Company generated from CNTNR a total of $70,000 for the year ended June 30, 2023 in other income, of which $20,000 was generated for consulting fees, and $50,000 for financing arrangement fee. See further discussion on Note 10– Note receivable to the Financial Statements.
During our fiscal year 2023, total operating expenses were $1,118,537 compared to $1,230,468 for the same period in 2022. The decrease in operating expenses is primarily a result of a decrease in Selling, General, and Administrative expenses due to company downsizing. The Company’s net loss was $1,226,311 for the fiscal year ended June 30, 2023 compared to net loss of $1,288,802 for the fiscal year ended June 30, 2022. The net losses are primarily a result of operating expenses, and interest expenses.
Liquidity and Capital Resources
Our cash balance at June 30, 2023 was $143,861 compared to $325 at June 30, 2022. We do not believe these cash reserves are sufficient to cover our expenses for our operations for the next 12 months. We will require additional funding for our ongoing operations.
As of our fiscal year ended June 30, 2023, we received $260,000, from a line of credit from a related party, and an additional $1,000,000 from a promissory note issued by a related party.
During our fiscal year ended June 30, 2023, the Company issued common stock valued at $624,344 in connection with settlement of stock payable, which included $594,344 associated with the settlement of a convertible promissory note with Steve Hall, and $30,000 related to settlement of compensation due to Richard Cutler for $20,000, and Christopher Mulgrew for $10,000.
In addition, we intend to raise funds through the sale of equity and debt securities. If we cannot raise any additional financing prior to the expiration of the first quarter of 2024, we believe we will be able to obtain loans from management in the future, if necessary, but have no agreement in writing.
We are a smaller reporting company and have accumulated losses to date. Under a limited operations scenario to maintain our corporate existence, we believe we will require additional funds over the next 12 months to complete our regulatory reporting and filings. However, we will require maximum participation through private placements, or alternative financing to implement our business plan.
There are no assurances that we will be able to obtain further funds required for our continued operations. Even if additional financing is available, it may not be available on terms we find favorable. Failure to secure the needed additional financing will have an adverse effect on our ability to remain in business.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through equity offerings, warrant exercises, and related party advances in the near future. We have no guarantees or firm commitments that the related party advances will continue in the near future.
Existing working capital, further advances, together with anticipated capital raises are expected to be adequate to fund our operations over the next twelve months, but there is no guarantee that we will be successful in raising enough capital, or that we will receive the cash flow required to fund our operations. We have no lines of credit with banking institutions or other bank financing arrangements, we do have a line of credit form a related party (see Note 7 to the Financial Statements). Generally, we have financed operations to date through proceeds from convertible loans.
| 11 |
| Table of Contents |
Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences, or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to continue our operations.
Material Commitments
As of the date of this annual report, we have entered into various commitments on loan obligations. For a discussion of the related items, please see Notes 5 to 10 to the Financial Statements.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment during the next twelve months.
Off-Balance Sheet Arrangements
As of the date of this annual report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Going Concern
As reflected in the accompanying financial statements, the Company had an accumulated deficit of approximately $12,108,487 at June 30, 2023 and net loss from operations of $1,118,537.
The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been the issuance of equity securities, proceeds from convertible loans, and related party advances. In addition, the Company is in the development stage and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue operations is dependent on the success of Management’s plans and raising of capital through the issuance of equity securities, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance its operations as well as to identify, negotiate and materialize a business combination with a target business. The Company believes its current available cash may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Critical Accounting Policies and Estimates
For a discussion of our accounting policies and related items, please see the Notes to the Financial Statements, included in Item 8.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
| 12 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data.
Contents
Part 1 | FINANCIAL INFORMATION |
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Report of Independent Registered Public Accounting Firm (PCAOB ID: 5041) |
| F-2 |
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| Report of Independent Registered Public Accounting Firm (PCAOB ID: |
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| Statements of Operations for the years ended June 30, 2023 and 2022 |
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| Statements of Changes in Stockholders’ Equity (Deficit) for the years ended June 30, 2023 and 2022 |
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| Statements of Cash Flows for the years ended June 30, 2023 and 2022 |
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| F-8 |
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| F-1 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Hawkeye Systems, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Hawkeye Systems, Inc. as of June 30, 2022, the related statements of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC
BF Borgers CPA PC (PCAOB ID 5041)
We have served as the Company's auditor from 2018 to 2023
Lakewood, CO
December 14, 2022
| F-2 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Hawkeye Systems, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Hawkeye Systems, Inc. (the “Company”) as of June 30, 2023, the related statement of operations, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Explanatory Paragraph - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, during the year ended June 30, 2023, the Company had a net loss of $1,226,311 and an accumulated deficit of $12,108,487. The Company has not established sufficient revenue to cover its operating costs and will require additional capital to continue its operating plan. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about its ability to continue as a going concern.
The Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Reliant CPA PC
Served as Auditor since 2023
October 5, 2023
| F-3 |
| Table of Contents |
HAWKEYE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
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ASSETS |
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Current assets: |
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Cash |
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Prepaid expenses |
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Interest receivable |
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Loan receivable |
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Total current assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable and accrued liabilities – related party |
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Accounts payable and accrued liabilities |
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Convertible note payable, net of discount - related party |
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Accrued interest – related party |
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Line of credit – related party |
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Promissory note payable – related party |
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Common stock payable - related party |
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Total current liabilities |
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Long-term liabilities: |
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Loan payable due to Eagle - JV partner |
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Total liabilities |
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Commitments and contingencies (Note 16) |
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Stockholders’ deficit: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
HAWKEYE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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Operating expenses: |
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General and administrative |
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Management compensation |
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Professional fees |
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Professional fees - related party |
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Marketing |
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Total operating expenses |
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Loss from operations |
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Other income and (expense): |
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Other income |
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PPP loan forgiveness |
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Interest income |
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Interest expense - related party |
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Gain on investment in HIE |
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Total other income and (expense) |
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Net loss |
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Net loss per common share - basic and diluted |
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Weighted average common shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
HAWKEYE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
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Balance, June 30, 2021 (Restated) |
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Cumulative-effect adjustment from adoption of ASU 2020-06 |
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Common stock issued for settlement of account payable |
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Stock based compensation – options |
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Stock option cashless exercised |
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Common stock issued for common stock payable |
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Net loss |
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Balance, June 30, 2022 |
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Common stock issued for common stock payable |
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Common stock issued for compensation |
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Stock based compensation – options |
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Shares issued for rounding to reflect the 1 for 10 reverse stock split |
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Net loss |
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Balance, June 30, 2023 |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
HAWKEYE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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PPP loan forgiveness |
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Stock based compensation – options and warrant |
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Common stock issued for services |
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Change in operating assets and liabilities: |
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Prepaid expense |
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Interest receivable |
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Accounts payable and accrued liabilities |
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Accounts payable and accrued liabilities – related party |
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Accrued interest - related party |
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Common stock payable -- related party |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Gain on investment in HIE |
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Loans advanced to CNTNR |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Net proceeds from promissory note – related party |
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Net proceeds from line of credit –related party |
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Net cash provided by financing activities |
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Net change in cash |
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Cash beginning of period |
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Cash end of period |
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Supplemental cash flow information |
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Cash paid for interest |
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Cash paid for taxes |
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Non-cash investing and financing activities: |
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Common stock issued for settlement of accounts payable |
| $ |
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Common stock issued in exchanged for common stock payable -related party |
| $ |
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Replacement of Inventory financing payable to convertible note |
| $ |
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Debt forgiveness |
| $ |
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Stock option cashless exercise |
| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
| Table of Contents |
HAWKEYE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2023 and 2022
Note 1 - Organization
Hawkeye Systems, Inc. (the “Company”), a Nevada corporation incorporated on May 15, 2018. Our previous focus was on pandemic management products and services. We are currently looking for investment opportunities in diversified industries, such as affordable housing development, and technology applications to mitigate the effects of climate change. From inception until the date of this filing our activities have primarily consisted of (i) liquidating our stock of personal protective equipment (“PPE”) products, (ii) the development of our business plan and the evaluation of strategic investment and business development strategies, including the execution of letters of intent and the provision of funding to a few selected target companies.
Note 2 - Summary of Significant Accounting Policies
Basis of presentation
The accompanying financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. Significant estimates in the accompanying financial statements include useful lives of property and equipment, fair value assumptions used for stock-based compensation, and the valuation allowance on deferred tax assets.
Cash
The Company considers cash in banks and other deposits with an original maturity of three months or less when purchased to be cash and cash equivalents. There were $
Financial instruments
For certain of the Company’s financial instruments, including cash, and convertible note payable, related party, the carrying amounts approximate their fair values due to their short maturities.
Accounts receivable and allowance for doubtful accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable.
The Company had no balance on accounts receivable and allowance for doubtful accounts at June 30, 2023 or 2022.
| F-8 |
| Table of Contents |
Inventory
The Company has no inventory as of June 30, 2023, and 2022, respectively.
Fair value measurements
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. The Company has no assets or liabilities that are adjusted to fair value on a recurring basis.
Convertible financial instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, discounts are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument.
Common stock purchase warrants and derivative financial instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement, or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception; are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Beneficial conversion feature
The issuance of the convertible debt generated a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, resulting in a discount on the convertible debt (recorded as a component of additional paid-in capital). The discount is amortized to interest expense over the term of the convertible debt.
| F-9 |
| Table of Contents |
Income taxes
The Company uses the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, 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, the Company does not foresee generating taxable income in the near future and utilizing its deferred tax asset, therefore, 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.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.
Revenue recognition
Revenue is recorded in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Revenue is recognized from product sales when goods are shipped, title and risk of loss have transferred to the purchaser, there are no significant vendor obligations, the fees are fixed or determinable, and collection is reasonably assured. Amounts billed to customers for shipping and handling are included in net sales. Costs associated with shipping and handling are included in cost of goods sold. The Company recognizes sales on a gross basis when it is considered the primary obligor in the transaction and on a net basis when it is considered to be acting as an agent. We record estimates for cash discounts, product returns, and other discounts in the period of the sale. This provision is recorded as a reduction from gross sales and the reserves are shown as a reduction of accounts receivable.
As of fiscal years ended June 30, 2023, and 2022, the Company had generated zero revenue for both years.
Cost of sales
Cost of sales includes inventory costs and shipping and freight expenses. Since the Company had not generated any revenue during fiscal years ended June 30, 2023, and 2022, the Company incurred no cost of sales in both years.
Related parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Commitments and contingencies
The Company follows ASC 450-20, “Loss Contingencies,” to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Basic and diluted earnings per share
Basic earnings per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares outstanding during the period plus the effect of potentially dilutive common stock equivalents, including stock options, warrants to purchase the Company’s common stock, and convertible note payable. For the years ended June 30, 2023 and 2022, potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share because they were anti-dilutive are as follows:
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| June 30, 2023 |
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| June 30, 2022 |
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Warrants |
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Options |
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Convertible notes |
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Total possible dilutive shares |
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| F-10 |
| Table of Contents |
The shares above have been adjusted to reflect a
Stock-based compensation
Stock-based compensation to employees and non-employees consists of stock options grants, warrants to purchase common stock, and restricted shares that are recognized in the statement of operations based on their fair values at the date of grant. The fair value of the share of common stock is based on the trading price of the Company’s share.
Option
The Company calculates the fair value of options and warrant grants utilizing the Black-Scholes pricing model. Assumptions used by the Company in using the Black-Scholes pricing model include:
| 1) | volatility based on the Company’s average volatility rate, |
| 2) | risk free interest rate based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of the grant, |
| 3) | the expected life of the option or warrants, and |
| 4) | expected cash dividend rate on shares of common stock. |
During the year ending June 30, 2023, and 2022, volatility was based on average rates for trading price of the Company’s share.
The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The resulting stock-based compensation expense for employee awards is generally recognized on a straight- line basis over the vesting period of the award.
There were no stock options granted during the fiscal year of 2023, and the remaining $
Restricted Shares Granted for Compensation
On April 09, 2023, the Company issued
On June 15, 2023, the Company issued
Reclassifications
Certain prior period amounts have been reclassified to conform with the current year’s presentation.
| F-11 |
| Table of Contents |
Recent accounting pronouncements
Management has considered all recent accounting pronouncements issued and their potential effect on our financial statements.
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt-Debt with Conversion and Other Options” and ASC subtopic 815-40 “Hedging-Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
The Company early adopted this standard effective July 1, 2021 using the modified retrospective approach transition method. Therefore, the condensed financial statements for the year ended June 30, 2022 are presented under the new standard, while the comparative period presented is not adjusted and continues to be reported in accordance with the Company’s historical accounting policy.
Note 3 - Going Concern
The Company’s financial statements are prepared using U.S. GAAP, applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
During the year ended June 30, 2023, the Company had a net loss of $
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include: sales of equity instruments; traditional financing, such as loans; and obtaining capital from management and significant stockholders sufficient to meet its minimum operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing this plan.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 4 – Loan payable due to Eagle - JV partner
July 17, 2020, the Company entered into a membership agreement with Eagle Equities LLC (“Eagle”) and Ikon Supplies (“Ikon”) to form a Nevada Limited Liability Company, HIE, LLC (“HIE”) for the purpose of procuring, funding the purchase of and sale of PPE (the “Membership Agreement”). Subject to the provision of the Agreement, the interest of any net profits would be shared 33.3% among each member. If there is a loss in some or all of the capital, the Company is contingently liable to contribute to repay 33.3% of the Origination Loan and Additional Contribution and of any losses of HIE.
In addition, the Company is obliged to repay 1/3 of the loan contributed by Eagle or 1/3 of the capital paid by Eagle according to the Membership Agreement.
| F-12 |
| Table of Contents |
HIE did not have any operating activities during the year ended June 30, 2023. As of June 30, 2023 and 2022, the Company’s investment balance in HIE was $
Note 5 - Related Party Transactions
Related party transactions are described in detail in Note 6, Note 7, Note 8, Note 9, Note 11, and Note 14.
Note 6 – Inventory Financing Payable – related party
On February 19, 2021, Steve Hall, a shareholder of the Company, advanced $
In June 2021 the Company cancelled the contemplated purchase of inventory and returned $
On October 1, 2021, the Company and Steve Hall entered into a restated and amended promissory note, to consolidate and restate the terms pursuant to which Steve Hall had provided funds to the Company (the “Consolidated Note”). The Consolidated Notes consolidated and restated the terms of advances made on
The Consolidated Note’s Due Date was extended to September 30, 2023.
As of June 30, 2023, and 2022, the accrued interest under the Consolidated Note was $
Note 7 – Line of Credit – related party
On October 1, 2021, Steve Hall
As of June 30, 2023, and 2022, the outstanding principal of the line of credit totaled $
Note 8 – Promissory notes payable – related party
On March 29, 2023, Steve Hall provided the Company with a loan in the principal amount of $
| F-13 |
| Table of Contents |
As of June 30, 2023, the outstanding loan balance was $
Note 9 – Accrued expenses – related party
Between September 2021 to September 2022, the Company had accepted deposits in the total amount of $
Note 10 – Note receivable
On February 27, 2023, the Company and CNTNR USA, Inc. (“CNTNR”) entered into a promissory note under which the Company disbursed $
The Amended CNTNR Note has an annual interest rate of
Moreover, the Amended CNTNR Note includes warrant coverage of one warrant for every share issued in repayment of the Principal Amount at the closing of an intended merger with CNTNR which is equal to 6,170,879 warrants.
As the interest is calculated on the total balance of the available loan of $
On May 23, 2022, the board of directors granted Richard Cutler, former director who had resigned in August 2022,
On May 23, 2022, the board of directors granted Chris Mulgrew, the Company’s Chief Financial Officer,
As of June 30, 2023, and 2022, the Company reported common stock payable-related party of $
| F-14 |
| Table of Contents |
Note 12 - Stockholders’ Equity
Common Stock
2023 Stock Issuances
| · | Issued |
| · | Issued |
|
| Issued |
| · | Issued |
| · | Issued |
| · | Issued |
2022 Stock Issuances
| · | Issued |
|
| Issued |
| · | Issued |
| · | Issued |
2022 Stock to be Issued
| · | On September 1, 2021, Steve Hall converted a note with a principal amount of $ |
|
| On May 23, 2022, the board of directors granted Chris Mulgrew, a related party |
| · | On May 23, 2022, the board of directors granted Richard Cutler, a related party |
| F-15 |
| Table of Contents |
Stock Purchase Warrants
Transactions in stock purchase warrants for the years ended June 30, 2023 and 2022 are as follows:
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| Number of |
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| Weighted Average |
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| Warrants |
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| Exercise Price |
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Balance at June 30, 2022 |
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Expired |
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Balance at September 30, 2022 |
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Expired |
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Balance at December 31, 2022 |
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Expired |
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Balance at March 31, 2023 |
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Expired |
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Balance at June 30, 2023 |
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| $ |
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The Company had not issued any warrants to purchase common stock in the years ended June 30, 2023 and 2022, respectively.
The composition of the Company’s warrants outstanding at June 30, 2023 are as follows:
Exercise Price |
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| Number of Warrants |
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| Weighted Average Remaining Life (in years) |
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$ |
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$ |
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$ |
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$ |
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$ |
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The intrinsic value of the warrants as of June 30, 2023 and 2022 was $0.
Stock Options
During 2019, the Company’s board of directors approved the 2019 Directors, Officers, Employees and Consultants Stock Option Plan (“Option Plan”) which authorized the issuance of options to purchase up to
Fiscal Year 2023
During the fiscal year ended June 30, 2023, the Company had not granted any stock options. And all stock options were vested at the end of 1st quarter of fiscal year 2023.
Fiscal Year 2022
On October 1, 2021, pursuant to the Company’s Option Plan, the Company granted
On May 23, 2022, the Company granted
| F-16 |
| Table of Contents |
Since the launch of the
On June 30, 2022, compensation cost for non-vested options of $
The fair value of the newly granted options was determined using the Black-Scholes option pricing model with the following assumptions:
|
| June 30, |
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| 2023 |
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| 2022 |
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Trading price |
| $ |
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| $ |
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Exercise price |
| $ |
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| $ |
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Expected term (in years) |
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| 0.00 |
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Risk-free rate |
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| % | |||
Volatility |
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| % |
| % | |||
Dividend yield |
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For options issued in the year ended June 30, 2022, the volatility rate is based on the Company’s volatility. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. The Company has no history or expectation of paying cash dividends on its common stock.
Transactions in stock options for the years ended June 30, 2023, and 2022, are as follows:
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| Weighted |
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| Number of |
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| Weighted average |
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| average remaining life |
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| options |
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| exercise price |
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Outstanding, June 30, 2021 |
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Granted |
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Expired or Forfeited |
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Exercised |
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Outstanding, June 30, 2022 |
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Granted |
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| - |
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Expired or Forfeited |
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Exercised |
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Outstanding, June 30, 2023 |
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Exercisable, June 30, 2023 |
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| (1) | These quantities have been adjusted to reflect a 1-for-10 reverse stock split that became effective on February 9, 2023. |
During fiscal year 2023, the Company amortized expenses of $
| F-17 |
| Table of Contents |
At the fiscal years ended of June 30, 2023, and 2022, the intrinsic value of the outstanding options was $
Note 13 – Stock Reverse Split
Hawkeye filed a form of 8K/A on March 23, 2023 announcing the Company amended its Articles of Incorporation to effect a one-for-ten reverse stock split (the “Reverse Split”) of the Company’s common stock while par value of $
Note 14 – Consulting Agreement - Related Party
On January 30, 2023, Hawkeye entered into a consulting agreement with Steve Hall, a shareholder of the Company, to provide real estate and development consulting services, including the supervision of the Company’s senior management, staff and all personnel, whether employees or consultants, strategic planning, property acquisitions and annual budget review.
The contract period is 12 months with no option for renewal thereafter. The Company has paid Steve Hall a one-time flat service fee of $
Note 15 – Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended June 30, 2023 and 2022.
At December 31, 2022 and 2021, the Company had net deferred tax assets principally arising from the net operating loss carryforward for income tax purposes multiplied by an expected federal rate of
As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset existed at June 30, 2023 and 2022.
A reconciliation of the federal statutory income tax to our effective income tax is depicted below:
|
| June 30, |
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| June 30, |
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| 2023 |
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| 2022 |
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Federal statutory rates |
| $ | ( | ) |
| $ | ( | ) |
Income tax adjustment |
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Stock based compensation |
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Permanent difference |
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Valuation allowance against net deferred tax assets |
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Effective rate |
| $ |
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| $ |
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On June 30, 2023, the Company had federal net operating loss carry forwards of approximately $
| F-18 |
| Table of Contents |
Net deferred tax assets consist of the following components as of:
|
| June 30, |
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| June 30, |
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| 2023 |
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| 2022 |
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Operating loss carry forward |
| $ |
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| $ |
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Valuation allowance |
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Net deferred income tax asset |
| $ |
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| $ |
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The Company is open to examination of our income tax filings in the United States and state jurisdictions for the 2018 through 2022 tax years. Tax attributes from years prior to that can be adjusted as a result of examinations. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.
On July 17, 2020, the Company entered into a Membership Agreement (See “Investment in HIE LLC” in Item 1. Description of Business). Under the terms and conditions of the Membership Agreement, in the event of a loss of capital of HIE, the Company shall contribute to repay
On January 30, 2023, Hawkeye entered into a consulting agreement with Steve Hall, a shareholder of the Company, to provide real estate and development consulting services. Transactions are described in detail in Note 14 - Consulting Agreement - Related Party.
On February 27, 2023, the Company and CNTNR USA, Inc. (“CNTNR”) entered into a promissory note under which the Company disbursed $
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation, the following subsequent events would require disclosure in the financial statements:
The Company borrowed additional funds of $
On July 12, 2023, and August 15, 2023, CNTNR advanced $
As of the date of this report, the Company and Steve Hall are currently working towards a restructuring of the Hall Note. Note detail is described in Note 8 – Promissory notes payable – related party.
| F-19 |
| Table of Contents |
Item 9. Change in and Disagreement with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
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 of accounting principles generally accepted in the United States. In our review, we sought to find potential for material weaknesses in our financial controls, which is defined as a deficiency, or combination of deficiencies, in our accounting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Because of its inherent limitations, which include a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures, internal control over financial reporting may not prevent or detect misstatement, whether unintentional errors or fraud. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, consisting of Corby Marshall as Chief Executive Officer and Christopher Mulgrew as Chief Financial Officer, reviewed and evaluated the effectiveness of the Company’s internal control over disclosure controls and procedures (as such term is defined in Rules 13a-15(3) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) and financial reporting as of June 30, 2021. In making this assessment, our management used the criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as well as the guidance provided in SEC Release 33-8809. In such evaluation, Mr. Marshall and Mr. Mulgrew assessed daily interaction, self-assessment and other ongoing monitoring activities as evidence in the evaluation. Furthermore we sought to identify financial reporting risks, identify controls that adequately address financial reporting risks, considered entity level controls, reviewed the role of technology in our controls and reviewed the evidence available to support the assessment.
Based on this evaluation, our management concluded that, as of June 30, 2023, our disclosure controls and our internal controls over financial reporting were not effective in recording, processing, summarizing and report on a timely basis information required to be disclosed in the reports that we file or submit under the Exchange Act and were not effective in assuring that information required to be disclosed in the reports we file or submit under the Exchange Act due to material weaknesses including (i) the Company having only two officers handling all financial transactions, (ii) lack of appropriate operational controls and consistency in providing our accounting personnel with financial information, (iii) incomplete financial statements on a daily basis and resulting errors in our underlying accounting system, (iv) lack of proper documentation of our assessment and evaluation, and (v) our determination that internal controls were ineffective due to the limited segregation of duties because of the limited management structure.
In response to that assessment we have made a determination that all accounting and financial reporting services should be outsourced to a qualified consulting firm, and we immediately engaged a new financial services provider. We subsequently replaced that provider with an internal accounting contractor.
We have also made the determination that we need to dedicate more of the Company’s current and future financial resources to this function and engaged a permanent Chief Financial Officer.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. The 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 the management’s report in this annual report.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
Not applicable.
| 13 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following persons are our executive officers and directors, and hold the offices set forth opposite their names.
Name |
| Age |
| Position |
Corby Marshall |
| 53 |
| Chairman, President, Secretary, Chief Executive Officer, and Director |
Christopher Mulgrew |
| 50 |
| Treasurer, Chief Financial Officer and Director |
Our Board of Directors consists of two members. All directors may be reimbursed for their expenses, if any, for attendance at meetings of the Board of Directors.
The following is a brief account of the business experience during the past five years of each of our directors and executive officers:
Corby Marshall, Chairman of the Board of Directors and Chief Executive Officer
Corby Marshall is the founder, chief executive officer and director of Hawkeye Systems, Inc. since August 2019. Before that, Mr. Marshall was the Chief Executive Officer of Hilltop Cybersecurity Inc. (CSE: CYBX) starting in March 2017. Previously, Mr. Marshall was Senior Vice President of Alliances and Partnerships for AppOrbit; where he developed and led the go-to-market programs for all consulting, reseller, and solution partners. He previously led sales, consulting, marketing, and operations for several companies, including Metastorm (OpenText), Mercator (IBM), Niku and LabCorp. Corby is an expert at developing new programs and leading through transformational change; skills he honed during his service as an Airborne-qualified, Field Artillery Officer in the United States Army. Mr. Marshall also speaks Portuguese.
Mr. Marshall is a distinguished graduate of the U.S. Military Academy at West Point. Mr. Marshall’s military career included time in Kuwait, Somalia and various other deployment areas as a Field Artillery Officer specializing in 155mm self-propelled artillery units.
Christopher Mulgrew, Chief Financial Officer and Director
Mr. Christopher Mulgrew has been our chief financial officer since January 2021 and was elected as a member of our board of directors in May of 2022. Prior to joining Hawkeye Systems, Inc., Mr. Mulgrew performed contract CFO, mergers, and acquisitions consulting for Gimmal, Inc., a private equity backed SaaS company. In 2019 and 2020 he was Chief Financial Officer for Panther Fluids Management, LLC, a Houston-based engineering, and drilling fluids company. Prior to that Mr. Mulgrew ended his tenure at award-winning JEMSU, LLC in 2018 as Chief Executive Officer where he had served as Chief Financial Officer 2011-2017. He helped build JEMSU via multiple acquisitions and an aggressive organic growth strategy.
In 2009 and 2010 Mr. Mulgrew was the Global Controller for the Shell Technology Ventures Fund (“STV”), a $1.4 billion venture capital fund focused on upstream oil and gas technology companies. While at STV he served on the board of several portfolio companies including Prometheus Energy Group, Inc., ThruBit BV (acquired by Schlumberger), and Smartpipe Technologies.
During 2009-2010 Mr. Mulgrew was Chief Operating Officer of Pacific Western Brewing Ltd., Canada’s largest independent brewery and beverage company. Previously he led the IPO via reverse merger of Acro Energy Technologies Corp as Chief Financial Officer. Mr. Mulgrew earned an MBA from the top-ranked Jones Graduate School of Business at Rice University and holds a BBA in Accounting from Simon Fraser University in Canada. Christopher is also qualified as a Chartered Public Accountant in Canada and a Certified Public Accountant in the US and has completed executive programs at the London School of Business.
| 14 |
| Table of Contents |
Committees of the Board
Decisions of the Board of Directors are generally taken by unanimous written consents. The current board comprises two members and is intending to hold regularly scheduled meetings. The entire board provides the functions of Audit, Compensation and Governance committees until such time as charters for these committees can be adopted and they can be populated by independent directors.
Code of Ethics
The Company has adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Until recently we have had a sole officer and director conducting all operations.
Family Relationships
No family relationships exist between any of our present directors and officers.
Compliance with Section 16(A) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the “reporting persons”) file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own during the fiscal year ended June 30, 2023, all forms required, if any, were filed with the SEC by such reporting persons.
Changes in Nominating Procedures
None
Item 11. Executive Compensation
The following table sets forth information concerning the total compensation paid or accrued by us during the fiscal year ended June 30, 2023 and the fiscal year ended June 30, 2022 to:
| · | all individuals who served as our chief executive officer, chief financial officer or acted in a similar capacity for us at any time during such periods, and |
| · | all individuals who served as executive officers of ours at any time during such periods and received annual compensation in excess of $100,000. |
| 15 |
| Table of Contents |
Summary Compensation Table
(a) |
| (b) |
| (c) |
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| (d) |
| (e) |
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| (f) |
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| (g) |
| (h) |
| (i) |
| (j) |
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Name and Principal |
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| Salary |
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| Bonus |
| Stock Awards |
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| Option Awards |
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| Non-Equity Incentive Plan Compensation |
| Change in Pension Value & Non-qualified Deferred Compensation Earnings |
| All Other Compensation |
| Totals |
| ||||
Position |
| Year |
| ($)* |
|
| ($) |
| ($) |
|
| ($) |
|
| (S) |
| ($) |
| ($) |
| ($) |
| ||||
Corby Marshall, Chief Executive Officer |
| 2023 |
|
| 250,000 |
|
| 106,500 | (1). |
|
|
|
| - |
|
|
|
|
|
|
|
|
| 356,500 |
| |
Corby Marshall, Chief Executive Officer |
| 2022 |
|
| 243,597 |
|
|
|
|
|
|
|
| 66,511 |
|
|
|
|
|
|
|
|
| 310,108 |
| |
Christopher Mulgrew, Chief Financial Officer & Director |
| 2023 |
|
| 195,000 |
|
| 71,000 | (2) |
|
|
|
| - |
|
|
|
|
|
|
|
|
| 266,000 |
| |
Christopher Mulgrew, Chief Financial Officer & Director |
| 2022 |
|
| 195,000 |
|
|
|
|
| 10,000 |
|
|
| 17,415 |
|
|
|
|
|
|
|
|
| 222,415 |
|
Richard Cutlet, Director (Resigned on August 19, 2022) |
| 2022 | 20,000 | - | 20,000 |
| ||||||||||||||||||||
(1) | Comprised of 750,000 shares of Common Stock issued by the Board of Directors by means of a board resolution dated February 13, 2023. |
(2) | Comprised of 500,000 shares of Common Stock issued by the Board of Directors by means of a board resolution dated February 13, 2023. |
| 16 |
| Table of Contents |
Narrative Disclosure Requirements for Summary Compensation Table
Compensation
On June 11, 2020, the Company entered into an employment agreement with Corby Marshall, the Company’s chairman of the board of directors, president, and chief executive officer (the “Employment Agreement”). The term of the Employment Agreement is three years. The Employment Agreement will automatically extend for successive three-year terms, unless either party gives written notice of termination 30 days prior to the end of the then current term. Pursuant to the terms of the Employment Agreement, Mr. Marshall shall receive a base salary from the Company of $250,000 per year. If the Company is unable to pay this amount in cash, Mr. Marshall may defer cash compensation and receive like kind compensation in shares of the Company’s common stock. Mr. Marshall shall be reimbursed for business expenses, receive a car allowance and health benefits from the Company. As part of his compensation, Mr. Marshall is entitled to receive a target bonus of up to 100% of his base salary, based on the Company’s and his individual performance. If Mr. Marshall’s employment is terminated by the Company without cause, he will be entitled to receive severance benefits. The severance benefits include (i) the continuation of payment of his base salary in effect immediately prior to termination for no less than twelve months (the “Severance Benefit Period”); and (ii) the continuation of all employment benefits for the Severance Benefit Period. If Mr. Marshall is terminated without cause and in conjunction with a change in control, he will be entitled to receive change in control benefits, which includes (i) continuation of payment of his base compensation for a period equal to twice the amount of the Severance Benefit Period (the “Change in Control Benefit Period”), and (ii) the continuation of his employment benefits for the Change in Control Benefit Period. On February 13, 2023, Mr. Marshall received a bonus of 710,000 shares common stock with a cash value of $106,500, for the years 2021 and 2022, and for agreeing to defer cash compensation.
On January 15, 2021, the Company entered into a consulting agreement with Christopher Mulgrew, the Company’s chief financial officer (the “Consulting Agreement”). The Consulting Agreement was amended and restated on March 1st, 2021 (the “Restated Agreement”). Pursuant to the terms of the Restated Agreement, the Company shall pay Mr. Mulgrew a consultant fee of US$195,000 per annum and issue options to acquire 500,000 shares of the Company’s Common Stock at $0.30 per shares, with 20% of the options vesting immediately upon issuance of the option, and an additional 20% every three months thereafter. The agreement also included healthcare premiums and automobile allowance. On February 13, 2023, Mr. Mulgrew received a bonus of 500,000 shares common stock with a cash value of $71,000 for the years 2021 and 2022, and for agreeing to defer cash compensation.
As of the date of this report, no other officer or director has formally entered into any compensation arrangement for services provided under consulting agreements or employment agreements.
Retirement, Resignation or Termination Plans
We sponsor no plan, whether written or verbal, that would provide compensation or benefits of any type to an executive upon retirement, or any plan that would provide payment for retirement, resignation, or termination as a result of a change in control of our company or as a result of a change in the responsibilities of an executive following a change in control of our company.
Directors’ Compensation
The persons who served as members of our Board of Directors, including executive officers, did not receive any cash compensation for services as directors in 2023 or 2022. We may reimburse our directors for expenses incurred in connection with attending board meetings.
| 17 |
| Table of Contents |
Option Exercises and Stock Vested
In fiscal year 2023, the Company has not granted any stock options. No stock options have been exercised as of June 30, 2023.
During fiscal year 2022, the Company has issued 2,400,000 stock options that are fully vested on the grant date to the officers and directors. The exercise prices of these options ranged from $0.05 to $0.11. The term of all options is five years. The aggregate fair value of these stock options total $115,642 and was recognized fully as of June 30, 2022. 900,000 options were exercised by the Company’s officers and directors during the fiscal year ended 2022.
In 2019, the board of directors adopted the 2019 Directors, Officers, Employees and Consultants Stock Option Plan (“Option Plan”) whereby the Company reserved for issuance 2,500,000 shares of common stock and agreed that such shares shall, when issued and paid for in accordance with the provisions of the Option Plan, constitute validly issued, fully paid and non-assessable shares of common stock.
The Company has granted the aggregate total of 5,325,000 stock options issued to the directors, and officers, of which 1,150,000 stock options were granted under the Option Plan, and 4,175,000 options, were granted as non-statutory stock options, outside of the Option Plan. The Company has had a 1-to-10 reversed stock split commenced on February 9, 2023, of which options outstanding balance is reduced proportionally. As of the day of this annual report, 425,600 shares are exercisable.
Director and Executive Officer Outstanding Equity Awards at Fiscal Year-End
The following table provides certain information concerning any common share purchase options, stock awards or equity incentive plan awards held by each of our named executive officers that were outstanding as of June 30, 2023.
Option Awards |
| Stock Awards |
| |||||||||||||||||||||||||||||||
|
| Number of Securities Underlying Unexercised Options (#) |
|
| Number of Securities Underlying Unexercised Options (#) |
|
| Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned |
|
| Option Exercise Price |
|
| Option Expiration |
| Number of Shares or Units of Stock That Have Not Vested |
|
| Market Value of Shares or Units of Stock That Have Not |
|
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not |
|
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not |
| ||||||||
Name |
| Exercisable |
|
| Un-exercisable |
|
| Options (#) |
|
| ($) |
|
| Date |
| (#) |
|
| Vested |
|
| Vested |
|
| Vested |
| ||||||||
Corby Marshall, Chief Executive Officer |
|
| 100,000 |
|
|
| 0 |
|
|
| 0 |
|
| $ | 0.20 |
|
| 05/22/2027 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Christopher Mulgrew, Chief Financial Officer & Director |
|
| 50,000 |
|
|
| 0 |
|
|
| 0 |
|
| $ | 0.10 |
|
| 05/22/2027 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Richard Cutlet, Director |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 18 |
| Table of Contents |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of September 25, 2023, the beneficial ownership of Hawkeye Systems, Inc. common stock by each of our directors and named executive officers, each person known to us to beneficially own more than 5% of our common stock, and by the officers and directors of the Company as a group. Except as otherwise indicated, all shares are owned directly. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power (subject to applicable community property laws) and that person’s address is that of the Company. Shares of Common Stock subject to options, warrants, or convertible notes currently exercisable or convertible or exercisable or convertible within 60 days after September 25, 2023 are deemed outstanding for computing the share ownership and percentage of the person holding such options, warrants, or convertible notes but are not deemed outstanding for computing the percentage of any other person. As of September 25, 2023, there were 5,552,222 shares of our common stock outstanding:
Title of Class |
| Name and Address of Beneficial Owner |
| Number of Shares Owned Beneficially |
|
| Percent of Class Owned |
| ||
Common Stock |
| Corby Marshall (1) |
|
| 1,236,500 |
|
|
| 22,270 | % |
Common Stock |
| Christopher Mulgrew (2) |
|
| 587,000 |
|
|
| 10.57 | % |
All Executive Officers and Directors as a Group (2 persons) |
|
|
|
| 1,823500 |
|
|
| 32.84 | % |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
| Steve Hall (3) |
|
| 2,061,134 |
|
|
| 37,12 | % |
Common Stock |
| CEDE&CO |
|
| 918,333 |
|
|
| 16,54 | % |
|
|
|
|
|
|
|
|
|
|
|
Executive Officers and Directors and 5% Beneficial Owners |
|
|
|
| 4,802,967 |
|
|
| 86.5 | % |
_____________
(1) | Consists of 1,236,500 shares of stock held by Mr. Marshall, and 100,000 shares pursuant to options. |
(2) | Consists of 587,000 shares of stock held by Mr. Mulgrew, and options to purchase 50,000 shares of common stock. |
(3) | Consists of 2,061,134 shares of stock held by Mr. Hall, which also included 239,401 shares of warrants, 50,000 shares of option, 317,507 from Line of Credit, 2,813,682 from revolver note and 3,324,658 shares from convertible notes. |
Note: Beneficial Ownership of Securities: Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, involving the determination of beneficial owners of securities, a beneficial owner of securities is a person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has, or shares, voting power and/or investment power with respect to the securities, and any person who has the right to acquire beneficial ownership of the security within sixty days through means including the exercise of any option, warrant or conversion of a security.
Item 13. Certain Relationships and Related Transaction, and Director Independence
In addition to the cash and equity compensation arrangements of our directors and executive officers discussed above under “Director Compensation” and “Executive Compensation,” the following is a description of transactions to which we have been a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock, or entities affiliated with them, had or will have a direct or indirect material interest.
| 19 |
| Table of Contents |
On April 6, 2020, and December 15, 2020, the Company issued two convertible notes payable of $250,000 each to Steve Hall. Both notes have one year term with simple interest at 10% per annum if repaid within 90 days, and simple interest at 20% per annum thereafter. At the option of holder, this note is convertible at any time which is six months from the date of issuance through that date which is one year from the date of issuance at a conversion price of $0.25 per share. In consideration for the loans, the Company also granted to the Mr. Hall 200,000 stock options exercisable at $0.25 for a two-year term. The options vested upon issuance. On November 2, 2021, the Company issued 160,000 shares of common stock for cashless exercise of 200,000 shares of stock option. Both notes and the accrued interests totaling $594,344 have been converted on September 1, 2021, and issued on July 28, 2022 for the aggregate total of 16,666,667 shares of common stock. On February 9, 2023, the 16,666,667 shares of common stock were reduced to 1,666,667 shares to reflect the 1-for-10 reverse stock split.
On October 1, 2021, the Company and Steve Hall entered into a restated and amended promissory note, to consolidate and restate the terms pursuant to which Steve Hall had provided funds to the Company (the “Consolidated Note”). The Consolidated Notes consolidated and restated the terms of advances made on February 17, 2021, for $500,000 for inventory financing, February 18, 2021, for $500,000 for inventory financing, November 12, 2021, for $30,000 and December 13, 2021, for $75,000. In addition to consolidating the advances singled out above, the Consolidated Note included the extension of a line of credit of up to $1,000,000, from Steve Hall to the Company. The principal amount of the Consolidated Note, excluding the $1,000,000 line of credit, is $1,105,000, payable on demand at any time after October 1, 2022 (the “Due Date”), and accruing interest at a rate of 12% per year, if repaid within 90 days of the due date and 20% if repaid thereafter. Principal and interest due under the line of credit extended pursuant to the Consolidated Note shall be added to the principal amount due under the Consolidated Note and shall be payable pursuant to the same terms. The line of credit is due and payable on the Due Date unless extended. At the option of holder, this note is convertible at any time into shares of common stock at a conversion price of $0.02 per share. As of June 30, 2023, and 2022, the accrued interest was $164,932, and $64,932, respectively.
The Consolidated Note’s Due Date was extended to September 30, 2023.
On October 1, 2021, Steve Hall agreed to provide a Line of Credit of up to $1,000,000 to the Company with simple interest at 12% for the first 90 days, and simple interest at 20% per annum thereafter. The principal and interest payable shall be added to the principal amount of the Consolidated Note and payable pursuant to the same terms. As of June 30, 2023, the term of Line of Credit was extended to October 1, 2023. Over the fiscal years 2023, and 2022 in multiple transactions dates, the Company has withdrawn a total of $525,000, and $265,000, respectively. In connection with the Line of Credit, the Company has accrued interest of $101,238, and $15,015 in the fiscal years 2023, and 2022, respectively.
On March 29, 2023, Steve Hall provided the Company with a loan in the principal amount of $1,000,000, as evidenced by a promissory note with an annual interest rate of 12% per year (the “Steve Hall Note”). The purpose of the Steve Hall Note was to provide the Company with a funding source to make a follow-on investment in CNTNR USA Inc., a Delaware corporation (“CNTNR”). On May 31, 2023 (or upon the closing of a debt financing), the Company will repay the outstanding principal balance of the Steve Hall Note to Steve Hall and transfer 90% of the shares of CNTNR, issued by CNTNR to the Company pursuant to the Company’s investment in CNTNR, plus 90% of the CNTNR Warrants as described in Note 10 - Note Receivable in the Financial Statements. As of June 30, 2023, the outstanding loan balance was $1,000,000 with accrued interest of $31,989.
On January 30, 2023, Hawkeye entered into a consulting agreement with Steve Hall, a shareholder of the Company, to provide real estate and development consulting services, including the supervision of the Company’s senior management, staff and all personnel, whether employees or consultants, strategic planning, property acquisitions and annual budget review. The contract period is 12 months with no option for renewal thereafter. The Company paid Steve Hall a one-time flat service fee of $250,000 on January 31, 2023. Compensation is without recourse and there is no requirement for performance of services during the term of the contract.
Director Independence
Our directors are not “independent,” as defined by SEC rules adopted pursuant to the requirements of the Sarbanes-Oxley Act of 2002. Although our stock is not listed for trading on the Nasdaq Stock Market at this time, we are required to determine the independence of our directors by reference to the rules of a national securities exchange or of a national securities association (such as the Nasdaq Stock Market). In accordance with these requirements, we have determined that none of our directors are “independent directors,” as determined in accordance with Rule 4200(a)(15) of the Marketplace Rules of the Nasdaq Stock Market, Inc. Subsequent to June 30, 2022, our board of directors is comprised of Corby Marshall and Chris Mulgrew, none of which are independent directors.
| 20 |
| Table of Contents |
Item 14. Principal Accounting Fees and Services
Audit Fees
The aggregate fees billed for the fiscal year ended June 30, 2023 and the fiscal year ended June 30, 2022 for professional services rendered by the principal accountants for the audit of the registrant’s annual financial statements and review of financial statements included in the registrant’s Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were: $42,500 and $52,340, respectively.
Audit-Related Fees
No aggregate fees were billed in either the fiscal year ended June 30, 2023 and the fiscal year ended June 30, 2022 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements.
Tax Fees
No aggregate fees were billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.
All Other Fees
Other fees billed for professional services provided by the principal accountant, other than the services reported above, for the fiscal years ended June 30, 2023 and 2022 were $0.
Audit Committee Pre-Approval Policies
Our Board of Directors performing as the Audit Committee has approved the principal accountant’s performance of services for the audit of the registrant’s annual financial statements and review of financial statements included in our Form 10-K for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending June 30, 2023. Audit-related fees, tax fees, and all other fees, if any, were approved by the Board of Directors.
| 21 |
| Table of Contents |
Item 15. Exhibits, Financial Statement Schedules
The following exhibits are filed as part of this registration statement.
Exhibit |
| Description |
|
|
|
| Articles of Incorporation of Registrant (as filed with the SEC on August 27, 2018) | |
| Bylaws of Registrant (as filed with the SEC on August 27, 2018) | |
| ||
| ||
10.2 |
| Employment Agreement dated as of June 11, 2020 between Registrant and Corby Marshall* |
| ||
| ||
10.5 |
| Consulting Agreement dated as of January 30, 2023 between the Registrant and Steve Hall* |
10.6 |
| Membership Agreement dated July 17, 2020, between the Registrant, Eagle Equities LLC and Ikon Supplies* |
| List of Subsidiaries (as filed with the SEC on December 9, 2019). | |
| ||
| ||
| Certification of Chief Executive Officer pursuant to Section 1350 | |
| Certification of Chief Financial Officer pursuant to Section 1350 | |
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
| Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
Item 16. Form 10-K Summary
None.
___________
*Filed Herewith
| 22 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| Hawkeye Systems, Inc. |
| |
|
|
|
|
October 16, 2023 | By: | /s/ Corby Marshall |
|
|
| Corby Marshall |
|
|
| Chief Executive Officer |
|
|
| (Principal Executive Officer) |
|
|
|
|
|
October 16, 2023 | By: | /s/ Christopher Mulgrew |
|
|
| Christopher Mulgrew |
|
|
| Chief Financial Officer |
|
|
| (Principal Financial Officer) |
|
Pursuant to the requirements of Section 13 or 15(d) 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.
October 16, 2023 | /s/ Corby Marshall |
|
| Corby Marshall, Director |
|
| and Principal Executive Officer |
|
| 23 |