AnTix Holdings, Inc 10-Q for FY2015 Q1
AnTix Holdings, Inc. (IMTH)
About this 10-Q
AnTix Holdings, Inc filed this 10-Q on February 1, 2021, covering the quarter ended July 31, 2014 (FY2015 Q1).
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2014
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-51390
| Fresh Harvest Products, Inc. |
| (Exact name of registrant as specified in its charter) |
| Delaware |
| 33-1130446 |
| (State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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| 2310 York St, Suite 200 Blue Island, IL |
| 60406 |
| (Address of principal executive offices) |
| (Zip Code) |
917.566.1080
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Not applicable. | Note applicable. | Not applicable. |
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☒ Yes ☐ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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. ☐ Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
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| Emerging growth company | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (April 30, 2014): $654,244 (1,635,610,445 shares at a per share price of $.0004)
As of July 31, 2014, there were 1,635,610,445 shares of Common Stock, $0.0001 par value per share, issued and outstanding.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless stated otherwise or the context otherwise requires, the words “we,” “us,” “our,” the “Company” or “Fresh Harvest” in this “Quarterly Report on Form 10-Q collectively refers to Fresh Harvest Products, Inc., a New Jersey corporation (the “Company”). The information in this Quarterly Report on Form 10-Q contains “forward-looking statements” relating to the Company, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
This report contains information that may be deemed forward-looking, that is based largely on the Company’s current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated.
Among such risks, trends and other uncertainties, which in some instances are beyond its control, may be the Company’s ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in its credit facilities, if necessary. Other risks and uncertainties include the impact of continuing adverse economic conditions, potential changes in energy costs, interest rates and the availability of credit, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, increased capital and other costs, competition and other risks detailed from time to time in the Company’s publicly filed documents.
The words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this report. The Company does not undertake to publicly update or revise its forward-looking statements.
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FRESH HARVEST PRODUCTS, INC.
FORM 10-Q
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| Management's Discussion and Analysis of Financial Conditions and Results of Operations |
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| Table of Contents |
| FRESH HARVEST PRODUCTS, INC. | ||||||||||||
| BALANCE SHEETS | ||||||||||||
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| July 31, 2014 |
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| October 31, 2013 |
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| ASSETS |
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| Total assets |
| $ | - |
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| $ | - |
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| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
| Current liabilities |
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| Accounts payable and accrued expenses |
| $ | 1,559,965 |
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| $ | 1,384,629 |
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| Accrued interest |
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| 301,233 |
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| 248,687 |
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| Notes payable, related party, current |
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| 32,312 |
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| 32,312 |
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| Notes payable, current, net of debt discount |
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| 615,733 |
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| 565,733 |
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| Derivative liability |
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| 174,594 |
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| 435,515 |
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| Total current liabilities |
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| 2,683,837 |
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| 2,666,876 |
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| Total liabilities |
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| 2,683,837 |
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| 2,666,876 |
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| Commitments and contingencies (Note 10) |
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| Stockholders' deficit |
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| Preferred stock, $.0001 par value, 5,000,000 shares authorized, 5,000,000 issued and outstanding |
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| 500 |
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| 500 |
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| Common stock, $.0001 par value, 2,000,000,000 authorized shares, 1,635,610,445 shares issued and outstanding |
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| 163,562 |
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| 163,562 |
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| Additional paid in capital |
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| 7,054,106 |
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| 7,054,106 |
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| Accumulated deficit |
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| (9,902,005 | ) |
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| (9,885,044 | ) | ||||
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| Total stockholders' deficit |
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| (2,683,837 | ) |
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| (2,666,876 | ) | ||||
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| Total liabilities and stockholders' deficit |
| $ | - |
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| $ | - |
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See accompanying notes to unaudited financial statements
| 4 |
| Table of Contents |
| FRESH HARVEST PRODUCTS, INC. | |||||||||||
| STATEMENTS OF OPERATIONS |
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| three months ended |
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| three months ended |
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| nine months ended |
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| July 31, 2014 |
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| July 31, 2013 |
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| July 31, 2014 |
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| July 31, 2013 |
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| Revenue |
| $ | - |
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| $ | - |
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| $ | - |
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| $ | - |
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| Cost of goods sold |
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| - |
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| - |
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| - |
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| - |
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| Gross profit |
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| - |
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| - |
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| - |
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| - |
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| Operating expenses |
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| Salaries and wages |
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| 36,000 |
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| 36,000 |
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| 108,000 |
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| 108,000 |
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| General and administrative |
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| 21,150 |
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| 21,281 |
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| 63,667 |
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| 64,898 |
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| Sales and marketing |
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| - |
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| - |
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| 50,000 |
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| 50,000 |
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| Legal and professional fees |
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| 1,500 |
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| 1,500 |
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| 3,669 |
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| 2,600 |
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| Total operating expenses |
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| 58,650 |
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| 58,781 |
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| 225,336 |
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| 225,498 |
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| Income (loss) from operations |
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| (58,650 | ) |
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| (58,781 | ) |
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| (225,336 | ) |
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| (225,498 | ) |
| Other income (expense) |
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| Change in fair value of derivatives |
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| 373,547 |
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| 93,790 |
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| 310,921 |
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| (172,207 | ) |
| Interest expense |
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| (29,292 | ) |
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| (51,164 | ) |
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| (102,546 | ) |
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| (115,268 | ) |
| Total other income (expenses) |
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| 344,255 |
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| 42,626 |
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| 208,375 |
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| (287,475 | ) |
| Income (loss) before provision for income taxes |
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| 285,605 |
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| (16,155 | ) |
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| (16,961 | ) |
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| (512,973 | ) |
| Provision for income taxes |
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| Net income (loss) |
| $ | 285,605 |
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| $ | (16,155 | ) |
| $ | (16,961 | ) |
| $ | (512,973 | ) |
| Basic and dilutive loss per share |
| $ | 0.00 |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) | |
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| Weighted average common shares outstanding - basic and dilutive |
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| 1,635,610,445 |
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| 1,635,610,445 |
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| 1,635,610,445 |
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| 1,635,610,445 |
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See accompanying notes to unaudited financial statements
| 5 |
| Table of Contents |
| FRESH HARVEST PRODUCTS, INC. | ||||||||
| STATEMENTS OF CASH FLOWS | ||||||||
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| For the |
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| nine months ended |
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| July 31, 2014 |
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| July 31, 2013 |
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| Cash flows from operating activities |
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| Net (loss) income |
| $ | (16,961 | ) |
| $ | (512,973 | ) |
| Adjustments to reconcile net loss to cash flows (used in) provided by operating activities: |
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| Amortization of debt discount |
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| 50,000 |
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| 61,312 |
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| Change in fair value of derivatives |
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| (260,921 | ) |
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| 222,207 |
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| Change in operating assets and liabilities: |
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| Accounts payable and accrued expenses |
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| 175,336 |
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| 175,499 |
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| Accrued interest |
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| 52,546 |
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| 53,955 |
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| Cash flows (used in) operating activities |
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| - |
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| - |
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| Net increase (decrease) in cash |
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| - |
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| Cash, beginning of period |
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| - |
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| Cash, end of period |
| $ | - |
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| $ | - |
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| Supplemental disclosure of cash flow information: |
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| Taxes paid |
| $ | - |
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| $ | - |
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| Interest paid |
| $ | - |
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| $ | - |
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| Non-cash financing activities: |
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| Convertible notes payable issued for accounts payable |
| $ | 50,000 |
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| $ | 50,000 |
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See accompanying notes to unaudited financial statements
| 6 |
| Table of Contents |
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
Fresh Harvest Products, Inc., a New Jersey corporation (the “Company”), is engaged in the software and mobile application development and video production businesses.
The Company previously operated as a natural and organic food products company before management decided to transition the Company’s line of business to capitalize on its relationships within the rapidly growing Software-as-a-Service (SaaS), enterprise software and mobile application markets.
During October 2012, the Company began integrating a digital plan and strategy which will shift the Company’s focus on expanding the online network and community, as well as an expansion of online services, with a focus on developing various SaaS models in the health, wellness, fitness, lifestyles of health and sustainability (LOHAS) and healthcare industries.
The Company expects to develop, license and acquire software applications that will generate revenue through subscription fees, in-app upgrades, purchases and advertising. The Company is currently working on several software applications including a calorie calculator and food comparison software solution so that consumers can be informed and compare what foods they are eating and be able to accurately calculate their daily calories per item, as well as compare foods with each other to learn and understand what the healthier options are. The Company is actively seeking strategic partners and acquisition targets in order to grow and expand.
NOTE 2. LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
The accompanying financial statements have been prepared on a going-concern basis, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business.
For the quarters ended July 31, 2014 and 2013, the Company reported a net income of $285,605 and net loss of $16,155, respectively.
As of July 31, 2014, the Company maintained total assets of $0, total liabilities including long-term debt of $2,683,837 along with an accumulated deficit of $9,902,005.
The Company believes that additional capital will be required to fund operations through the year ended October 31, 2014 and beyond, as it attempts to generate increasing revenue, and develop new products. The Company intends to attempt to raise capital through additional equity offerings and debt obligations. There can be no assurance that the Company will be successful in obtaining financing at the level needed or on terms acceptable to the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying quarterly financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s insolvent financial condition also may create a risk that we may be forced to file for protection under applicable bankruptcy laws or state insolvency statutes. The Company also may face the risk that a receiver may be appointed. The Company may face additional risks resulting from our current financial condition. For these and other reasons, our management recognizes the adverse difficulties and continuing severe challenges we face. Apart from the limited funds that The Company has received there can be no assurance that the Company will receive any financing or funding from any source or if any financing should be obtained, that existing shareholders will not incur substantial, immediate, and permanent dilution of their existing investment.
The Company’s operations are subject to certain additional risks and uncertainties including, among others, dependence on outside suppliers and manufacturers, competition, dependence on its exclusive license and relationship with the licensor, uncertainties regarding patents and proprietary rights, dependence on key personnel, and other business risks. In addition, there is no assurance, assuming the Company is successful in raising additional capital that the Company will be successful in achieving profitability or positive cash flow.
| 7 |
| Table of Contents |
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the quarters ended July 31, 2014 and 2013.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.
Cash and Cash Equivalents
The Company maintains cash balances in a non-interest bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of July 31, 2014 and October 31, 2013.
Net Loss Per Share Calculation
Basic net loss per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per shares is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued.
Revenue Recognition and Sales Incentives
Sales will be recognized when an online transaction is processed, which occurs when a user of one of the Company’s software products purchases the products online or in an app. Sales are reported net of sales incentives, which could include discounts and promotions.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements.
Advertising
Advertising is expensed when incurred. For the three month period ended July 31, 2014 and 2013, advertising expense was $0 and $0, respectively. For the nine month period ended July 31, 2014 and 2013, advertising expense was $0 and $0, respectively.
Fair value of financial instruments
Fresh Harvest’s financial instruments include cash and cash equivalents, accounts payable, accrued liabilities, and debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of the debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. Fresh Harvest’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.
| 8 |
| Table of Contents |
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable, accrued expenses and interest, certain notes payable and notes payable – due to related parties, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under Level 3 (See Note 6).
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial feature.
Derivative financial instruments
When the Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company's stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.
If the conversion feature within convertible debt meet the requirements to be treated as a derivative, Fresh Harvest estimates the fair value of the derivative liability using the Monte Carlo Simulation Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the statements of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 “Derivatives and Hedging” (provides comprehensive guidance on derivative and hedging transactions) whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Share-based compensation
The Company accounts for common stock issued to employees, directors, and consultants in accordance with the provisions of the Accounting Standards Codification (ASC) 718 Stock Based Compensation. The compensation cost relating to share-based payment transactions will be recognized in the financial statements. The cost associated with common stock issued to employees, directors and consultants will be recognized, at fair value, on the date issued. Awards granted to non-employee consultants will be subsequently re-measured to current fair value until performance is completed or a performance commitment exists.
| 9 |
| Table of Contents |
Recently Issued Accounting Pronouncements
As of and for the fiscal quarter ended July 31, 2014, the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.
Subsequent Events
In accordance with ASC 855, Subsequent Events, the Company evaluated subsequent events through the date of this report; the date the financial statements were available for issue.
NOTE 4. NOTES PAYABLE - RELATED PARTIES
As of July 31, 2014 and October 31, 2013 the Company had $32,312 in outstanding notes payable to related parties. As of July 31, 2014 and October 31, 2013, the Company had $5,896. And $3,231, respectively, in outstanding interest to related parties. The outstanding notes payable have one-year terms and 10% interest rates. The principal amount of the notes and accrued and unpaid interest is convertible into common shares of the Company upon the due date at $0.0001 per share, subject to adjustments.
NOTE 5. NOTES PAYABLE
The Company did not enter into any notes payable during the quarter ended July 31, 2014. As of July 31, 2014 and October 31, 2013, the notes payable were as follows:
| Date of Note Issuance |
| Original Principal Balance |
|
| Maturity Date |
| Interest Rate % |
|
| Conversion Rate |
|
| Principal Balance 7/31/14 |
|
| Principal Balance 10/31/13 |
| |||||
| 11/1/13 |
| $ | 50,000 |
|
| 11/1/14 |
|
| 10 | % |
| lesser $0.0003 or 50% discount to market |
|
| $ | 50,000 |
|
| $ | - |
| |
| 2/1/13 |
|
| 50,000 |
|
| 2/1/14 |
|
| 10 | % |
| lesser $0.0015 or 50% discount to market |
|
|
| 50,000 |
|
|
| 50,000 |
| |
| 10/31/12 |
|
| 104,278 |
|
| 10/31/13 |
|
| 10 | % |
| lesser $0.0015 or 50% discount to market |
|
|
| 104,278 |
|
|
| 104,278 |
| |
| 3/16/12 |
|
| 50,000 |
|
| 9/16/12 |
|
| 10 | % |
| $ | 0.00200 |
|
|
| 60,000 |
|
|
| 60,000 |
|
| 2/14/12 |
|
| 14,900 |
|
| 2/14/13 |
|
| 10 | % |
| $ | 0.00100 |
|
|
| 24,900 |
|
|
| 24,900 |
|
| 2/10/12 |
|
| 25,000 |
|
| 8/10/12 |
|
| 10 | % |
| $ | 0.00119 |
|
|
| 25,000 |
|
|
| 25,000 |
|
| 1/26/12 |
|
| 40,000 |
|
| 7/26/12 |
|
| 10 | % |
| $ | 0.00113 |
|
|
| 8,000 |
|
|
| 8,000 |
|
| 1/26/12 |
|
| 65,595 |
|
| 7/26/12 |
|
| 10 | % |
| $ | 0.00113 |
|
|
| 27,595 |
|
|
| 27,595 |
|
| 10/18/11 |
|
| 1,900 |
|
| 10/18/11 |
|
| 8 | % |
| no written agreement |
|
|
| 6,900 |
|
|
| 6,900 |
| |
| 10/11/11 |
|
| 2,500 |
|
| 4/11/12 |
|
| 12 | % |
| $ | 0.00390 |
|
|
| 2,500 |
|
|
| 2,500 |
|
| 8/25/11 |
|
| 108,101 |
|
| 2/25/12 |
|
| 10 | % |
| $ | 0.01000 |
|
|
| 2,631 |
|
|
| 2,631 |
|
| 10/3/10 |
|
| 20,000 |
|
| 10/3/12 |
|
| 10 | % |
| lesser $0.01 or 20% discount to market |
|
|
| 20,000 |
|
|
| 20,000 |
| |
| 10/31/09 |
|
| 4,000 |
|
| 10/31/10 |
|
| 8 | % |
| no written agreement |
|
|
| 4,000 |
|
|
| 4,000 |
| |
| 8/31/09 |
|
| 5,000 |
|
| 8/31/12 |
|
| 12 | % |
| lesser $0.01 or 20% discount to market |
|
|
| 5,000 |
|
|
| 5,000 |
| |
| 8/26/09 |
|
| 20,000 |
|
| 8/26/12 |
|
| 12 | % |
| lesser $0.01 or 20% discount to market |
|
|
| 20,000 |
|
|
| 20,000 |
| |
| 8/25/09 |
|
| 20,000 |
|
| 8/25/12 |
|
| 12 | % |
| lesser $0.01 or 20% discount to market |
|
|
| 20,000 |
|
|
| 20,000 |
| |
| 2/26/07 |
|
| 30,000 |
|
| 2/26/09 |
|
| 12 | % |
| lesser $0.50 or 35% discount to market |
|
|
| 30,000 |
|
|
| 30,000 |
| |
| 4/17/07 |
|
| 20,000 |
|
| 4/17/09 |
|
| 10 | % |
| lesser $0.45 or 35% discount to market |
|
|
| 20,000 |
|
|
| 20,000 |
| |
| 6/14/07 |
|
| 15,000 |
|
| 6/15/09 |
|
| 10 | % |
| lesser $0.50 or 25% discount to market |
|
|
| 15,000 |
|
|
| 15,000 |
| |
| 1/29/07 |
|
| 15,000 |
|
| 1/29/09 |
|
| 10 | % |
| $ | 0.95000 |
|
|
| 15,000 |
|
|
| 15,000 |
|
| 4/17/07 |
|
| 15,000 |
|
| 4/17/09 |
|
| 10 | % |
| lesser $0.45 or 35% discount to market |
|
|
| 15,000 |
|
|
| 15,000 |
| |
| 12/23/06 |
|
| 18,000 |
|
| 12/23/08 |
|
| 10 | % |
| $ | 0.95000 |
|
|
| 18,000 |
|
|
| 18,000 |
|
| 11/30/06 |
|
| 50,000 |
|
| 11/30/08 |
|
| 10 | % |
| $ | 0.85000 |
|
|
| 50,000 |
|
|
| 50,000 |
|
| 9/16/06 |
|
| 100,000 |
|
| 9/9/08 |
|
| 12 | % |
| 35% discount to market |
|
|
| 38,000 |
|
|
| 38,000 |
| |
| 10/1/05 |
|
| 15,000 |
|
| 4/1/07 |
|
| 10 | % |
| $ | 0.50000 |
|
|
| 15,000 |
|
|
| 15,000 |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 646,804 |
|
| $ | 596,804 |
|
| Debt Discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (31,071 | ) |
|
| (31,071 | ) | ||
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 615,733 |
|
| $ | 565,733 |
|
The Company currently has a total of twenty-four convertible promissory notes that are in default and we may be subject to legal proceedings or lawsuits from any number of those convertible noteholders.
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| Table of Contents |
NOTE 6. Derivative LIABILITY
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of July 31, 2014 and October 31, 2013 and the amounts that were reflected in income related to derivatives for the quarter and year then ended:
|
|
| July 31, 2014 |
| |||||
|
|
| Indexed |
|
| Fair |
| ||
| The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
| Compound embedded derivative |
|
| 4,525,190,451 |
|
| $ | (174,594 | ) |
|
|
| October 31, 2013 |
| |||||
|
|
| Indexed |
|
| Fair |
| ||
| The financings giving rise to derivative financial instruments |
| Shares |
|
| Values |
| ||
| Compound embedded derivative |
|
| 2,549,713,618 |
|
| $ | (435,515 | ) |
The following tables summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended July 31, 2014 and 2013:
The financings giving rise to derivative financial instruments and the income effects:
|
|
| Nine Months Ended |
| |||||
|
|
| July 31, 2014 |
|
| July 31, 2013 |
| ||
| Compound embedded derivative |
| $ | 319,588 |
|
| $ | (150,207 | ) |
| Day one derivative loss |
|
| (8,667 | ) |
|
| (22,000 | ) |
| Total derivative gain (loss) |
| $ | 310,921 |
|
| $ | (172,207 | ) |
The Company’s Convertible Notes gave rise to derivative financial instruments. The Notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.
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| Table of Contents |
Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the compound embedded derivative that has been bifurcated from the Convertible Notes and classified in liabilities:
|
|
| July 31, 2014 |
|
| July 31, 2013 |
| ||
| Quoted market price on valuation date |
| $ | 0.0002 |
|
| $ | 0.0003 |
|
| Contractual conversion rate |
| $ | 0.00010 - $0.00024 |
|
| $ | 0.00011 - $0.00023 |
|
| Range of effective contractual conversion rates |
|
| -- |
|
|
| -- |
|
| Contractual term to maturity |
| 0.25 Years |
|
| 1.00 Year |
| ||
| Market volatility: |
|
|
|
|
|
|
|
|
| Volatility |
| 138.28% - 238.13 | % |
| 138.28% - 238.13 | % | ||
| Contractual interest rate |
| 5% - 12 | % |
| 5% - 12 | % | ||
The following table reflects the issuances of compound embedded derivatives and changes in fair value inputs and assumptions related to the compound embedded derivatives during the quarter ended July 31, 2014 and the year ended October 31, 2013.
|
|
| July 31, 2014 |
|
| October 31, 2013 |
| ||
| Beginning balance |
| $ | 435,515 |
|
| $ | 334,526 |
|
| Issuances: |
|
|
|
|
|
|
|
|
| Convertible Note Financing |
|
| 50,000 |
|
|
| 50,000 |
|
| Changes in fair value inputs and assumptions reflected in income |
|
| (310,921 | ) |
|
| 50,989 |
|
| Ending balance |
| $ | 174,594 |
|
| $ | 435,515 |
|
The fair value of the compound embedded derivative is significantly influenced by the Company’s trading market price, the price volatility in trading and the interest components of the Monte Carlo Simulation technique.
NOTE 7. STOCKHOLDERS’ EQUITY
Series A Preferred Stock
Certificate of Designations
On February 23, 2011, the Company filed a Certificate of Designations of Series A Convertible Preferred Stock (the “Certificate of Designations”) with the Secretary of State of the State of New Jersey. The Certificate of Designations, subject to the requirements of New Jersey law, states the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions of the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”). In summary, the Certificate of Designations provides:
Number
5,000,000 shares of the Company’s Preferred Stock are designated as shares of Series A Convertible Preferred Stock.
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Dividends
Any dividends (other than dividends on common stock payable solely in common stock or dividends on the Series A Preferred Stock payable solely in Series A Preferred Stock) declared or paid in any fiscal year will be declared or paid among the holders of the Series A Preferred Stock and common stock then outstanding in proportion to the greatest whole number of shares of common stock which would be held by each such holder if all shares of Series A Preferred Stock were converted into shares of common stock pursuant to the terms of the Certificate of Designations. The Company’s Board of Directors is under no obligation to declare dividends on the Series A Preferred Stock.
Conversion
Each share of Series A Preferred Stock is generally convertible into 100 shares of the Company’s common stock (the “Conversion Rate”).
Liquidation
In the event of any liquidation, dissolution or winding up of the Company, the assets of the Company legally available for distribution by the Company would be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock and common stock in proportion to the number of shares of common stock held by them, with the shares of Series A Preferred Stock being treated for this purpose as if they had been converted to shares of common stock at the then applicable Conversion Rate.
Voting
On any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock would be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Company’s Certificate of Incorporation, holders of Series A Preferred Stock vote together with the holders of common stock as a single class.
NOTE 8. PROVISION FOR CORPORATE INCOME TAXES
The Company provides for income taxes by the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. This also requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The valuation allowance at July 31, 2014 was $2,985,471. The net change in allowance during the quarter ended July 31, 2014 was $97,106.
As of July 31, 2014, the Company has federal net operating loss carry forwards of approximately $8,780,000 available to offset future taxable income through 2034. The Company may be able to utilize its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carry-forwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is possible that the utilization of the NOLs could be substantially limited. The Company has no tax provision for the quarterly periods ended July 31, 2014 and 2013 due to losses and full valuation allowances against net deferred tax assets.
As of July 31, 2014, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):
| Statutory federal income tax rate |
|
| (34 | )% |
| State taxes – net of federal benefits |
|
| (5 | )% |
| Valuation allowance |
|
| 39 | % |
| Income tax rate – net |
|
| 0 | % |
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| Table of Contents |
Fin 48 - Accounting for Uncertain Tax Positions
The Company files income tax returns in the U.S. federal jurisdiction and various state, and local jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities for the years prior to October 31, 2005. With respect to state and local jurisdictions, with limited exception, the Company and or its subsidiaries are no longer subject to income tax audits prior to October 31, 2005. In the normal course of business, the Company is subject to examination by various taxing authorities. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that may result from these open tax years.
Based on management’s review of the Company’s tax position, the Company and subsidiaries had no significant unrecognized corporate tax liabilities as of July 31, 2014 and 2013 payable to the Internal Revenue Service due to the net operating loss carry-forward, however, the Company had yet to file its 2005 through 2009 Federal, New Jersey nor New York Corporate Income Tax Returns.
NOTE 9. UNPAID PAYROLL TAXES
As of July 31, 2014, the Company owed the Internal Revenue Service and New York State payroll related taxes in the amounts of $135,875 and $30,084, respectively, plus applicable interest and penalties. The total amount due to both taxing authorities including penalties and interest was $165,959 as of July 31, 2014 and October 31, 2013, subject to further penalties and interest plus accruals on unpaid wages.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Rent
As of July 31, 2014, the Company maintains its office in New York, New York. There is a month-to-month office lease. The rent is approximately $1,050 per month for the current office location. The Company rents its office space from the father of the Company’s President and Chief Executive Officer.
For the three month period ended July 31, 2014 and 2013, rent expense was $3,150 and is included within general and administrative expenses on the statement of operations. For the nine month period ended July 31, 2014 and 2013, rent expense was $9,450 and is included within general and administrative expenses on the statement of operations.
As of July 31, 2014 and October 31, 2013, the total amount owed to related party was $46,100 and $36,650, including $30,250 and $17,450, respectively, for accumulated rent.
IRS Tax Lien
The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company.
NOTE 11 SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition and disclosure through January 29, 2021, the date the financial statements were available to be issued, and determined that there were no such events requiring adjustment to, or disclosure in, the accompanying financial statements, other than included below:
Change of Domicile
On November 3, 2017 the Company changed its domicile from New Jersey to Delaware and authorized shares to 20 Billion shares of common stock, par value, $0.000001 per share, and 500 Million shares of Series A Preferred Stock, par value, $0.000001 per share, and 500 Million Shares of Series B Preferred Stock, par value, $0.000001 per share. Each share of Series A and Series B Preferred Stock is convertible into 100 shares of the Company’s common stock.
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| Table of Contents |
Release of Federal Tax Liens
Between the period of May 2016 and April 2018 federal tax liens in the amount of $103,156 were released.
D&E Agreements – Convertible Promissory Notes and Put Option Agreement
On May 5, 2020, the Company entered into 4 agreements with D&E Holdings 20, LLC (“D&E”). The Agreements were: Convertible Promissory Note for $50,000 (the note has a 6-month term, a 10% interest rate and a conversion price of $0.0001), a Stock Purchase Agreement, a Note Purchase Agreement and a Put Option Agreement. The Put Option Agreement describes a transaction where, once D&E loans the Company a total of $100,000, then D&E may, at its sole discretion, exercise their Put Option to merge their real estate asset (a laboratory space consisting of between 30, 000 and 40,000 sq ft within the Former MetroSouth Medical Center Campus Illinois) with the Company. Upon D&E exercising the Put Option, D&E shall be issued a total of 83% of all of the outstanding shares of stock of the Company.
Increase of Authorized Common and Preferred Shares
On December 21, 2020, the Company increased its authorized shares to 1 Trillion shares of common stock, par value, $0.000001 per share, and 5 Billion shares of Series A Preferred Stock, par value, $0.000001 per share, and 5 Billion Shares of Series B Preferred Stock, par value, $0.000001 per share. Each share of Series A and Series B Preferred Stock is convertible into 100 shares of the Company’s common stock.
On December 31, 2020 the Company issued 1,050,000,000 common shares for services rendered to the Company. On December 31, 2020 five (5) Noteholders, including the Company’s Board of Director Members, converted a total of $1,965,460 of convertible promissory notes into 40,702,104,817 common shares of the Company. The Company’s two Board of Director Members converted a total of $1,644,825 of convertible promissory notes into a total of 34,267,187,500 common shares. The Company’s Board of Director Members control approximately 87.32% of the voting rights of the Company. The 3 (three) Noteholders converted a total of $325,666 of convertible promissory notes into a total of 6,439,917,317 common shares.
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| Table of Contents |
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Forward Looking Statements
Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Quarterly Report on Form 10-Q.
Unless stated otherwise, the words “we,” “us,” “our,” “the Company” or “Fresh Harvest” in this Quarterly Report on Form 10-Q collectively refers to Fresh Harvest Products, Inc., a New Jersey corporation (the “Company”).
Overview
Fresh Harvest previously operated as a natural and organic food products company before management decided to transition the Company's line of business to capitalize on its relationships within the rapidly growing Software-as-a-Service (SaaS), enterprise software and mobile application markets. The Company is engaged in the software and mobile application development and video production businesses.
During October 2012, the Company began integrating a digital plan and strategy which will shift the Company’s focus on expanding the online network and community, as well as an expansion of online services, with a focus on developing various SaaS models in the health, wellness, fitness LOHAS and healthcare industries.
The Company expects to develop, license and acquire software applications that will generate revenue through subscription fees, in-app upgrades, purchases and advertising. The Company is currently working on several software applications including a calorie calculator and food comparison software solution so that consumers can be informed and compare what foods they are eating and be able to accurately calculate their daily calories per item, as well as compare foods with each other to learn and understand what the healthier options are. The Company is actively seeking strategic partners and acquisition targets in order to grow and expand.
As of July 31, 2014, the Company had current assets of $0. The Company has no liquid cash and other liquid assets on hand as of July 31, 2014 are not sufficient to fund operations for the next 12 months. Accordingly, we will be required to raise additional funds to meet our short and long-term planned goals. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to us. In this regard, we have obtained and will continue to attempt to obtain (short and long term) loans for inventory purchases, new product development, expansion, advertising and marketing. We cannot assure you that we will be successful in obtaining the aforementioned financings (either debt or equity) on terms acceptable to us, or otherwise.
Our unaudited financial statements contained in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which assumes that we will be able to realize our assets and discharge our obligations in the normal course of business.
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| Table of Contents |
Results of Operations for the Three Months Ended July 31, 2014 and July 31, 2013
Financial Information from Comparative Fiscal Year Periods
For the quarter ended July 31, 2014, we recorded gross revenues of $0 versus $0, for no change for the quarter over the quarter ended July 31, 2013. The Company believes that the zero revenue was due to the Company’s shift in its business model.
For the quarter ended July 31, 2014, gross profit was $0 versus $0 for no change for the quarter ended July 31, 2013. The Company believes that the zero gross profit is due to the Company’s shift in its business model.
For the quarter ended July 31, 2014, operating expenses decreased to $58,650 from $58,781 or 0.22% over the quarter ended July 31, 2013. The decrease is due to a decrease in general and administrative expenses.
For the quarter ended July 31, 2014, interest expense on our convertible notes payable decreased to $29,292 from $51,164 over the quarter ended July 31, 2013. This decrease is primarily due to derivative adjustments.
For the quarter ended July 31, 2014, we realized a net income of $285,605 as compared to a net loss of $16,155 for the quarter ended July 31, 2013. The increase of $301,760 was primarily due to derivative adjustments.
Results of Operations for the Nine Months Ended July 31, 2014 and July 31, 2013
For the nine months ended July 31, 2014, we recorded gross revenues of $0 versus $0, for no change for the nine months ended July 31, 2013. The Company believes that the zero revenue was due to the Company’s shift in its business model.
For the nine months ended July 31, 2014, gross profit was $0 versus $0 for no change for the nine months ended July 31, 2013. The Company believes that the zero gross profit is due to the Company’s shift in its business model.
For the nine months ended July 31, 2014, operating expenses decreased to $225,336 from $225,498 or 0.07% over the nine months ended July 31, 2013. The decrease is due to a decrease in general and administrative expenses.
For the nine months ended July 31, 2014, interest expense on our convertible notes payable decreased to $102,546 from $115,268 over the nine months ended July 31, 2013. This decrease is primarily due to the notes payable interest accruals and derivative adjustments.
For the nine months ended July 31, 2014, we realized a net loss of $16,961 as compared to a net loss of $512,973 for the nine months ended July 31, 2013. The decrease of $496,012 was due to several factors, including a decrease in derivative adjustments and general and administrative expenses.
Liquidity and Capital Resources
Since inception, we have not been able to finance our business from cash flows from operations and have been reliant upon loans and proceeds from the sale of equity which may not be available to us in the future, or if available, on reasonable terms. Accordingly, if we are unable to obtain funding from loans and the sale of our equity, it is unlikely that we will be able to continue as a going concern.
As of July 31, 2014, we had current assets of $0. We had fixed assets with a net book value of $0 and we had total liabilities of $2,683,837.
Currently, we do not have sufficient financial resources to implement or complete our business plan. We cannot be assured that revenue from operations will be sufficient to fund our activities during the next 12 months. Accordingly, we will have to seek alternate sources of capital. We can offer no assurance that we will be able to raise such funds on acceptable terms to us or otherwise. If we are unsuccessful in our attempts to raise sufficient capital, we may have to cease operations or postpone our plans to initiate or complete our business plan. Our insolvent financial condition also may create a risk that we may be forced to file for protection under applicable bankruptcy laws or state insolvency statutes. We also may face the risk that a receiver may be appointed. We face that risk and other risks resulting from our current financial condition. For these and other reasons, our management recognizes the adverse difficulties and continuing severe challenges we face. Apart from the limited funds that we have received there can be no assurance that we will receive any financing or funding from any source or if any financing should be obtained, that existing shareholders will not incur substantial, immediate, and permanent dilution of their existing investment.
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If we are unable to raise the required financing, we may have to cease operations. We currently have no history operating as a software company. This will continue until we have established a satisfactory operating history. We cannot estimate, with any certainty, how long this may take, or if it will occur at all. Our inability to build an operating history could have a significant impact upon our liquidity. Similarly, if and when we hire additional personnel, including management and sales personnel, the cost related to such hiring will have a significant impact on our liquidity and deployment of funds.
As of July 31, 2014, the Company owed the Internal Revenue Service, and New York State payroll, unemployment and other related taxes in the approximate amounts of $135,875 and $30,084, respectively, plus applicable interest and penalties. The total amount due to the taxing authorities including penalties and interest was $165,959 as of July 31, 2014 and October 31, 2013, subject to further penalties and interest. The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Critical Accounting Estimates
Our interim unaudited financial statements as of July 31, 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in accordance with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of expenses during the periods covered.
A summary of accounting policies that have been applied to the historical financial statements can be found in Note No. 3 to our financial statements.
We evaluate our estimates on an on-going basis. The most significant estimates relate to deferred financing and issuance costs, and the fair value of financial instruments. We base our estimates on historical company and industry experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from those estimates.
Inflation
We do not believe that inflation had a significant impact on our results of operations for the periods presented.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of July 31, 2014. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
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Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was not accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the principal executive officer and the principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
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| • | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; |
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| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and |
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| • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of our internal control over financial reporting as of July 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which assessment identified material weaknesses in internal control over financial reporting. A material weakness is a control deficiency, or a combination of deficiencies in internal control over financial reporting that creates a reasonable possibility that a material misstatement in annual or interim financial statements will not be prevented or detected on a timely basis. Since the assessment of the effectiveness of our internal control over financial reporting did identify a material weakness, management considers its internal control over financial reporting to be ineffective.
Management has concluded that our internal control over financial reporting had the following deficiency:
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| • | We were unable to maintain any segregation of duties within our business operations due to our reliance on a single individual fulfilling the role of sole officer. This control deficiency did result in adjustments to our 2014 and 2013 interim and annual financial statements. Accordingly we have determined that this control deficiency constitutes a material weakness. |
To the extent reasonably possible, given our limited resources, our goal is, upon sufficient operating cash flow and/or capital, to separate the responsibilities of principal executive officer and principal financial officer, intending to rely on two or more individuals. We will also seek to expand our current board of directors to include additional individuals willing to perform directorial functions. Since the recited remedial actions will require that we hire or engage additional personnel, this material weakness may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.
This Quarterly Report on Form 10-Q does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this Quarterly Report on Form 10-Q.
Changes in Internal Controls over Financial Reporting
During the quarter ended July 31, 2014, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
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As of July 31, 2014, we were not a party to any material legal proceedings. We currently have twenty-four convertible promissory notes that are in default, and we may be subject to legal proceedings or lawsuits from any number of those convertible noteholders, including the below Notice of Commencement of Action Subject to Mandatory Electronic Filing.
On April 7, 2013, three note holders (Brook Hazelton, Benjamin M. Manalaysay, Jr., and Diego McDonald, the “Plaintiffs'), whom together invested a total principal amount of $45,000 in the form of Convertible Promissory Notes (the “Notes") to the Company, together filed a “Notice of Commencement of Action Subject to Mandatory Electronic Filing” in the Supreme Count of the State of New York, County of New York. The Plaintiffs alleged that the Company breached their contracts with the Plaintiffs, and included causes of action for unjust enrichment and related claims, seeking repayment of each of their respective convertible promissory notes plus interest. Since the initial filing, the Plaintiffs have not proceeded with the case.
We are subject to various risks that may materially harm our business, financial condition and results of operations. An investor should carefully consider the risks and uncertainties described below and the other information in this Quarterly Report on Form 10-Q before deciding to purchase our securities. If any of these risks or uncertainties actually occurs, our business, financial condition or operating results could be materially harmed. In that case, the trading price of our common stock could decline or we may be forced to cease operations.
RISKS RELATED TO OUR BUSINESS
We have limited capital resources and have experienced net losses and negative cash flows and we expect these conditions to continue for the foreseeable future, as such we expect that we will need to obtain additional financing to continue to operate our business. Such financing may be unavailable or available only on disadvantageous terms, which could cause the Company to curtail its business operations and delay the execution of its business plan. To date, we have not generated significant revenues. Our net losses for the nine months ended July 31, 2014 and 2013 were $16,961 and $512,973, respectively. As of July 31, 2014, we realized an accumulated deficit of $9,902,005 and we had no cash on hand. Our revenues have not been sufficient to sustain our operations and we expect that our revenues will not be sufficient to sustain our operations for the foreseeable future. As such, we expect that we will continue to need significant financing to operate our business. Furthermore, there can be no assurance that additional financing will be available or that the terms of such additional financing, if available, will be acceptable to us. If additional financing is not available or not available on terms acceptable to us, our ability to fund our operations or otherwise respond to competitive pressures may be significantly impaired. We could also be forced to curtail our business operations, reduce our investments, decrease or eliminate capital expenditures and delay the execution of our business plan, including, without limitation, all aspects of our operations, which would have a material adverse affect on our business. The items discussed above raise substantial doubt about our ability to continue as a going concern. We cannot assure you that we can achieve or sustain profitability in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether our products achieve market acceptance and whether we obtain additional financing. We may not achieve our business objectives and the failure to achieve such goals would have a materially adverse impact on us.
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We are currently in default with respect to various outstanding debt obligations, which if we fail to repay, could result in foreclosure upon our assets. We are currently in default with respect to a number of our debt obligations. In the event we are unable to repay such debt obligations, we could lose all of our assets and be forced to cease our operations.
We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock and our business. We will require additional financing to fund future operations. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities may similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse affect on our business.
Accrued and Unpaid Payroll Taxes. As of July 31, 2014, the Company owed the Internal Revenue Service and New York State payroll, unemployment and other related taxes in the approximate amounts of $135,875 and $30,084, respectively, plus applicable interest and penalties. The total amount due to the taxing authorities including penalties and interest was $165,959 as of July 31, 2014 October 31, 2013, subject to further penalties and interest. The Internal Revenue Service has placed a federal tax lien on all of the assets of the Company. If we are unable to resolve these tax liabilities such failure could have a material adverse effect on our business, financial condition, results of operations or liquidity.
Other companies, many of which have greater resources than we have, may develop competing products which may cause our products to become noncompetitive which could have an adverse affect on our business. We will be competing with firms that sell organic food products. In addition, additional potential competitors may enter the market in the future. Some of these current and potential competitors have longer operating histories, greater name recognition, access to larger customer bases, well-established business organizations and product lines and significantly greater resources. There can be no assurance that one or more such companies will not succeed in developing or marketing products that will render our products noncompetitive. If we fail to compete successfully, our business would suffer.
We may suffer the loss of key personnel or may be unable to attract and retain qualified personnel to maintain and expand our business which have a material adverse affect on our business. We will be competing with firms that sell software and mobile services, products and applications. In addition, additional potential competitors enter the market and build software products which compete with our products and services. Many of these current and potential competitors have longer operating histories, greater name recognition, access to larger customer bases, well-established business organizations and significantly greater resources. There can be no assurance that one or more such companies will not succeed in developing or marketing products that will render our products noncompetitive. If we fail to compete successfully, our business would suffer.
Significant Control of the Company is held by management and the Board of Directors. As of July 31, 2014 our directors and officers hold the power to vote an aggregate of about 52.50% of our common shares. As a result, any person who acquires our common shares will likely have little or no ability to influence or control the Company.
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Our common stock is considered a “penny stock” and as a result, related broker-dealer requirements may hamper its trading and liquidity. Our common stock is considered to be a “penny stock” since it meets one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of the Exchange Act. These include but are not limited to the following: (i) the common stock trades at a price less than $5.00 per share; (ii) the common stock is not traded on a “recognized” national exchange; or (iii) the common stock is issued by a company with average revenues of less than $6.0 million for the past three (3) years. The principal result or effect of being designated a “penny stock” is that securities broker-dealers cannot recommend our common stock to investors, thus hampering its liquidity.
Section 15(g) and Rule 15g-2 require broker-dealers dealing in penny stocks to provide potential investors with documentation disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the documents before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any of our shares.
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.
We may have difficulty raising necessary capital to fund operations as a result of market price volatility for our shares of common stock. The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:
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| · | new products by us or our competitors; |
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| · | additions or departures of key personnel; |
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| · | sales of our common stock; |
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| · | our ability to integrate operations and products; |
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| · | our ability to execute our business plan; |
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| · | operating results below expectations; |
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| · | industry developments; |
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| · | economic and other external factors; and |
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| · | period-to-period fluctuations in our financial results. |
Because we have limited revenues to date, you may consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above listed factors. In recent years, the securities markets in the U.S. have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If our business development plans are successful, we may require additional financing to continue to develop our products and to expand into new markets. The success of our products may, therefore, be dependent upon our ability to obtain financing through debt and equity or other means.
We will not pay cash dividends and investors may have to sell their shares in order to realize their investment. We do not intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and marketing of our products. As a result, investors may have to sell their shares of common stock to realize their investment.
Our business and future operating results may be adversely affected by events that are outside of our control. Our business and operating results are vulnerable to interruption by events outside of our control, such as earthquakes, fire, power loss, telecommunications failures and uncertainties arising out of terrorist attacks throughout the world, the economic consequences of military action and the associated political instability, and the effect of heightened security concerns on domestic and international travel and commerce.
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RISKS RELATING TO OUR BUSINESS
We can provide no assurance that our business will be able to maintain a competitive technology advantage in the future. The Company’s ability to generate revenues now and in the future is based upon maintaining a competitive technology advantage over its competition. We can provide no assurances that we will be able to garner nor maintain a competitive technology advance in the future over our competitors, which have significantly more experience and are better capitalized than us.
No assurances can be given that we will be able to keep up with a rapidly changing technology market or that we can prevent unauthorized access to our customer data. Failure to keep up with rapidly changing technologies and marketing practices could cause our products and services to become less competitive or obsolete, which could result in loss of market share and revenues. Advances in information technology are changing the way clients use and purchase information products and services. Maintaining a technological competitiveness of any products, software systems and services is key to our future success. However, the complexity and uncertainty regarding the development of new technologies and the extent and timing of market acceptance of innovative products and services create difficulties in maintaining this competitiveness. Without the timely introduction of new products, services and enhancements, our products and services will become technologically or commercially obsolete over time, in which case our revenue and operating results would suffer. Consumer needs and the business information industry as a whole are in a constant state of change. Our ability to continually improve our current processes and products in response to changes in technology and to develop new products and services are essential in maintaining our competitive position and meeting the increasingly sophisticated requirements of our clients. If we fail to enhance our current products and services or fail to develop new products in light of emerging technologies and industry standards, we could lose clients to current or future competitors, which could result in impairment of our growth prospects and revenues. A significant breach of the confidentiality of the information we may hold or of the security of our or our customers’, suppliers’, or other partners’ computer systems could be detrimental to our business, reputation and results of operations. Our business may require the storage, transmission and utilization of data.
If we fail to respond quickly to technological developments, our service may become uncompetitive and obsolete. The markets in which we plan to compete are expected to experience rapid technology developments, changes in industry standards, changes in customer requirements and frequent new improvements. If we are unable to respond quickly to these developments, we may lose competitive position, and our technologies may become uncompetitive or obsolete, causing revenues and operating results to suffer. In order to compete, we may be required to develop or acquire new technology and improve our existing technology and processes on a schedule that keeps pace with technological developments. We must also be able to support a range of changing customer preferences. We cannot guarantee that we will be successful in any manner in these efforts.
We May Not Be Able To Garner Technological Expertise, Which Would Adversely Impact Our Business. The markets for our information technology services are characterized by rapidly changing technology and evolving process development. Our business will depend upon our ability to:
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| · | enhance our technological capabilities; |
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| · | develop and market services which meet changing customer needs; and |
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| · | successfully anticipate or respond to technological changes in e-government processes on a cost-effective and timely basis. |
We cannot be certain that we will develop capabilities required by potential customers in the future. Also, the emergence of new technologies, industry standards or customer requirements may render our equipment, inventory or processes obsolete or noncompetitive. In addition, we may have to acquire new testing technologies and equipment and train personnel to remain competitive. The acquisition and implementation of new technologies and equipment and training of new personnel may require significant expense or capital investment. Our failure to anticipate and adapt to our customers’ changing technological needs and requirements would harm our ability to attract new customers and maintain existing customers. Our inability to maintain and expand our customer base could force us to curtail or cease our business operations.
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We Have An Unproven Business Model And No Technical Operating History, Which Makes It Difficult To Evaluate Our Current Business And Future Prospects For Generating Revenues. We have only a very limited operating history upon which to base an evaluation of our current business and future prospects and we have yet to receive widespread acceptance of our services. We started our current business in October 2012. Our limited operating history and the overall economic environment make an evaluation of our business and prospects very difficult. We encounter certain risks and difficulties including, but are not limited to, the following:
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| · | our new and unproven business model and technology; |
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| · | the difficulties we face in managing rapid growth in personnel and operations; |
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| · | the response by potential customers and strategic partners to our products and services; |
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| · | the timing and success of new product and service introductions and new technologies by our competitors; and, |
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| · | our ability to build awareness and receive recognition in the information technology and software market. |
We may not be able to successfully address any of these risks. Failure to adequately do so could seriously impair our ability to operate, cause our revenues to decline and force us to curtail or cease our business operations.
We May Incur Significant Operating Losses In The Future, Which May Force Us to Cease Operations Or Significantly Curtail Our Business. Our success to generate revenues depends on numerous factors, including the ability to service our clients, provide needed information technology services and products, collect revenues from potential clients, and to develop new markets. However, developing new products and markets will lead to more expenses, being incurred as we have to, among other things:
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| · | hire additional personnel, including marketing personnel, engineers and other technical staff; |
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| · | hire senior executives and members of our senior management team; |
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| · | expand our selling and marketing activities; |
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| · | expand our product and service offerings; and, |
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| · | upgrade our operational and financial systems, procedures and controls. |
If our revenue does not grow to offset these expected increased expenses, we will not be profitable. Furthermore, if our operating expenses exceed our expectations, or if we encounter difficulties in collecting the revenue from our customers, our financial performance will be adversely affected and we could be forced to curtail or cease our business operations.
We Depend On The Continued Services Of Our Executive Officers, And The Loss Of Key Personnel Could Affect Our Ability To Successfully Grow Our Business. We are highly dependent upon the services of Mr. Friedman, our CEO, President and Chairman. The permanent loss of our key executive could have a material adverse effect upon our operating results. We may not be able to locate a suitable replacement if his services were lost. We do not maintain key man life insurance on him. Our future success will also depend, in part, upon our ability to attract and retain highly qualified personnel. Our inability to retain additional key executives and to attract new, qualified personnel could cause us to curtail our business operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
See the disclosure under Notes Nos. 4, 5 and 6 to the Company's interim unaudited financial statements with respect to the Company's unregistered sales of equity securities and use of proceeds.
Item 3. Defaults Upon Senior Securities.
See the disclosure under Notes Nos. 4 and 5 to the Company's interim unaudited financial statements with respect to the Company's past due loans.
Item 4. Mine Safety Disclosure
Not applicable.
None.
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| Exhibit |
| Description |
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| Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
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| The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended July 31, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows and (iv) related notes. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Fresh Harvest Products, Inc. (Registrant) | |||
| Date: February 1, 2021 | By: | /s/ Michael Jordan Friedman | |
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| Michael Jordan Friedman, | |
| President, Chief Executive Officer and Chief Financial Officer | |||
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EXHIBIT 31.1
CERTIFICATIONS
I, MICHAEL JORDAN FRIEDMAN, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended July 31, 2014 of Fresh Harvest Products, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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| FRESH HARVEST PRODUCTS, INC. |
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| Dated: February 1, 2021 | By: | /s/ Michael Jordan Friedman |
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| Michael Jordan Friedman Chief Executive Officer, President, Chief Financial Officer and Chairman |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fresh Harvest Products, Inc. (the “Registrant”) on Form 10-Q for the quarter ended July 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Jordan Friedman, Principal Executive Officer and the Principal Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
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| FRESH HARVEST PRODUCTS, INC. |
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| Dated: February 1, 2021 | By: | /s/ Michael Jordan Friedman |
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| Michael Jordan Friedman Chief Executive Officer, President, Chief Financial Officer and Chairman |
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