Cannaisseur Group Inc S-1/A, filed Jul 18, 2023
Cannaisseur Group Inc. (TCRG)
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON July 18, 2023
Registration No. 333-262710
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
AMENDMENT NO. 3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF
1933
| THE CANNAISSEUR GROUP, INC. | ||
| (Exact Name of Registrant as specified in its charter) |
Delaware |
2833 | 86-1907561 | ||
(State or other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
1039 Grant St Se Ste B24
Atlanta, GA 30315
Tel: (404) 254.2100
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Floretta Gogo
1039 Grant St Se Ste B24, Atlanta, GA 30315
Tel: (404) 839-2885
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With copies to:
Elton F. Norman, Esquire
The Norman Law Firm PLLC
8720 Georgia Avenue,
Suite 1000
Silver Spring, MD 20910
Phone: (301)-588-4888
Facsimile: (301) 576-3544
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-Accelerated filer | x | Smaller reporting company | x |
| Emerging Growth Company | x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) ¨
| Proposed | Proposed | |||||||||||||||
| Maximum | Maximum | |||||||||||||||
| Amount to be | Offering | Aggregate | ||||||||||||||
| Title of Each Class of | Registered | Price per | Offering | |||||||||||||
| Securities to be Registered | (1)(2) | Share (3) | Price (4) | |||||||||||||
| Shares of Common Stock, par value $0.0001 per share, underlying, Common Stock | 28,550,000 | $ | .23 | $ | 6,566,500 | $ | ||||||||||
| Total | 28,550,000 | $ | .23 | $ | 6,566,500 | $ | ||||||||||
| (1) | 15,000,0000 shares of Common Stock being registered hereunder are being registered for sale by the Company and 13,550,000 shares of Common Stock are being registered for sale by Selling Shareholders. |
| (2) | Pursuant to Rule 416 under the Securities Act of 1933, as amended, the shares being registered hereunder shall be deemed to cover additional securities to be offered to prevent dilution and thus includes such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or other similar transactions. |
| (3) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the “Securities Act”). |
| (4) | The Company will receive $3,450,000 in aggregate proceeds, and Selling Shareholders will receive $3,116,500 in aggregate proceeds, assuming all shares are sold. |
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The Company may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION July 18, 2023
THE CANNAISSEUR GROUP, INC.
28,550,000 shares common Stock
This prospectus relates to the offer and sale, of up to 28,550,000 shares of our common stock. 15,000,000 shares are being sold by the Company and 13,550,000 shares are being sold by Selling Shareholders. The Company will not receive any proceeds from the shares being sold by Selling Shareholders. The Company and Selling Shareholders are conducting the offering and sale of shares on a self-underwritten best-efforts basis, with no minimum shares required. This offering by the Company and Selling Shareholders will commence promptly on the date of this Prospectus and will terminate 12 months from the date that the Registration Statement relating to the Shares in this prospectus is declared effective, unless earlier fully subscribed or terminated by the Company.
The Selling Shareholders identified in this prospectus may offer the shares of common stock from time to time through public or private transactions at prevailing market prices or at privately negotiated prices. The Selling Shareholders can offer all, some or none of their shares of common stock, thus we have no way of determining the number of shares of common stock each will hold after this Offering.
The offering price bears no relationship to our assets, book value, earnings, or any other customary investment criteria. For additional information regarding the methods of sale you should refer to the section entitled “Plan of Distribution” beginning on page 5 of this prospectus.
We will bear all costs relating to the registration of the Shares. We plan to list our common stock on the OTC Marketplace, however, our shares will not be listed before the offering is consummated.
We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the “JOBS Act.”
Investing in our common stock is highly speculative and involves a high degree of risk. See the section entitled “Risk Factors” appearing on page 8 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities, including the risk relating to registration of our shares.
You should rely only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you with different information.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is, July 18 2023
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TABLE OF CONTENTS
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You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell, nor seeking an offer to buy, securities in any state where the offer or solicitation is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. Our business, &financial condition, results of operations, and prospects may have changed since such date.
The distribution of this prospectus and the issuance of the securities in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the issuance of the securities and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, the securities offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
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This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in the common stock of The Cannaisseur Group, Inc. (referred to herein as the “Company,” “The Cannaisseur Group,” “TCGI,” “we,” “our,” and “us”). You should read this entire prospectus carefully, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and our financial statements and the related notes appearing at the end of this prospectus, before making an investment decision.
Overview
The Cannaisseur Group, Inc. (the “Company” or “TCG”) was established in December 2020. On January 4, 2021 the Company acquired a fifty-one percent (51%) interest in Atlanta CBD Inc. (d/b/a as Inno Medicinals) (“Atlanta CBD”). Atlanta CBD is engaged in hemp cultivation, extraction, manufacturing, distribution, and retail through CBD stores. Currently, the Company’s only assets and operations consist of the 51% interest it owns in Atlanta CBD, Inc.
Atlanta CBD is a hemp products supplier and retailer. It sells its retail hemp products through trade name, Inno Medicinals, located in Atlanta Georgia. Atlanta CBD intends in the future to engage in cultivation and extraction of hemp flower, through a trade name Requisite Technologies. Requisite Technologies will be dedicated to producing and selling premium oil, tinctures, and capsules, edibles, and topicals. Our mission is to grow one of the best hemp plants and produce high-quality infused products to provide customers with products and services they trust. We expect that, when established, Requisite Technologies will have the ability to grow hemp year-round, aiming to grow up to 12 different strains, and can produce from seedling to finished product.
Corporate History
TCG is a Delaware corporation. It was formed to engage in the hemp business. In January 2021, it acquired a fifty-one percent (51%) interest in Atlanta CBD, a Georgia company that engaged in the hemp business. The Company’s 51% interest in Atlanta CBD is its only business operation at this time. However, the Company’s plan is to build on its current business by acquiring assets from companies actively engaged in hemp cultivation to develop and grow its hemp business. Potential assets for acquisition, include, CBD cultivation, processing, and distribution equipment and infrastructure from companies that grow and develop CBD products for the consumer market. These assets will support and further develop Atlanta CBD’s operations. The Company plans to use a combination of equity (common stock) and funds raised from private placements to acquire assets.
Atlanta CBD is a family-owned business, founded in October 2018. It was born from the desire to offer people an alternative approach to good health. They are a CBD boutique, offering many leading brands of hemp extracts. Atlanta CBD began planning for a retail hemp store in September of 2018. Cannabis sativa (hemp) extracts were chosen because the founders believe the extracts have the potential to help people. Knowledge gained since opening a retail location in June of 2019 has given them a greater understanding of the industry and the people that purchase hemp products.
Atlanta CBD is committed to increasing public awareness of CBD and helping grow the hemp community statewide. The Company plans to primarily grow innovative hemp, and in the future intends to source up to 15% of its hemp through a network of local farms to encourage and promote diversity within our community. It also intends to grow hemp and develop proprietary hemp genetics to be used in supplying stores as well as, working with local/ regional farmers to grow the bulk of hemp needed for retail products.
Atlanta CBD also offers for sale a majority of its products direct to consumers via its website, https://innomedicinals.com. Consumer markets served by the INNO Medicinals website are extensive. In terms of geography, the products are only sold wherever legal and INNO Medicinals stipulates to its distribution channels that the products may only be sold to end-user persons eighteen years of age or older and residing in states that allow its products (See “Description of Our Business” – “Government Regulation” for a further explanation of the laws regarding the sale of hemp-derived CBD products). The CBD products sold by Atlanta CBD contain no more than the legal limit of .03 % Delta 9 THC and is legal under federal law, however state law does not always coincide with federal law as in the states of Idaho, Iowa, and South Dakota, where CBD is entirely illegal. THC products derived from hemp are legal in many states and covered under the FARM BILL of 2018, but in Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Kentucky, Idaho, Iowa, Mississippi, Montana, New York, Nevada, Rhode Island, Utah, Vermont, Washington, Michigan, and North Dakota it is illegal and therefore, we do not ship such products to those states, and we disclose this and warn consumers of the restrictions on the INNO Medicinals website. The legal landscape for some hemp derived products is uncertain and must be considered on a state-by-state basis. The Company and Atlanta CBD stay informed of regulatory changes with respect to hemp through hemp related groups such as the US Hemp Authority.
The Company owns 51% of Atlanta CBD. The Company’s majority shareholders are Floretta Gogo and Xavier Carter, who also owns the remaining 49% of Atlanta CBD. Ms. Gogo and Mr. Carter each own approximately 19% of the outstanding common stock of the Company. Ms. Gogo and Mr. Carter are the President and Chief Executive Officer of the Company and the Chief Operating Officer of the Company, respectively. They both run the day-to-day operations of Atlanta CBD. Pursuant to the acquisition agreement between the Company and Atlanta CBD, the Company is entitled to 51% of the net profits from the operations of Atlanta CBD.
Atlanta CBD has outstanding 1,518 shares of preferred stock. The preferred stock has redeemable features that allow the preferred shareholders to request repayment of their investment. The preferred shareholders are also entitled to profit distributions equal to the lesser of (i) 25% interest on their investment, or (ii) the difference between the ownership percentage of management and 50%, which will be distributed to management, until a 35% profit goal achieved. Preferred shareholders are entitled to a return of their investment upon 15 days’ notice given to the Atlanta CBD after any distribution.
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Emerging Growth Company Status
We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the “JOBS Act.” We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:
| · | not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act (we will also not be subject to the auditor attestation requirements of Section 404(b) as long as we are a “smaller reporting company,” which includes issuers that had a public float of less than $75 million as of the last business day of their most recently completed second fiscal quarter); |
| · | reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and |
| · | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to utilize this extended transition period.
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The Cannaisseur Group, Inc. (the “Company” or “TCG”) was established in December 2020. On January 4, 2021, we acquired a fifty-one percent (51%) interest in Atlanta CBD Inc. (d/b/a as Inno Medicinals) (“Atlanta CBD”). Atlanta CBD is engaged in hemp cultivation, extraction, manufacturing, distribution, and retail through CBD stores. The Company does not have any ownership interests in Atlanta CBD beyond its 51% ownership of Atlanta CBD. The Company’s majority shareholders are Floretta Gogo and Xavier Carter, who also owns the remaining 49% of Atlanta CBD. Ms. Gogo and Mr. Carter each own approximately 19% of the outstanding common stock of the Company. Ms. Gogo and Mr. Carter are the President and Chief Executive Officer of the Company and the Chief Operating Officer of the Company, respectively. They both run the day-to-day operations of Atlanta CBD. The Atlanta CBD acquisition was accounted for as a common control transaction pursuant to ASC 805-50-45, and the assets and liabilities of Atlanta CBD were recorded at their historical cost as if the transaction occurred at the beginning of the period presented.
The Cannaisseur Group, Inc., is a Delaware corporation, and the operator of the website, https://thecannaisseurgroup.com/.
| Securities Offered by the Company | 15,000,000 shares of the Company’s common stock. |
| Securities Offered by Selling Shareholders | 13,550,000 shares of the Company’s common stock |
| Common stock Outstanding Before the Offering (1) | 39,663,333 |
| Common stock Outstanding After the Offering | 54,663,333 |
Quotation of Common stock The Company’s intends to have its common shares quoted on the OTCQB markets.
| Use of Proceeds | See “Use of Proceeds” on page 18 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock. |
| Risk Factors | The common stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” beginning on page 7. |
| (1) | Based on 39,663,333 shares outstanding as of June 30, 2023. |
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An investment in our common stock involves a high degree of risk. An investor should carefully consider the following risk factors and the other information in this registration statement before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks.
A pandemic, epidemic or outbreak of an infectious disease in the markets in which the Company operates or that otherwise impacts its facilities and customers could adversely impact the Company’s business.
If a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) first identified in Wuhan, Hubei Province, China, or other public health crisis were to affect the Company’s markets or facilities, or its customers, the Company’s business could be adversely affected. Consequences of the coronavirus outbreak are resulting in disruptions in or restrictions on the Company’s ability to travel and hold live events. If such an infectious disease broke out at the Company’s office, facilities or work sites, its operations may be affected significantly, its productivity may be affected, and the Company may incur increased costs. If the persons and entities with which the Company contracts are affected by an outbreak of infectious disease, its live events may be delayed or cancelled, and the Company may incur increased costs. If the Company’s employees or subcontractors with whom it works were affected by an outbreak of infectious disease, the Company’s labor supply may be affected, and it may incur increased labor costs. In addition, the Company may experience difficulties with certain suppliers or with vendors in its supply chains, and its business could be affected if the Company becomes unable to procure essential equipment, supplies or services in adequate quantities and at acceptable prices. Further, an infectious outbreak may cause disruption to the U.S. economy, or the local economies of the markets in which the Company operates, increase costs associated with its business, affect job growth and consumer confidence, or cause economic changes that the Company cannot anticipate. Overall, the potential impact of a pandemic, epidemic or outbreak of an infectious disease with respect to the Company’s markets or its facilities is difficult to predict and could adversely impact the Company’s business. In response to the COVID-19 situation, federal, state, and local governments (or other governments or bodies) are considering placing, or have placed, restrictions on travel and conducting or operating business activities. Currently those restrictions are very fluid and evolving. the Company has been and will continue to be impacted by those restrictions. Given that the type, degree, and length of such restrictions are not known at this time, the Company cannot predict the overall impact of such restrictions on it, its customers, its subcontractors, and others with whom the Company works or the overall economic environment. As such, the impact these restrictions may have on the Company’s financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact may be material. In addition, due to the speed with which the COVID-19 situation is developing and evolving, there is uncertainty around its ultimate impact on public health, business operations and the overall economy; therefore, the negative impact on the Company’s financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact may be material.
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Our industry may become subject to expanded regulation and increased enforcement by the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC)
The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, and distribution of food, dietary supplements, drugs, cosmetic, medical devices, biologics, and tobacco products. Our hemp-derived CBD products are not intended to be drugs. Accordingly, we have not been required to obtain FDA approval for our existing hemp-derived CBD products. Moreover, the regulatory status of hemp-derived CBD products is in a state of flux as FDA attempts to determine the appropriate manner in which to regulate these products. Thus, the regulatory approach is still evolving, and we may be required to seek FDA’s approval to market food and dietary supplements containing hemp-derived CBD. It is also possible that FDA may simply issue a regulation setting forth the conditions in which such products may be marketed, or it may simply prohibit these products. However, because FDA’s regulatory process is in its infancy, we cannot predict the likely outcome. (See preceding Section, “Government Regulation”.) In addition, the FTC under the Federal Trade Commission Act (“FTC Act”) requires that product advertising be truthful, substantiated, and non-misleading. We believe that our advertising meets these requirements. However, the FTC may bring a challenge at any time to evaluate our compliance with the FTC Act.
Increases in the cost of ingredients, labor and other costs could adversely affect our operating results.
Our principal products contain hemp-derived CBD oil. Increases in the cost of ingredients in our products could have a material adverse effect on our operating results. Significant price increases, market conditions, weather, acts of God and other disasters could materially affect our operating results. An increase in our operating costs could adversely affect our profitability. Factors such as inflation, increased labor and employee benefit costs and increased energy costs may adversely affect our operating costs. Many of the factors affecting costs are beyond our control and we may not be able to pass along these increased costs to our customers.
We do not have long-term contracts with many of our suppliers, and as a result they could seek to increase prices or fail to deliver.
We typically do not rely on written contracts or long-term arrangements with our suppliers. Although we have not experienced significant problems with our suppliers, our suppliers may implement significant price increases or may not meet our requirements in a timely fashion, if at all. The occurrence of any of the foregoing could have a material adverse effect on our operating results.
Any prolonged disruption in the operations of any of our packaging facilities could harm our business.
Any prolonged disruption in the operations of any facilities that perform our packaging, whether due to technical or labor difficulties, destruction or damage to the facility, real estate issues or other reasons, could result in increased costs and reduced revenues and our profitability and business results could be harmed.
Loss of key personnel or our inability to attract and retain new qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.
Our ability to successfully grow our brand depends on our ability to attract and retain professionals with talent, integrity, enthusiasm, and loyalty to our corporate team. If we are unable to attract or retain key personnel, our profitability and growth potential could be harmed.
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We may not be able to adequately protect our intellectual property, which could harm the value of our brand and branded products and adversely affect our business.
We depend on the reputation of INNO Medicinals as the vendor of high quality and unique products. Our branded products consist of bath bombs, bath salts and soaps with our unique proprietary blend of essential oils and cannabidiols. While these branded products are only 5% of sales, they help bring customers into the store. Our Name, our reputation and our unique branded products promote a positive shopping experience. We rely on a combination of trademarks, copyrights, trade secrets and similar intellectual property rights to protect our brand and branded products. The success of our business depends on our continued ability to use our existing trademarks to increase brand awareness and further develop our branded products in both domestic and international markets. We have registered, or will register, certain trademarks in the United States and may elsewhere. We may not be able to adequately protect our trademarks and our use of these trademarks may result in liability for trademark infringement, trademark dilution or unfair competition. We may from time to time be required to institute litigation to enforce our trademarks or other intellectual property rights, or to protect our trade secrets. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability and business results regardless of whether we are able to successfully enforce our rights.
Pandemics, natural disasters and geo-political events could adversely affect the Company’s business.
Pandemics, natural disasters, including hurricanes, cyclones, typhoons, tropical storms, floods, earthquakes and tsunamis, weather conditions, including winter storms, droughts and tornadoes, whether as a result of climate change or otherwise, and geo-political events, including civil unrest or terrorist attacks, that affect the Company, or other service providers, could adversely affect the Company’s business.
We do not have any outside Board Directors which could create a conflict of interests and pose a risk from a corporate governance perspective.
Our Board of Directors consists of five directors, which means that we have no outside or independent directors. The lack of independent directors may prevent the Board from being independent from management in its judgments and decisions and its ability to pursue the Board responsibilities without undue influence. For example, an independent Board can serve as a check on management, which can limit management taking unnecessary risks. Furthermore, the lack of independent directors creates the potential for conflicts between management and the diligent independent decision-making process of the Board. Furthermore, our lack of outside directors deprives our company of the benefits of various viewpoints and experience when confronting the challenges we face. With no independent director sitting on the Board of Directors, it will be difficult for the Board to fulfill its traditional role as overseeing management.
Risks Relating to Our Financial Condition
All businesses are affected by an unstable economy.
Even through there may be downturns in the economy, consumers will always need essential goods and services regardless of the economy. However, economic downturns almost inevitably signal cutbacks in overall spending, which would translate specifically to us as decreased revenue, if any, as we expect that part of our income stream will be commissions on customer purchases and interest on customers’ balances.
We have a limited operating history and operate in a new industry, and we may not succeed.
The consumer products business is a highly competitive and risky business, and such competition from companies much bigger than us could adversely affect our operating results.
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We compete with many national, regional, and local businesses. We could experience increased competition from existing or new companies in our channel, which could create increasing pressures to grow ours. If we are unable to maintain our competitive position, we could experience downward pressure on prices, lower demand for our products, reduced margins, the inability to take advantage of new business opportunities and the loss of channel share, which would have an adverse effect on our operating results. Other factors that could affect our business are:
| · | Consumer tastes |
| · | National, regional, or local economic conditions |
| · | Disposable purchasing power |
| · | Demographic trends; and |
| · | The price of special ingredients that go into our products. |
Our financial statements may not be comparable to those of other companies.
Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates, and our stockholders and potential investors may have difficulty in analyzing our operating results if comparing us to such companies.
The success of our new and existing products and services is uncertain.
We have committed, and expect to continue to commit, significant resources and capital to develop and market existing product enhancements and new products. We cannot assure you that we will achieve market acceptance for all of our products, or of new products that we may offer in the future. Moreover, these new products may be subject to significant competition with offerings by new and existing competitors. In addition, new products and enhancements may pose a variety of challenges and require us to attract additional qualified employees. The failure to successfully develop and market these new products or enhancements could seriously harm our business, financial condition and results of operations.
We cannot predict our future capital needs and we may not be able to secure additional financing.
We will need to raise additional funds in the future to fund our working capital needs and to fund further expansion of our business. We may require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, we may have to delay or scale back our growth plans.
Our annual and quarterly financial results are subject to significant fluctuations depending on various factors, many of which are beyond our control, which could adversely affect our ability to satisfy our debt obligations as they become due.
Our sales and operating results can vary significantly from quarter to quarter and year to year depending on various factors, many of which are beyond our control. These factors include:
| · | Variations in the timing and volume of our sales |
| · | The timing of expenditures in anticipation of future sales |
| · | Sales promotions by us and our competitors |
| · | Changes in competitive and economic conditions generally |
| · | Foreign currency exposure |
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Consequently, our results of operations may decline quickly and significantly in response to changes in order patterns or rapid decreases in demand for our products. We anticipate that fluctuations in operating results will continue in the future. The Company’s operating results may vary. We may incur net losses. The Company expects to experience variability in its revenues and net profit. While we intend to fully implement our business plan, we may experience net losses. Factors expected to contribute to this variability include, among other things:
| · | The general economy |
| · | The regulatory environment pertaining to our products |
| · | Climate, seasonality and environmental factors |
| · | Consumer demand |
| · | Transportation costs |
| · | Competition in products |
You should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages. For example, unanticipated expenses, problems, and technical difficulties may occur and they may result in material delays in the operation of our business, in particular with respect to our new products. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.
As we expand our operations, we may be unable to successfully manage our future growth.
Since inception, our business has grown. This growth has placed substantial strain on our management, operational, financial and other resources. If we are able to continue expanding our operations in the United States and in other countries where we believe our products will be successful, as planned, we may experience periods of rapid growth, which will require additional resources. Any such growth could place increased strain on our management, operational, financial and other resources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, and other professionals. In addition, we will need to expand the scope of our infrastructure and our physical resources. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with our business objectives could have a material adverse effect on our business and results of operations.
Any future litigation could have a material adverse impact on our results of operations, financial condition and liquidity, particularly since we do not currently have director and officer (“D&O”) insurance. Our lack of insurance may also make it difficult for us to retain and attract talented and skilled directors and officers. While we intend to apply for D&O insurance, we cannot guarantee that such application will be accepted.
Despite our significant efforts in product quality control, we face risks of litigation from customers and others in the ordinary course of business, which may divert our financial and management resources. Any adverse litigation or publicity may negatively impact our financial condition and results of operations.
Claims of illness or injury relating to product quality or handling are common in the consumer products industry. While we believe our processes and high standards of quality control will minimize these instances, there is always a risk of occurrence, and so despite our best efforts to regulate quality control, litigation may occur. In that event, our financial condition, operating results and cash flows could be harmed.
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From time to time we may be subject to litigation, including potential stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date we have no directors and officers liability (“D&O”) insurance to cover such risk exposure for our directors and officers. Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expenses including attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to the Company. While we intend to attempt to obtain such insurance, there can be no assurance that we will be able to do so at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. While neither Delaware law nor our articles of incorporation or bylaws require us to indemnify or advance expenses to our officers and directors involved in such a legal action, we expect that we would do so to the extent permitted by Delaware law. Without D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Further, our lack of D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could adversely affect our business.
The Company may be unable to manage growth, which may impact its potential profitability.
Successful implementation of the Company’s business strategy requires it to manage its growth. Growth could place an increasing strain on the Company’s management and financial resources. To manage growth effectively, the Company will need to:
| ∙ | Establish definitive business strategies, goals and objectives; |
| ∙ | Maintain a system of management controls; and |
| ∙ | Attract and retain qualified personnel, as well as develop, train, and manage management-level and other employees. |
If the Company fails to manage its growth effectively, its business, financial condition, or operating results could be materially harmed, and the Company’s stock price may decline.
The Company operates in a highly competitive environment, and if it is unable to compete with its competitors, its business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.
The Company operates in a highly competitive environment. The Company’s competition includes all other companies that are in the business of hemp cultivation and sales or other related companies. A highly competitive environment could materially adversely affect the Company’s business, financial condition, results of operations, cash flows and prospects.
The Company may not be able to compete successfully with other established companies offering the same or similar services and, as a result, the Company may not achieve its projected revenue and user targets.
If the Company is unable to compete successfully with other businesses in its existing markets, it may not achieve its projected revenue and/or customer targets. The Company competes with both start-up and established companies. Compared to the Company’s business, some of its competitors may have greater financial and other resources, have been in business longer, have greater name recognition and be better established.
Our prior operating results may not be indicative of our future results.
You should not consider prior operating results with respect to revenues, net income or any other measure to be indicative of our future operating results. The timing and amount of future revenues will depend almost entirely on our ability to sell our products to new customers. Our future operating results will depend upon many other factors, including:
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| · | The level of product and price competition; |
| · | Our success in expanding our distribution network and managing our growth; |
| · | Our ability to develop and market product enhancements and new products; |
The timing of product enhancements, activities of and acquisitions by competitors
The Company’s lack of adequate D&O insurance may also make it difficult for it to retain and attract talented and skilled directors and officers.
In the future the Company may be subject to additional litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, the Company has not obtained directors and officers liability (“D&O”) insurance. Without adequate D&O insurance, the amounts the Company would pay to indemnify its officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on the Company’s financial condition, results of operations and liquidity. Furthermore, the Company’s lack of adequate D&O insurance may make it difficult for it to retain and attract talented and skilled directors and officers, which could adversely affect its business.
The Company does not expect to pay dividends in the future; any return on investment may be limited to the value of the Company’s common stock.
The Company does not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on the Company’s common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. The Company’s current intention is to apply net earnings, if any, in the foreseeable future to increasing the Company’s capital base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of its common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of the Company’s board of directors. If the Company does not pay dividends, its common stock may be less valuable because a return on investment will only occur if its stock price appreciates.
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our stock price is not quoted or traded on any securities market. The common stock price is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control or unrelated to its operating performance.
We intend to have our common stock begin trading on the OTC Markets Group, Inc. under the symbol “TCGI”. The OTC Markets is a network of security dealers that buy and sell stock.
The Company’s common stock, if quoted or traded, will be thinly traded so the Company’s stockholders may be unable to sell at or near ask prices or at all if they need to sell their shares to raise money or otherwise desire to liquidate their shares.
There is no active trading market for our common stock, and if a market for our common stock does not develop our investors will be unable to sell their shares.
There is currently no active trading market for our common stock and such a market may not develop or be sustained. We currently plan to apply to have our common stock listed on the OTC Markets Group, Inc. In order to do this, we must file an application with OTC Markets Group and meet all of its required listing standards. We cannot provide our investors with any assurance that our common stock will be traded on the OTC Markets or, if traded, that a public market will materialize. If our common stock is not listed on the OTC Markets Group, Inc. or if a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock and may lose all of their investment.
An active and visible public trading market for our Common Stock may not develop.
We do not currently have an active or visible trading market. We cannot predict whether an active market for our common stock will ever develop in the future. In the absence of an active trading market:
| · | Investors may have difficulty buying and selling or obtaining market quotations; |
| · | Market visibility for shares of our common stock may be limited; and |
| · | A lack of visibility for shares of our common stock may have a depressive effect on the market price for shares of our Common Stock. |
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The market price of our common stock may be volatile.
The market price for our common stock may be volatile and subject to wide fluctuations in response to factors including the following:
| · | Actual or anticipated fluctuations in our quarterly or annual operating results |
| · | Changes in financial or operational estimates or projections |
| · | Conditions in markets generally |
| · | Changes in the economic performance or market valuations of companies similar to ours |
| · | Announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures, or capital commitments |
| · | Our intellectual property position; and general economic or political conditions in the United States or elsewhere. |
In addition, the securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the operating performance of companies. These market fluctuations may also materially and adversely affect the market price of shares of our common stock.
Our issuance of additional common stock or preferred stock may cause our common stock price to decline, which may negatively impact your investment.
Issuances of a substantial number of additional shares of our common or preferred stock, or the perception that such issuances could occur, may cause prevailing market prices for our common stock to decline. In addition, our board of directors is authorized to issue additional series of shares of preferred stock without any action on the part of our stockholders. Our board of directors also has the power, without stockholder approval, to set the terms of any such series of shares of preferred stock that may be issued, including voting rights, conversion rights, dividend rights, preferences over our common stock with respect to dividends or if we liquidate, dissolve, or wind up our business and other terms. If we issue cumulative preferred stock in the future that has preference over our common stock with respect to the payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the market price of our common stock could decrease.
Our common stock is subject to the SEC’s penny stock rules and accordingly, broker-dealers may have trouble in completing customer transactions and trading activity in our securities may be adversely affected.
The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share and therefore would be a “penny stock” according to SEC rules, unless we are listed on a national securities exchange. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:
| · | Make a special written suitability determination for the purchaser; |
| · | Receive the purchaser’s prior written agreement to the transaction; |
| · | Provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; |
| · | Obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has received the required risk disclosure document before a transaction in a “penny stock” can be completed. |
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As our common stock is subject to these rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. As a result, the market price of our securities may be depressed, and you may find it more difficult to sell your securities.
The market for penny stocks has experienced numerous frauds and abuses, which could adversely impact investors in our stock.
OTC Market securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because reporting requirements are less stringent than those of the stock exchanges such as NASDAQ. Patterns of fraud and abuse include:
| · | Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; |
| · | Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
| · | “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; |
| · | Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; |
| · | Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. |
Our management is aware of the abuses that have occurred historically in the penny stock market.
Among the factors that could affect our stock price are:
| · | Industry trends and the business situation of our suppliers |
| · | Actual or anticipated fluctuations in our quarterly financial and operating results and operating results that vary from the expectations of our management or of securities analysts and investors |
| · | our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future operating results |
| · | Announcements of strategic developments, acquisitions, dispositions, financings, product developments and other materials events by us or our competitors |
| · | Regulatory and legislative developments |
| · | Litigation |
| · | General market conditions |
| · | Other domestic and international macroeconomic factors unrelated to our performance |
| · | Changes in key personnel |
Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock.
A substantial portion of our total outstanding shares of common stock may be sold into the market at any time, or a substantial portion of our total outstanding shares of preferred stock may be converted to common stock and sold into the market at any time. Some of these shares are owned by the management of the Company, and we believe that such holders have no current intention to either convert their preferred stock into common stock or to sell a significant number of shares of their common stock into the market. If all of the major stockholders were to decide to sell large amounts of stock over a short period of time such sales could cause the market price of our common stock to drop significantly, even if our business is performing well.
Our business is dependent upon continued market acceptance by consumers.
We are substantially dependent on continued market acceptance of our products by consumers. Although we believe that our products in the United States are gaining increasing consumer acceptance, we cannot predict that this trend will continue in the future.
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The ability to hire additional qualified employees, and the timing of such hiring and our ability to control costs. We may require additional capital to finance our operations in the future, but that capital may not be available when it is needed and could be dilutive to existing stockholders.
We may require additional capital for future operations. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources:
| · | Cash provided by operating activities |
| · | Available cash and cash investments |
| · | Capital raised through debt and equity offerings |
Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only on unfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control. Accordingly, we cannot assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our liquidity, financial condition, results of operations and prospects. Further, if we raise capital by issuing stock, the holdings of our existing stockholders will be diluted.
If we raise capital by issuing debt securities, such debt securities would rank senior to our common stock upon our bankruptcy or liquidation. In addition, we may raise capital by issuing equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, which may adversely affect the market price of our common stock. Finally, upon bankruptcy or liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both.
Requirements associated with being a reporting public company will require significant company resources and management attention.
We have filed a Form S1 registration statement with the U.S. Securities and Exchange Commission (“SEC”). Once the Form S1 becomes effective, we will be subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC relating to public companies. We are working with independent legal, accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as an SEC reporting company. These areas include corporate governance, internal control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal control over financial reporting. However, we cannot provide assurances that these and other measures we may take will be sufficient to allow us to satisfy our obligations as an SEC reporting company on a timely basis.
In addition, compliance with reporting and other requirements applicable to SEC reporting companies will create additional costs for the Company and will require the time and attention of management and may require the hiring of additional personnel and legal, audit and other professionals. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the impact that our management’s attention to these matters will have on our business.
We are an emerging growth company and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.
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We are an emerging growth company, as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies, but not to emerging growth companies, including, but not limited to, a requirement to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements, although some of these exemptions are available to us as a smaller reporting company (i.e. a company with less than $75 million of its voting equity held by affiliates). We have elected to adopt these reduced disclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.
We do not expect to pay any cash dividends in the foreseeable future.
We intend to retain our future earnings, if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and such other factors as our board of directors deems relevant. Accordingly, investors may need to sell their shares of our common stock to realize a return on their investment, and they may not be able to sell such shares at or above the price paid for them.
We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which would result in dilution of existing stockholders’ interests in the Company and could depress our stock price.
Our Articles of Incorporation authorize 100,000,000 shares of common stock, par value $0.0001 per share, of which 39,663,333 were outstanding as of June 30, 2023. Moreover, our Board of Directors is authorized to issue additional shares of our common stock and preferred stock. Although our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the future issuance of additional shares of our common stock or preferred stock convertible into common stock would cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have a material effect on the market value of the shares.
Because we will be subject to “penny stock” rules, the level of trading activity in our stock may be reduced.
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges). The penny stock rules require a broker-dealer to deliver to its customers a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market prior to carrying out a transaction in a penny stock not otherwise exempt from the rules. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules.
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Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit your ability to buy and sell our stock, which could depress our share price.
FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares, depressing our share price.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the section entitled “Risk Factors” beginning on page 7.
All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise after the date of this prospectus, except where applicable law requires us to update these statements. Market data used throughout this prospectus is based on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal surveys, independent industry publications and other publicly available information. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward- looking statements.
In addition, in this prospectus, we use words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” and similar expressions to identify forward-looking statements.
Our Offering is being made in a direct public offering on a self-underwritten basis - no minimum number of shares must be sold in order for the Offering to proceed. The Offering price per share is $0.23. There is no assurance that we will raise the full $3,450,000.00, as anticipated.
Not taking into account any possible additional funding or revenues, we intend to use the proceeds from this Offering as follows. The following chart indicates the amount of funds that we plan to allocate to each item but does not indicate the total fee/cost of each item. The amount of proceeds we allocate to each item is dependent upon the amount of proceeds we receive from this Offering:
We believe that our current cash and cash equivalents, anticipated cash flow from operations and the proceeds from the sale of the maximum amount of Shares being offered hereunder will only be sufficient to meet our anticipated cash needs for the next 12 months. Our management has determined that the maximum amount of funds received from this Offering would be sufficient to cover our intended plan of operations contemplated hereby. We will use any proceeds received to file reports with the SEC, as well as to proceed with our intended business.
We expect that if we sell all shares in this offering, the funds raised will be sufficient to allow us to purchase the assets we plan to acquire to grow our business. If we do not sell all shares in this offering, we may have to rely on private placements of our shares or loans to acquire assets for the business. If we do not receive the necessary funding, we will not be able to acquire the assets we need to expand our business.
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However, there can be no assurance that we will raise any funds through our offering or through private placements or loans, if required. As with any form of financing, there are uncertainties concerning the availability of such funds and the likelihood that such funds will be available to us on terms acceptable to us.
The Selling Security Holders will receive all the proceeds from the sales of the Selling Shareholders Shares under this Prospectus. We will not receive any proceeds from these sales. We have agreed to bear certain expenses relating to the registration of the shares of Common Stock being registered herein for Selling Security Holders.
See “Plan of Distribution” elsewhere in this Prospectus for more information.
USE OF PROCEEDS
Our Offering is being made in a direct public offering on a self-underwritten basis - no minimum number of shares must be sold in order for the Offering to proceed. The Offering price per share is $0.23. There is no assurance that we will raise the full $3,450,000, as anticipated. Not taking into account any possible additional funding or revenues, we intend to use the proceeds from this Offering as follows. The following chart indicates the amount of funds that we will allocate to each item but does not indicate the total fee/cost of each item. The amount of proceeds we allocate to each item is dependent upon the amount of proceeds we receive from this Offering:
| Use of Proceeds | 100%
of Shares Sold | % of Total | 50%
of Shares Sold | % of Total | 25%
of Shares Sold | % of Total | ||||||||||||||||||
| Gross Proceeds from Offering | $ | 3,450,000 | $ | 1,725,000 | $ | 862,500 | ||||||||||||||||||
| Use of Proceeds | ||||||||||||||||||||||||
| Operational Costs | 1,450,000 | 42 | % | 725,000 | 42 | % | 362,500 | 42 | % | |||||||||||||||
| Marketing | 500,000 | 14 | % | 250,000 | 14 | % | 125,000 | 14 | % | |||||||||||||||
| Product Development | 900,000 | 26 | % | 450,000 | 26 | % | 225,000 | 26 | % | |||||||||||||||
| New Hires | 600,000 | 18 | % | 300,000 | 18 | % | 150,000 | 18 | % | |||||||||||||||
| Total use of proceeds | $ | 3,450,000 | 100 | % | $ | 1,725,000 | 100 | % | $ | 862,500 | 100 | % | ||||||||||||
| Offering Expenses (1) | ||||||||||||||||||||||||
| Securities and Exchange Commission registration fee | $ | 609 | $ | 609 | $ | 609 | ||||||||||||||||||
| Accounting fees and expenses | 13,000 | 13,000 | 13,000 | |||||||||||||||||||||
| Legal fees and expenses | 18,000 | 18,000 | 18,000 | |||||||||||||||||||||
| Registrar and transfer agent fees and expenses | 2,000 | 2,000 | 2,000 | |||||||||||||||||||||
| Total offering expenses | $ | 33,609 | $ | 33,609 | $ | 33,609 | ||||||||||||||||||
| (1) | Offering expenses will not be paid from proceeds received from the Offering. |
DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the Shares. The initial public offering price was determined by management. The principal factors considered in determining the initial public offering price include:
| ∙ | the information set forth in this Registration Statement and otherwise available; |
| ∙ | our history and prospects and the history of and prospects for the industries in which we compete; |
| ∙ | our past and present financial performance; |
| ∙ | our prospects for future earnings and the present state of our development; |
| ∙ | the general condition of the securities markets at the time of this Offering; |
| ∙ | the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and other factors deemed relevant by us. |
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If you purchase shares in this Offering, your ownership interest in our Common Stock will be diluted immediately, to the extent of the difference between the price to the public charged for each share in this Offering and the net tangible book value per share of our Common Stock after this Offering.
Our historical net tangible book value as of March 31, 2023 was ($0.00) based on 39,663,333 outstanding shares of our Common Stock outstanding on June 30, 2023. Historical net tangible book value per share equals the amount of our total tangible assets less total liabilities, divided by the total number of shares of our Common Stock outstanding, all as of the date specified.
After giving effect to (i) the sale of 15,000,000 shares of our Common Stock in this offering at the assumed initial public offering price of $0.23 per share and (ii) the application of the net proceeds from this offering, our pro forma net tangible book value would be $3,530,640, or $0.07 per share. This represents an immediate increase in pro forma net tangible book value of $0.07 per share to our existing investors and an immediate dilution in pro forma net tangible book value of ($0.16) per share to new investors.
The following table illustrates this dilution on a per share of common stock basis:
| Assumed initial public offering price per share | $ | 0.23 | ||
| Net tangible book value per share as of March 31, 2023 | $ | (0.00 | ) | |
| Increase in net tangible book value per share attributable to new investors | $ | 0.23 | ||
| Pro forma net tangible book value per share after this offering | $ | 0.07 | ||
| Dilution in pro forma net tangible book value per share to new investors | $ | (0.16 | ) |
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
We intend to have our common stock begin trading on the OTC Markets Group, Inc. under the symbol “TCGI”. The OTC Markets is a network of security dealers that buy and sell stock.
As of June , 2023, there were approximately holders of record of our common stock.
Dividends. We have never declared or paid any cash dividends on our common stock, nor do we anticipate paying any in the foreseeable future. We expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATION
The following Management’s Discussion and Analysis of Financial Condition and Plan of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements and contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Basis of Presentation
The financial statements are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
Forward-Looking Statements
Some of the statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Prospectus constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” and “would” or the negatives of these terms or other comparable terminology.
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You should not place undue reliance on forward-looking statements. The cautionary statements set forth in this Form S-1 identify important factors, which you should consider in evaluating our forward-looking statements. These factors include, among other things:
| · | The unprecedented impact of COVID-19 pandemic on our business, customers, employees, consultants, service providers, stockholders, investors and other stakeholders; |
| · | The speculative nature of the business we intend to develop; |
| · | Our reliance on suppliers and customers; |
| · | Our dependence upon external sources for the financing of our operations, particularly given that there are concerns about our ability to continue as a “going concern;” |
| · | Our ability to effectively execute our business plan; |
| · | Our ability to manage our expansion, growth and operating expenses; |
| · | Our ability to finance our businesses; |
| · | Our ability to promote our businesses; |
| · | Our ability to compete and succeed in highly competitive and evolving businesses; |
| · | Our ability to respond and adapt to changes in technology and customer behavior; and |
| · | Our ability to protect our intellectual property and to develop, maintain and enhance strong brands. |
Although the forward-looking statements in this Prospectus are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as maybe be required by law, to update this Prospectus or otherwise make public statements updating our forward-looking statements.
The Cannaisseur Group, Inc. (the “Company” or “TCG”) was established in December 2020, as a result, we had limited activity for the year ended December 31, 2020. On January 4, 2021 we acquired a fifty-one percent (51%) in Atlanta CBD Inc. (d/b/a as Inno Medicinals) (“Atlanta CBD”). Atlanta CBD is engaged in hemp cultivation, extraction, manufacturing, distribution, and retail sales through CBD stores.
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Results of Operations of TCG during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.
For the three months ended March 31, 2023, we generated revenues of $16,463 compared to $23,614 for the three months ended March 31, 2022. The decrease in revenues of $7,151 was due to the decline in the retail sales driven by inflation and reduced buying power of consumers.
Our Gross Profit from the sale of all products for the three months ended March 31, 2023, was $ 6,628 as compared to $14,401 for the three months ended March 31, 2022. The decrease of $7,773 was due to a decrease in sales volume. Continued growth of the consumer market for CBD products and anticipated increases in competition are anticipated to continue to create pressure on gross profit margins.
Our Net Loss for the three months ended March 31, 2023, and March 31, 2022 was ($16,521) and ($8,888) respectively, an increase of $7,633. Our net loss increased primarily due to lower sales and an increase in general and administrative costs of $14,243, mainly relating to the increase in costs associated with the registration of the shares for sale.
Results of Operations of TCG during the year ended December 31, 2022, as compared to the year ended December 31, 2021
For the years ended December 31, 2022, and 2021, we generated revenues of $88,145 and $72,749 respectively. The increase in revenues of $15,396 was due to the Atlanta CBD getting back to full operations, and increased store sales following the closures due to Covid 19.
Gross profits from the sale of products were $45,306 and $36,453 for the years ended December 31, 2022 and 2021. The increase in gross profits of $8,853 was due to the increase in sales.
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Our Net Loss for the years ended December 31, 2022, and 2021 were $94,013 and $154,768 respectfully, a decrease of $60,755, mainly attributable to our decreased general and administrative costs which decreased by $80,160, from $213,109 during the year ended December 31, 2021 to $132,949 during the year ended December 31, 2022. The decrease in general and administrative costs was due to a decrease in professional fees that had increased for costs relating to our stock offering and registration.
Liquidity and Capital Resources
As of March 31, 2023, we had $45,373 in total assets including cash and cash equivalents of $4,976, as compared to $59,289 in total assets including of cash and cash equivalents of $18,534, as of December 31, 2022. The decrease in assets is primarily attributable to a decrease in cash and cash equivalents and a decrease in right of use assets.
As of March 31, 2023, we had total liabilities of $79,713 consisting of accounts payable and accrued expenses of $33,788 and dividends payable of $1,608, notes payable current of $4,250, lease liabilities of $14,284, and long-term notes payable of $25,783. As of December 31, 2022, we had total liabilities of $81,717 including accounts payable and accrued expenses of $32,009, dividends payable of $1,608, notes payable current of $1,517, lease liabilities of $19,850 and long-term notes payable of $25,783. The decrease of $2,367 is mainly due to the decrease in lease liabilities.
Cash Flow from Operating Activities
Net cash used in operations for the three months ended March 31, 2023, was ($35,823) as compared to net cash used in operations of $852 for the three months ended March 31, 2022. The decrease in capital use is attributed to a reduction in inventory expenses, rent-related CAM expenses, and decreased labor costs.
Cash Flow from Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2023, was $22,265 as compared to $0 for the three months ended March 31, 2022.
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
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Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for fiscal year 2023 will depend on numerous factors, including management’s evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.
Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.
The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.
We have recently sold the following shares of common stock for working capital purposes:
In July 2021, the Company sold 2,400,000 shares of common stock in a private placement for gross proceeds of $75,000.
In August 2022, the Company sold 580,000 shares of common stock in a private placement for gross proceeds of $2,900.
In November 8, 2022, the Company sold 666,667 shares of common stock in a private placement for gross proceeds of $20,000.
During the year ended December 31, 2022. the Company received cash in the aggregate amount of $13,751 from an investor for capital contributions.
On February 16, 2023, the Company sold 333,334 shares of common stock in a private placement for gross proceeds of $10,000.
On February 9, 2023, February 17, 2023 and March 9, 2023 the Company received capital contributions from a related party in the amounts of $1,797, $3,685 and $5,000, respectively.
On May 10, 2023, we sold 1,066,666 shares of common stock at a price of $0.015 per share for cash proceeds of $16,000 to to each of two investors (a total of 2,133,332 shares of common stock for aggregate cash proceeds of $32,000).
At March 31, 2023, we had an Economic Injury Disaster Loan payable (the “EIDL Loan”) dated June 9, 2020. The EIDL Loan bears interest at the rate of 3.75%. Payments were deferred on the EIDL Loan until June 2021 at which point monthly payments of principal and interest totaling $134 were due. The due date of the EIDL Loan is June 9, 2030. Also at March 31, 2023, we had a receivables based financing loan payable in the amount of $4,095 (the “Financing Loan”). The amount received under the Financing Loan was $3,500; payments are made at the rate of 11% of the Company’s sales receipts.
We are working with a manufacturer to develop a time-release product which we believe is unique to the market. This product, if successful, has the potential to generate substantial revenue.
TCGI expects to raise funds through private investors and investment firms and is looking to secure a non-recourse loan for work capital and operating expenses. We must raise $100,000.00 for the next 12 months to expand operations (increase our locations). We have succeeded in securing investments of up to $20,000.00 and intend to continue offering smaller investment opportunities. Long term, we plan to seek larger amounts of investment to expand operations. TCGI will look to attain a non-recourse loan of $50,000.
Inflation
The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Going Concern
The accompanying financial statements have been prepared on a going concern basis. For the three months ended March 31, 2023, the Company had a net loss of $32,394, had net cash used in operating activities of $35,823, had negative working capital of $26,243, accumulated deficit of $334,034 and stockholders’ deficit of $72,215. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
A summary of significant accounting policies is included in Note 2 to the consolidated financial statements included in this Registration Statement. Of these policies, we believe that the following items are the most critical in preparing our financial statements.
Consolidation Policy
The Company relied upon the guidance of ASC 250 Accounting Changes and Error Corrections (“ASC 250”) and ASC 805 Business Combinations (“ASC 805”) in accounting for and presenting acquisition of Atlanta CBD. Pursuant to ASC 805-50-05-5, the pooling-of-interests method of accounting provides relevant guidance when an exchange of shares between entities under common control results in a change in the reporting entity. Under the pooling-of-interests method, the transferred assets and liabilities are recorded at their historical carrying amounts, and the equity accounts of the separate entities are combined. Pursuant to ASC 805-50-45-2, the transaction should be presented as if it occurred on the first day of the period reported; accordingly, we have reported the Atlanta CBD transaction as if it occurred on January 1, 2020
Inventory
Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company sells CBD related products in a retail location in Atlanta, Georgia and through e-commerce. Revenue is recognized based on the following model:
1. The Company sells products at their one retail location and via web site sales. A sale agreement exists when the customer purchases the product at the counter or via an online purchase. The price for and product to be received are known at time of purchase.
2. The performance obligations are to provide the product for the customer at the counter or ship the product to the customer. Product is shipped on the day of sale.
3. The price of the product is located on the label or presented on the web site and therefore is known at the time of purchase.
4. The price of the product is properly allocated to the sole performance of providing the product.
5. Revenue is recognized in the retail location at the point of sale where money is collected and product is in control of customer and from the web site upon settlement of the credit card transaction, which is effectively at the time of purchase.
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Use of Estimates
Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses
Most Recent accounting pronouncements
Refer to Note 2 in the accompanying consolidated financial statements.
Impact of Most Recent Accounting Pronouncements
There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.
TCG is a Delaware corporation. It was formed to engage in the hemp business. In January 2021, it acquired a fifty-one percent (51%) interest in Atlanta CBD. TCG’s plan is to acquire assets from companies actively engaged in hemp cultivation to develop and grow the business. Potential assets for acquisition, include, CBD cultivation, processing, and distribution equipment and infrastructure from companies that grow and develop CBD products for the consumer market. These assets will support and further develop Atlanta CBD’s operations. The Company plans to use the proceeds from this offering and a combination of equity (common stock) and funds raised from private placements, if necessary, to acquire additional assets to support and grow Atlanta CBD’s operations.
Atlanta CBD operates the day-to-day operations of the hemp business as discussed herein. The Company’s only source of income is from its fifty-one percent ownership interest in Atlanta CBD. The Company is entitled to receive its proportionate share of revenue from Atlanta CBD’s operations.
Atlanta CBD is a family-owned business, founded in October 2018. It was born from the desire to offer people an alternative approach to good health. They are a CBD boutique, offering many leading brands of hemp extracts. Atlanta CBD began planning for a retail hemp store in September of 2018. Cannabis sativa (hemp) extracts were chosen because the founders believe the extracts have the potential to help people. Knowledge gained since opening a retail location in June of 2019 has given them a greater understanding of the industry and the people that purchase hemp products.
Atlanta CBD is committed to increasing public awareness of CBD and helping grow the hemp community statewide. Atlanta CBD plans to grow primarily innovative hemp, and in the future intends to source up to 15% of its hemp through a network of local farms to encourage and promote diversity within our community. It also intends to grow hemp and develop proprietary hemp genetics to be used in supplying stores as well as, working with local/ regional farmers to grow the bulk of hemp needed for retail products.
The Company owns 51% of Atlanta CBD. The Company’s majority shareholders are Floretta Gogo and Xavier Carter, who also owns the remaining 49% of Atlanta CBD. Ms. Gogo and Mr. Carter each own approximately 19% of the outstanding common stock of the Company. Ms. Gogo and Mr. Carter are the President and Chief Executive Officer of the Company and the Chief Operating Officer of the Company, respectively. They both run the day-to-day operations of Atlanta CBD. Pursuant to the acquisition agreement between the Company and Atlanta CBD, the Company is entitled to 51% of the net profits from the operations of Atlanta CBD.
Atlanta CBD has outstanding 1,518 shares of preferred stock. The preferred stock has redeemable features that allow the preferred shareholders to request repayment of their investment. The preferred shareholders are also entitled to profit distributions equal to the lesser of (i) 25% interest on their investment, or (ii) the difference between the ownership percentage of management and 50%, which will be distributed to management, until a 35% profit goal achieved. Preferred shareholders are entitled to a return of their investment upon 15 days’ notice given to the Company after any distribution.
Atlanta CBD is a hemp products supplier and retailer and it sells its retail hemp products through trade name, Inno Medicinals, located in Atlanta Georgia. Atlanta CBD intends in the future to engage in cultivation and extraction of hemp flower, through a trade name Requisite Technologies. Requisite Technologies will be dedicated to producing and selling premium oil, tinctures, and capsules, edibles, and topicals. Our mission is to grow one of the best hemp plants and produce high-quality infused products to provide customers with products and services they trust. We expect that, when established, Requisite Technologies will have the ability to grow hemp year-round, aiming to grow up to 12 different strains, and can produce from seedling to finished product.
Atlanta CBD is currently in the research and development stage of a line of CBD-based beauty products -soaps, bath salts and bath bombs, made with proprietary formulas. Atlanta CBD markets its products using internet advertising and promotes its products via social media and hemp related trade shows.
Hemp-derived CBD is distinguishable from CBD derived from marijuana. Hemp-derived CBD contains not more than 0.3 percent of THC, while marijuana contains in excess of this amount. Marijuana is regulated under the Controlled Substances Act. We do not believe that our hemp-derived CBD products are regulated under the Controlled Substances Act, but under the Agricultural Act of 2018, known as the “Farm Bill”.
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The 2018 Farm Bill allows for the interstate sale and transfer of hemp-derived products for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law. The Farm Bill ensures that any cannabinoid—components of CBD —that is derived from hemp will be legal, if that hemp is produced in a manner consistent with the Farm Bill, associated federal regulations, associated state regulations, and by a licensed grower as defined in the Farm Bill.
The Company believes that all products sold and marketed by Atlanta CBD, are in compliance with the Farm Bill and all other federal and state law and regulation.
All the full Spectrum Hemp CBD Infused products the Company sells are pharmacist formulated and nano-amplified for rapid absorption and maximum bioavailability. Products categories include full spectrum bath bombs, face serums, hair and beard serums, edibles, topicals, sports recovery, ingestible, and vapes to name a few. Product categories also include various sub-categories and are distributed to brick-and-mortar resellers, and online merchants. Inno Medicinals product line, because of its size, is constantly in flux as new products are added and products are culled based on several factors including, but not limited to, consumer acceptance, inventory levels, and replacement as the result of incremental improvement.
While most of the products that Atlanta CBD sells through its trade name Inno Medicinals are geared to human health and wellness, the company does sell pet products such as recovery oil and skin conditioner, and full spectrum tincture. These products offer pet owners a new way to support their pet’s mood and wellness in a non-invasive, non-toxic way. The global pet care industry is expected to reach $110 billion in 2017, according to Euromonitor Research (The State Of Global Pet Care: Trends And Growth Opportunities, September 2017). Technavio, a leading market research firm, recently analyzed the global pet care industry and forecasted a CAGR of 5% between 2016-2020 (Global Pet Dietary Supplements Market 2018-2022, March 2018). According to that report, rising pet ownership combined with increased consumer spending on premium natural and organic pet care products are fundamental factors driving that growth.
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Atlanta CBD also offers for sale a majority of its products direct to consumers via its website, https://innomedicinals.com/. Consumer markets served by the INNO Medicinals website are extensive. In terms of geography, the products are only sold wherever legal and INNO Medicinals stipulates to its distribution channels that the products may only be sold to end-user persons eighteen years of age or older and residing in states that allow its products (See “Government Regulation” below for a further explanation of the laws regarding the sale of hemp-derived CBD products).
The CBD products sold by Atlanta CBD contain no more than the legal limit of .03 % Delta 9 THC and is legal under federal law, however state law does not always coincide with federal law as in the states of Idaho, Iowa, and South Dakota, where CBD is entirely illegal. THC products derived from hemp are legal in many states and covered under the FARM BILL of 2018, but in Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Kentucky, Idaho, Iowa, Mississippi, Montana, New York, Nevada, Rhode Island, Utah, Vermont, Washington, Michigan, and North Dakota it is illegal and therefore, we do not ship such products to those states, and we disclose this and warn consumers of the restrictions on the INNO Medicinals website. The legal landscape for some hemp derived products is uncertain and must be considered on a state-by-state basis. The Company and Atlanta CBD stay informed of regulatory changes with respect to hemp through hemp-related groups such as the US Hemp Authority.
Product Formulation and Production
Atlanta CBD uses its commercial suppliers and contract manufacturers for its product research and development, formulation, quality testing, production and packaging. These suppliers and manufacturers hold, as required, the necessary regulatory and other licenses/permits specific to each one’s activity. Atlanta CBD outsources fulfillment as well. In addition to direct sales, Atlanta CBD, has the option to drop ship its products. This allows the third-party supplier to ship the merchandise directly to such customers. Any and all raw materials constituting active ingredients in its products are routinely tested by a third-party laboratory for purity and consistency of active ingredient concentrations. Atlanta CBD, owns its own propriety formulas for certain bath bombs, bath salts and soaps that it manufactures, which it regards as trade secrets (the Company and Atlanta CBD do not own any patents nor have any pending), and continuously is engaged in both new product development and product incremental improvement with its suppliers. While these branded products are only 5% of sales, they help bring customers into the store. Our Name, our reputation, and our unique branded products promote a positive shopping experience for customers. New product development and incremental improvement costs are absorbed by each respective supplier as part of their overhead in providing services to the Company. Our raw materials include terpenes, hemp flower, and CBD oil. Our principal suppliers of these materials are Sweet Leaf, Life Cycle Hemp, Flow Gardens, American Indian Hemp, and Bluebird Botanicals. Raw materials are available upon request to our suppliers and there are no written agreements between our suppliers, the Company or Atlanta CBD.
Sales Channels
Holistic healers are very accepting of CBD and its benefits, making them a good fit for CBD products. The Company, through Atlanta CBD intends to establish relationships with holistic healers and acupuncturists that attended their CBD seminars. The goal is to work with a small group of six to twelve practitioners and collaborate on creating a sales channel within their networks. There is a proliferation of small businesses that sell CBD products. From 2020 to 2021 the Atlanta CBD had an agreement with Cryogenics where it was selling its products in Cryogenics stores. The relationship was not profitable, and Atlanta CBD discontinued the relationship in 2021. Neither the Company nor Atlanta CBD currently have any relationships with holistic healers or acupuncturists, but the Company intends to pursue this sales channel in the future.
The Markets for Our Products
Market research from BDS Analytics is predicting a compound annual growth rate of 49 percent by 2024 across all distribution channels and that the CBD market, combined with THC products, will create a total market of $45 billion for cannabinoids by 2024. (Forbes, May 20, 2019).
The growth of the market shows that hemp-derived CBD products are becoming “mainstream” as consumers increasingly perceive them as providing wellness benefits.
Competition
Currently, in the United States, we are not aware of any businesses that can demonstrate or claim a dominant market share of the growing CBD products market. Competition, outside those companies that provide over .03 percent THC containing CBD in states where that is allowed under state law, is limited to numerous brands with geocentric distribution footprints. Overall, there are no major pharmaceutical manufacturing companies marketing general purpose CBD products into the overall CBD market at this time, although the Company is expecting such an entry in the future. Competition also includes many small regional marketers/packagers of CBD oil containing products that have limited distribution and economic resources.
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Employees
The Company has 3 full-time employees.
Patents and Trademarks
The Company holds no patents or trademarks, nor at this time, has any patent or trademarks pending.
Government Regulation
The Company’s CBD Products Are Not Subject to the Controlled Substances Act
The Agriculture Improvement Act of 2018 (“AIA” or “the Act”) exempted hemp-derived cannabidiol products (“hemp-derived CBD products”) from the federal Controlled Substances Act (“CSA”). Specifically, the AIA, also known as the Farm Bill of 2018, established a legal definition of “hemp”: the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [∆-9 THC] concentration of not more than 0.3 percent on a dry weight basis.
The Act amends the CSA to exclude “hemp” from the definition of “marihuana.” It also amended the CSA to exclude THC found in “hemp” from the “tetrahydrocannabinols” listed in Schedule I. Therefore, hemp-derived CBD products that contain less than less than 0.3% of 9∆-THC, such as those marketed by the Company, are not controlled substances under the CSA. These amendments to the CSA took immediate effect on December 20, 2018.
By way of background, the CSA establishes five “schedules” into which a substance with abuse potential may be classified. Substances that fall under any one of the five schedules are subject to various requirements and restrictions enforced by the
U.S. Drug Enforcement Administration (“DEA”). The most restrictive is Schedule I, which is reserved for those substances having a high potential for abuse that do not have a currently accepted medical use, and that lack accepted safety for use under medical supervision.
Marijuana has long been classified under Schedule I. Previously, DEA took the position that CBD met the expansive definition of “marijuana”, which made it subject to Schedule I as well. Specifically, DEA created a code number in Schedule I for “marihuana extract,” defined as “an extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis, other than the separated resin (whether crude or purified) obtained from the plant.” DEA made clear that the agency considered CBD to fall within the definition of “x` extract” (and to therefore be a Schedule I substance) if the CBD came from the part of the cannabis plant that is included within the definition of “marijuana.”
The passage of the AIA confirms that hemp-derived CBD products are now excluded from the CSA. As noted above, the AIA amended the definition of “marihuana” as follows:
(A) Subject to subparagraph (B), the term ‘marihuana’ means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds to resin.
| (B) | The term ‘marihuana’ does not include— |
| (i) | hemp, as defined in section 297A of the Agricultural Marketing Act of 1946. |
| I. | Limits of the AIA |
Although the AIA removed “hemp” from the CSA, the Act has limitations.
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| a. | Products containing more than 0.3% of 9∆-THC still subject to the CSA. |
Notably, the AIA’s exclusion of “hemp” from the CSA definition of “marihuana” is limited to those parts, derivatives, or extracts of the plant containing less than 0.3% of 9∆-THC. Parts, derivatives, and extracts containing levels of 9∆-THC greater than 0.3% meet the definition of marihuana and are subject to the CSA. Consequently, manufacturers and distributors of CBD products must be prudent with respect to verifying the levels of 9∆-THC in products.
The passage of the AIA confirms that hemp-derived CBD products are now excluded from the CSA. As noted above, the AIA amended the definition of “marihuana” as follows:
(C) Subject to subparagraph (B), the term ‘marihuana’ means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds to resin.
| (D) | The term ‘marihuana’ does not include— |
| (i) | hemp, as defined in section 297A of the Agricultural Marketing Act of 1946. |
| II. | Limits of the AIA |
Although the AIA removed “hemp” from the CSA, the Act has limitations.
| a. | Products containing more than 0.3% of 9∆-THC still subject to the CSA. |
Notably, the AIA’s exclusion of “hemp” from the CSA definition of “marihuana” is limited to those parts, derivatives, or extracts of the plant containing less than 0.3% of 9∆-THC. Parts, derivatives, and extracts containing levels of 9∆-THC greater than 0.3% meet the definition of marihuana and are subject to the CSA. Consequently, manufacturers and distributors of CBD products must be prudent with respect to verifying the levels of 9∆-THC in products.
| b. | Hemp production and cultivation restrictions |
The AIA requires the establishment of a shared Federal-state program to regulate the cultivation and production of hemp. The USDA is actively engaged in rulemaking efforts to implement these requirements and state laws are evolving in response. Our Company is not involved in the cultivation or production of hemp; however, we recognize that new rules will impact the industry as a whole and we are closely monitoring the USDA’s rulemaking efforts.
| c. | Hemp-derived CBD remains subject to FDA regulatory authority |
Further, The Federal Food, Drug and Cosmetic Act (“FDCA”) and the AIA authorize the FDA to regulate the marketing and distribution of hemp products in interstate commerce that are intended for consumption, including topical use. Pursuant to its jurisdiction, FDA may regulate hemp as a feed, food, dietary supplement, cosmetic or drug depending on the intended use of the hemp and whether the hemp is otherwise a permissible ingredient for a particular intended use. The AIA expressly preserves the FDA’s authority over “hemp” that is intended to be used as a drug, device, cosmetic, food (including animal food), dietary supplement, or tobacco product.
Generally, hemp-derived CBD products that are intended for ingestion and intended to support the normal function/structure of the body or added as an ingredient in food, may be considered a dietary supplement or conventional food under the FDCA. However, FDA has taken the position through advisory Warning Letters that CBD products are precluded from being marketed as dietary supplements or as food because CBD is subject to statutory exclusions designed to protect the integrity of the drug approval process.
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Specifically, the statutory definition of a “dietary supplement” excludes an “article” that has been approved as a drug under section 505 of the FDCA. The term “dietary supplement” also excludes “an article” if (1) it has been authorized for investigation as a new drug; (2) substantial clinical investigations have been instituted on the article and their existence made public; and (3) it was not marketed as a food or dietary supplement prior to being authorized for investigation as a new drug. For purposes of this exclusion, the FDA has interpreted “authorized for investigation as a new drug” to mean that an Investigational New Drug application (“IND”) has been submitted for the active ingredient or active moiety.
FDA has taken the position that hemp-derived CBD cannot be marketed as dietary supplement because a CBD isolate has been approved as a drug, Epidiolex, and prior to approval, was subject to substantial clinical investigations under an IND. Further, FDA has stated that it has not been provided with the evidence needed to overcome this exclusion. The FDA asserts this same position with regard to products marketed as food under a separate, but identical, statutory provision applicable to “food” broadly. As such, FDA takes the position that hemp-derived CBD products intended for ingestion may be adulterated.
That being said, FDA has yet to take enforcement action against CBD products and has initiated a regulatory process to determine whether there is a regulatory pathway to permit the marketing of these products. Indeed, FDA in recognizing the significant increase in hemp-derived CBD products on the market, the Agency held a public meeting on May 31, 2019 requesting scientific information and data regarding the safety, manufacturing, product quality, marketing, labeling, and sale of products containing hemp-derived CBD. It further requested that comments be filed with the agency by July 2, 2019. This meeting and request for comments signaled FDA’s intent to consider various regulatory options for CBD products, including but not limited to (1) requiring companies to seek approval to market such product; (2) issuing regulations setting forth the conditions which such products may be marketed in food and dietary supplements; or (3) prohibiting the use of hemp-derived CBD in foods and dietary supplements. With that said, there is significant regulatory uncertainty around this category which makes it difficult to predict the likely outcome of this process FDA has initiated.
| d. | Hemp-derived CBD products are subject to regulation on the state level. |
Although the AIA provided clarity regarding the status of hemp-derived CBD under the federal CSA, the AIA did not address the myriad of state laws and regulations governing such products. For example, hemp-derived CBD still meets the definition of a controlled substance under certain laws.
Our directors hold office until the next annual general meeting of the stockholders or until their successors are elected and qualified. Our officers are appointed by our Board of Directors and hold office until the earlier of their death, retirement, resignation, or removal.
The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each.
Name and Principal Position Floretta Gogo- Chief Executive Officer/Board Member Xavier Carter – Chief Operating Officer – Interim Chief Financial Officer/Board Member Valarie Grant – Corporate Secretary Keijiro Valera – Board Member Jamie Brown – Board Member Harold Woolfork – Board Member
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Floretta Gogo
Floretta Gogo, 59 years of age, is the Chief Executive Officer of The Cannaisseur Group since its inception in December 2020. From 2018 to 2020 she was the Chief Executive Officer of Atlanta CBD, LLC. From 2013 to 2017 Ms. Gogo worked for Allnex USA, Inc. as a Corporate Tax and Finance Accountant. Her duties ranged from tax planning and compliance with federal, local, payroll and other applicable taxes to registering and maintaining all federal and state business licensing and annual reporting. With over 35 years of financial and managerial experience, Ms. Gogo currently serves as Chairman and CEO to the Cannaisseur Group providing the Company with strategic financial planning direction.
Early in her career, she gained experience as a Cost Accountant/Accounting Manager with several companies. As a cost manager, Ms. Gogo’s duties ranged from preparing monthly financial statements to implementing cost standards from raw materials to finished products. As an Accounting Manager, Ms. Gogo’s experience transitioned into a managerial role as she managed, disciplined, and directed the Accounting, Customer Service, Human Resources and Shipping Departments. Ms. Gogo graduated with an accounting degree from Mercer University in Atlanta in 1986.
Xavier Carter
Xavier Carter, 62 years of age, is the Chief Operations Officer of The Cannaisseur Group since its inception in December 2020 and its Interim Chief Financial Officer since April 24, 2023. Mr. Carter graduated from the Atlanta College of Arts (now Savanah College of Arts) in 1992 with a major in Video and Computer graphics. From 1977 – 1986, he acquired a wealth of knowledge working in the food and beverage and shipping industries. In 1995, Mr. Carter established IEC Enterprises, a video and graphics support company that focuses on tradeshows and has been self-employed until he began working for the Company in December 2020. He has worked with many Fortune 500 companies presenting ideas and concepts ranging from customer care to product marketing. Major clients include D&J Electronics, PRG, Video equipment Rentals, and Fuse Technologies. With over thirty years of customer service and management experience Carter understands the importance of customer service and superior products.
Valarie Grant
Valarie Grant, 35 years of age, is the Corporate Secretary for The Cannaisseur Group since its inception in December 2020. She earned her degree in Business Management and a certificate in Business Technology, specializing in Office Administration from Houston Community College in 2019. Ms. Grant is equipped with over 10 years of administrative, financial, business support, and management experience reporting to senior management executives. From 2009 to 2011, she worked for M Green, Inc., and managed the office administration and customer service for the company’s three (3) Houston locations. From 2011 to 2012 Ms. Grant began working with iVoice Ideas, Inc. where she provided general administrative, and record-keeping support for the CEO and executive team and supported the company’s public filings of legal and accounting documents for the Securities and Exchange Commission. In addition, she assisted in writing, planning, and coordinating press releases and website tracking.
From 2012 through 2018, Ms. Grant worked for Brazil Property International (“BPI”) providing personal administrative and business support to the Managing Director of BPI in addition to administrative support to the other members of the executive management team, including the Finance Officer and the Lead Construction Officer. Ms. Grant served as Corporate Secretary and Director at 4G Enterprises and Bensata Corporation, responsible for compliance, registrations, and document management on behalf of the Corporation. Finally, she is also a registered Notary Public in the State of Texas.
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Keijiro Varela
Keijiro Varela, age 40, is a current board member of The Cannaisseur Group and has been the President of Nature Science Health Inc. (EvoCann) since it was founded in 2018. Valera earned his undergraduate and graduate degree in 2003 and 2012 respectfully at Temple University (Philadelphia) in Engineering and Business Administration. From 2003 - 2014 he worked for Chevron Corporation as an engineer, Lean 6 Sigma operator and supply chain manager. After climbing the ranks and several global assignments within Chevron’s Products Division, Varela decided to make a dramatic change and follow in the footsteps of his idols Nikolai Tesla and George Washington Carver who both developed life changing technologies and dedicated their lives to improving humanity with their discoveries.
Combining Varela’s passion and drive to educate the masses on a healthier way of living and healing, in 2017 he decided to join the California based company Methodology Inc., that specializes in food as medicine. With a common mission to help people live a healthier lifestyle, Varela spent a year with the company to gain a stronger understanding of the nutritional impact of how clean food effects the body and living a healthier lifestyle yields a better quality of life. After struggling and surviving Non-Hodgkin’s Lymphoma in his early 30’s, Varela was determined to help other’s that had chronic illnesses; a potential tragedy became a life calling.
In 2019 Varela, for personal reasons, decided to begin his own journey of cultivating ways to help the people closest to him that were struggling with their own health issues. Over the years of hearing people’s personal health struggles, Varela finally discovered his calling and made the leap to be fully committed to developing a holistic approach to treat various ailments that effect the mind and the internal body workings.
Through willing participants, years of research and with Varela’s Industrial Engineering & Chemistry background, he began creating an innovative Full Spectrum CBD product line that enhances the body’s cannabinoid receptors. CBD and other cannabinoids are naturally occurring compounds that display potent anti-inflammatory and pain-relieving properties. They can promote the body’s healthy regulation of the central nervous, immune, and endocannabinoid systems. Varela’s unique approach maximizes the delivery of medical cannabis oil through various innovative techniques combined with using the highest quality ingredients. Stemming from the food industry where the phrase “made with love” is used, Valera incorporates the phrase and mission is behind EvoCann’s products “made for the ones we love”.
Jamie Brown
Jamie Brown, 41 years old, currently serves as a board member of The Cannaisseur Group. Brown graduated with a Bachelor’s Degree in Business Marketing from North Carolina A&T in 2002. Brown worked at the Harlem Medical Hospital in New York City from 2005 – 2018 where he held various executive and management positions overseeing specialty fields such as Neurology, Oncology, Lupus, Renal, Gastroenterology, and Endocrinology. His close interactions with chiefs of specialty services and patient advocating for the patient population has been the driving force behind his passion to do clinical research and creating a more holistic approach to pain management and disease prevention.
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Brown’s family history of cancer and diabetes led him towards his calling in the healthcare industry and continues his focus towards creating more effective ways to help other families who are suffering from life impacting illnesses. In his spare time he enjoys working with non-profits and educating the younger generations on the importance of living a healthier lifestyle.
Harold Woolfork
Harold Woolfolk, 62 years of age, currently serves as a board member of The Cannaisseur Group. Woolfork is a 1982 graduate of The University of Michigan with a Degree in Kinesiology. As a student/athlete, he starred as a two sport All-American, in football and track & field. Following college, he was drafted in the 1st Round by The New York Giants and spent the next 8-years in the NFL. After football, he would hone his skills writing as a newspaper columnist, for 3-years, before leaving that post to embark on a career path in both the corporate sector and as an entrepreneur. Woolfork established a construction company, that would later be featured on CNN, building affordable housing in Houston’s blighted communities for low-income families. His company’s success led him to construct health clinics inside of Walmart Superstores, through a subcontractor agreement with Walmart Corporate, in Bentonville, Arkansas.
Woolfolk thrived in the exertion of entrepreneurship, where he built, managed and sold several businesses. In 2014, he developed, an alliance with a physician group, to construct and operate Kemah Palms Recovery Center, an upscale drug and alcohol addiction facility for high profile clients, where he served as a managing partner. Prior to that, he was President for 7-years, running a multimillion-dollar, toxicology drug testing business, in a SAMHSA certified Laboratory. Woolfork has served as a board member with his alma mater in the past and is currently a partner and board member of First Genesis Inc., an IT company that specializes in interoperability connection solutions in both the Oil & Gas and Healthcare Industries. Its proprietary Block Chain integration is used by several federal agencies. Woolfork maintains a diverse interest as a shareholder in several other businesses that he helped develop.
Deutsche Cannabis, a CBD operation he founded, now a company trading on the German Exchange, is the latest one of those businesses. “It’s not what you take, but what you leave behind that defines greatness,” is an anonymous quote that Woolfork lives by after 38 years of success in both the sports and business arena. He lists his passions as writing, playing with his grandchildren, golf and giving back to the community. He contributes to several not-for-profits, of which his favorite, is delivering meals to homebound seniors. Woolfolk has learned immensely from the competitive nature of business & sports and he believes, it’s shadowed his life and shaped who he is from the playing field to the boardroom.
Family Relationships
There are no familial relationships among any of our officers or directors. None of our directors or officers is a director in any other reporting companies except as disclosed. The Company is not aware of any proceedings to which any of the Company‚ officers or directors, or any associate of any such officer or director, is a party adverse to the Company or any of the Company subsidiaries or has a material interest adverse to it or any of its subsidiaries.
Board Committees
There are currently no committees of the Board of Directors.
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Code of Ethics
Our board of directors intends to adopt a code of ethics that our officers, directors and any person who may perform similar functions will be subject to.
Involvement in Certain Legal Proceedings
To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:
| 1. | any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| 2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; |
| 4. | being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| 5. | being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 6. | being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self- regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our chief executive officer for services rendered in all capacities for the periods set forth below.
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Summary Compensation Table
| Name and
Principal Position |
Year |
Bonus | Stock
Option Awards | Non-Equity
Incentive Plan Compensation | Deferred
Compensation Earnings | All Other
Compensation |
Total | |||||||||||||
| Floretta Gogo | 2022 2021 | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -0- -0- | |||||||||||||
| Xavier Carter | 2022 2021 | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -0- -0- | |||||||||||||
| Steven Plumb | 2022 2021 | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -0- -0- | -0- -0- |
Employment Agreements
The Company does not yet have any employment agreements with any of our officers and directors, all of whom have performed services on our behalf for no compensation, including Floretta Gogo, CEO, Xavier Carter, COO and Interim CFO, since April 24, 2023, and Steven Plumb, CFO through March 16, 2023.
Compensation of Directors
Our board of directors has not received any compensation to date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
The Company, through Atlanta CBD, has contracted with, Liberty Management Investments (“Liberty”), which is owned by certain minority shareholders of the Company to provide administrative support to the Company. Liberty provides management advisory and consulting services to the Company and works in close relationship with Company’s management team. We consider Liberty a related party because the owners of Liberty are minority shareholders of the Company and also due to the close working relationship with Liberty. On October 20, 2020, Atlanta CBD entered into an agreement with Liberty whereby Liberty will provide management advisory services to the Company in developing and building a public company entity, equity investment, and organizational structure. In addition, Liberty assists the Company in interfacing with regulatory agencies and conducting due diligence for proposed transactions. In exchange, Liberty received an upfront fee and is entitled to receive success payments and equity interest in the Company. Either party may terminate the agreement upon 30-days written notice to the other party. A copy of the agreement is attached as an Exhibit to this Registration Statement.
The Company has paid Liberty $197,019 for administrative services during the period from inception (December 22, 2020) through June 2022. In addition, the Company has advanced Liberty funds for working capital purposes. The net amount due from Liberty is $0 as of June 30, 2023. The funds were advanced to Liberty without interest and there is no written loan agreement or promissory note for the advance.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 30, 2023, we had 39,663,333 common shares outstanding. The following table sets forth certain information regarding our shares of common stock beneficially owned as of June 30, 2023, for (i) each stockholder known to be the beneficial owner of five percent (5%) or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within sixty (60) days through an exercise of stock options or warrants or otherwise. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within sixty (60) days of the date of this Form 10. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of the Closing Date is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.
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| Name and Address | Shares of Common Stock Owned | Percentage Votes Before Offering | Percentage of Votes Assuming all Shares are Sold | |||||||||
| Floretta Gogo | 6,800,000 | 17.14 | % | 12.44 | % | |||||||
| Xavier Carter | 6,800,000 | 17.14 | % | 12.44 | % | |||||||
| Jamie Brown | 1,000,000 | 2.52 | % | 1.83 | % | |||||||
| Keijiro Valera | 1,000,000 | 2.52 | % | 1.83 | % | |||||||
| Valarie Grant | 1,000,000 | 2.52 | % | 1.83 | % | |||||||
| Harold Woolfolk | 500,000 | 1.26 | % | 0.91 | % | |||||||
| Total Officers and Directors (1) | 17,100,000 | 43.11 | % | 31.286 | % | |||||||
| >5% Share Shareholders | ||||||||||||
| Real Estate Investment Holdings, LLC (2) | 6,400,000 | 16.14 | % | 11.71 | % | |||||||
| 1039 Grant St Se Ste B24, Atlanta, GA 30315 | ||||||||||||
| (1) | All officer and director addresses are c/o the Company at 1039 Grant St., SE, Ste. B24, Atlanta, GA 30315. Steven Plumb resigned his position as CFO on March 16, 2023. |
| (2) | Real Estate Investment Holdings, LLC beneficially owns 800,000 of these shares indirectly through Eddie R. Cheeks, M.D., P.C., and 800,000 through the Cheeks Agency, Inc., each with whom it shares investment control. |
This prospectus relates to the offer and sale, from time to time of up to 28,550,000 shares of our common stock. 15,000,000 shares are being sold by the Company and 13,550,000 shares are being sold by Selling Shareholders. The Company will not receive any proceeds from the shares being sold by Selling Shareholders.
There can be no assurance that the Company will sell any or all of its common stock offered by this prospectus. We do not know if, when, or in what amounts, the Company may offer the common stock for sale.
Sales of Common Stock
We are offering for sale a maximum of 15,000,000 shares of our Common Stock in a self-underwritten offering directly to the public at a price of $0.23 per share. There is no minimum number of shares that we must sell in our direct offering, and therefore no minimum amount of proceeds will be raised. No arrangements have been made to place funds into escrow or any similar account. Upon receipt, offering proceeds will be deposited into our operating account and used to conduct our business and operations. We are offering the shares without any underwriting discounts or commissions. The purchase price is $0.23 per share. The Offering will terminate 12 months from the date that the Registration Statement relating to the Shares is declared effective, unless earlier fully subscribed or terminated by the Company. The offering may be extended.
In connection with the Company's selling efforts in the offering, the Company's officers and directors will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the "safe harbor" provisions of SEC Rule 3a4-1, promulgated under the Exchange Act. Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer's securities. The Company's officers and directors are not subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. Our officers and directors will not be compensated in connection with their participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. Our officers and directors are not now, nor has he been within the past 12 months, a broker or dealer, and he has not been, within the past 12 months, an associated person of a broker or dealer. At the end of the offering, our officers and directors will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Our officers and directors will not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange Act Rule 3a4-1(a)(4)(i) or (iii).
In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale; exempted from such registration or if a qualification requirement is available and with which the Company has complied. In addition, and without limiting the foregoing, the Company will be subject to applicable provisions, rules and regulations under the Exchange Act with regard to security transactions during the period of time when this Registration Statement is effective.
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Penny Stock Regulation
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, that:
| · | contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; |
| · | contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties; |
| · | contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask price; |
| · | contains a toll-free telephone number for inquiries on disciplinary actions; |
| · | defines significant terms in the disclosure document or in the conduct of trading penny stocks; and |
| · | contains such other information and is in such form (including language, type, size, and format) as the SEC shall require by rule or regulation. |
The broker-dealer also must provide the customer with the following, prior to proceeding with any transaction in a penny stock:
| · | bid and offer quotations for the penny stock; |
| · | details of the compensation of the broker-dealer and its salesperson in the transaction; |
| · | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and |
| · | monthly account statements showing the market value of each penny stock held in the customer's account. |
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities.
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Offering Period and Expiration Date
This Offering will start on the date of this Registration Statement is declared effective by the SEC and continue for a period of 12 months. We may extend the offering period for an additional 90 days, unless the Offering is completed or otherwise terminated by us.
Procedures for Subscribing
We will not accept any money until this Registration Statement is declared effective by the SEC. Once the Registration Statement is declared effective by the SEC, if you decide to subscribe for any shares in this Offering, you must:
| 1. | execute and deliver a Subscription Agreement; and | |
| 2. | deliver payment* to us for acceptance or rejection. |
*All checks for subscriptions must be made payable to “The Cannaisseur Group, Inc.”
Right to Reject Subscriptions
We have the right to accept or reject subscriptions in whole or in part, if our management believes that accepting the subscription from the potential investor is not in the Company's best interests. All monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions. The Company will accept or reject any subscriptions within ten days of receipt, and any funds received related to the rejected subscription agreement will be return promptly without interest or deduction.
Underwriters
We have no underwriter and do not intend to have one. In the event that we sell or intend to sell by means of any arrangement with an underwriter, then we will file a post-effective amendment to this Registration Statement to accurately reflect the changes to us and our financial affairs and any new risk factors, and in particular to disclose such material relevant to this Plan of Distribution.
Regulation M
We are subject to Regulation M of the Exchange Act. Regulation M governs activities of underwriters, issuers, selling security holders, and others in connection with offerings of securities. Regulation M prohibits distribution participants and their affiliated purchasers from bidding for, purchasing or attempting to induce any person to bid for or purchase the securities being distributed.
Section 15(G) of the Exchange Act
Our shares are covered by Section 15(g) of the Exchange Act and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker/dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).
Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.
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Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless the broker/dealer has first provided to the customer a standardized disclosure document.
Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny stock transaction unless the broker/dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.
Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for a customer unless the broker/dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Rule 15g-5 requires that a broker/dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the salesperson’s compensation.
Rule 15g-6 requires broker/dealers selling penny stocks to provide their customers with monthly account statements.
Rule 15g-9 requires broker/dealers to approve the transaction for the customer's account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his or her rights and remedies in cases of fraud in penny stock transactions; and FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
Shares Offered by the Selling Shareholders
Selling Shareholders are offering 13,550,000 shares of common stock by this prospectus. The common stock may be sold or distributed from time to time by the Selling Shareholders directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market price prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices , or at fixed prices, which may be changed .. The Selling Shareholders may use any one or more of the following methods when selling securities:
| · | ordinary brokers’ transactions; |
| · | transactions involving cross or block trades; |
| · | through brokers, dealers, or underwriters may act solely as agents; |
| · | “at the market” into an existing market for the common stock; |
| · | in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; |
| · | in privately negotiated transactions; or |
| · | any combination of the foregoing. |
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In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.
Brokers, dealers, underwriters or agents participating in the distribution of the shares as agents may receive compensation in the form of commissions, discounts, or concessions from the Selling Security Holders and/or purchasers of the common stock for whom the broker-dealers may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions. Neither we nor any Selling Shareholder can presently estimate the amount of compensation that any agent will receive.
We know of no existing arrangements between Selling Shareholders or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names of any agents, underwriters or dealers and any compensation from the Selling Security Holder, and any other required information.
We will pay the expenses incident to the registration, offering, and sale of the shares by Selling Shareholders.
We have advised Selling Shareholders that they are required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes selling stockholders, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.
This offering will terminate on the date that all shares offered by this prospectus have been sold by the Selling Security Holder or upon the termination of the Warrants.
The Selling Security Holders are “underwriters” within the meaning of Section 2(a)(11) of the Securities Act.
The Selling Security Holders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Security Holder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
Because the Selling Security Holders are deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The Selling Security Holder has advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Security Holder.
Attached as Exhibit 99.1 is the list of our Selling Shareholders. Such list is incorporated herein by this reference.
DESCRIPTION OF REGISTRANT’S SECURITIES
The Company is authorized to issue up to 100,000,000 shares of common stock, $0.0001 par value per share. As of June 30, 2023, we had outstanding 39,663,333 shares of Common Stock. The holders of our Common Stock are entitled to one vote per share held and have the sole right and power to vote on all matters on which a vote of stockholders is taken. Voting rights are non-cumulative. Common stockholders are entitled to receive dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore and to share pro rata in any distribution to stockholders. Upon liquidation, dissolution, or the winding up of our Company, common stockholders are entitled to receive the net assets of our Company in proportion to the respective number of shares held by them after payment of liabilities which may be outstanding. The holders of common stock do not have any preemptive right to subscribe for or purchase any shares of any class of stock of the Company. The outstanding shares of common stock will not be subject to further call or redemption and are fully paid and non-assessable. To the extent that additional common shares are issued, the relative interest of existing stockholders will likely be diluted.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No experts or counsel to the Company have been hired on a contingent basis.
The financial statements of The Cannaisseur Group, Inc. . for the fiscal years ended December 31, 2022 and December 31, 2021 have been audited by M&K CPAS, PLLC, an independent registered public accounting firm as set forth in its report and are included in reliance upon such report given on the authority of such firm as experts in accounting.
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The Norman Law Firm, PLLC of Silver Spring, MD, will pass upon the validity of the shares of our common stock to be sold in this offering.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities we are offering to sell. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement and the exhibits, schedules and amendments to the registration statement. For further information with respect to us and our securities, we refer you to the registration statement and to the exhibits and schedules to the registration statement. Statements contained in this prospectus about the contents of any contract, agreement or other document are not necessarily complete, and, in each instance, we refer you to the copy of the contract, agreement or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
You may read and copy the registration statement of which this prospectus is a part at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, DC 20549. You can request copies of the registration statement by writing to the Securities and Exchange Commission and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public reference room. In addition, the SEC maintains a website, which is located at www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of which this prospectus is a part at the SEC’s website.
When this registration statement becomes effective, we will become subject to the information reporting requirements of the Securities Exchange Act of 1934, and we will be required to file reports, proxy statements and other information with the SEC. All documents filed with the SEC are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at https://thecannaisseurgroup.com/. You may access our reports, proxy statements and other information free of charge at this website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information on such website is not incorporated by reference and is not a part of this prospectus.
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THE CANNAISSEUR GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
THE CANNAISSEUR GROUP, INC.
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 4,976 | $ | 18,534 | ||||
| Accounts receivable | - | 807 | ||||||
| Inventory | 13,627 | 13,456 | ||||||
| Deposits | 9,084 | 3,000 | ||||||
| Total Current Assets | 27,687 | 35,797 | ||||||
| Property and equipment | 20,972 | 20,972 | ||||||
| Accumulated depreciation | (17,936 | ) | (17,150 | ) | ||||
| Property and equipment, net | 3,036 | 3,822 | ||||||
| Right of Use Asset | 14,650 | 19,670 | ||||||
| TOTAL ASSETS | $ | 45,373 | $ | 59,289 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | 33,788 | 32,009 | ||||||
| Notes payable, current portion | 4,250 | 1,517 | ||||||
| Notes payable, related party | - | 950 | ||||||
| Operating lease liability, current portion | 14,284 | 19,850 | ||||||
| Dividends payable | 1,608 | 1,608 | ||||||
| Total current liabilities | 53,930 | 55,934 | ||||||
| Long Term Notes Payable, less current portion | 25,783 | 25,783 | ||||||
| Operating lease, less current portion | - | - | ||||||
| Total long term liabilities | 25,783 | 25,783 | ||||||
| TOTAL LIABILITIES | 79,713 | 81,717 | ||||||
| Mezzanine Equity | 37,875 | 37,875 | ||||||
| Stockholders' Equity (Deficit) | ||||||||
| Common Stock, $0.0001 par value, 100,000,000,000 shares authorized 37,530,001 and 35,950,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 3,753 | 3,720 | ||||||
| Additional paid in capital | 333,746 | 314,453 | ||||||
| Accumulated deficit | (334,034 | ) | (318,103 | ) | ||||
| Minority interest | (75,680 | ) | (60,373 | ) | ||||
| Total Stockholders' Deficit | (72,215 | ) | (60,303 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 45,373 | $ | 59,289 | ||||
The accompanying notes are an integral part of the financial statements.
F-2
THE CANNAISSEUR GROUP, INC.
CONSOSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2023 and 2022
| Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Revenue, net of discounts | 16,463 | 23,614 | ||||||
| Cost of revenue | 9,835 | 9,213 | ||||||
| Gross profit | 6,628 | 14,401 | ||||||
| Operating Expenses | ||||||||
| General and administrative expenses | 37,389 | 23,146 | ||||||
| Depreciation & amortization | 786 | 1,307 | ||||||
| Total operating expenses | 38,175 | 24,453 | ||||||
| Operating Loss | (31,547 | ) | (10,052 | ) | ||||
| Other Income (expense) | ||||||||
| Interest expense | (847 | ) | (252 | ) | ||||
| Total other income (expense) | (847 | ) | (252 | ) | ||||
| Net Income (loss) before taxes | (32,394 | ) | (10,304 | ) | ||||
| Income tax benefit | - | - | ||||||
| Net Income (Loss) | $ | (32,394 | ) | $ | (10,304 | ) | ||
| Net income (loss) attributable minority interest | (15,873 | ) | (1,416 | ) | ||||
| Net income (Loss) attributable to TCGI | $ | (16,521 | ) | $ | (8,888 | ) | ||
| Weighted average of common shares - basic and diluted | 37,315,025 | 35,650,000 | ||||||
| Net loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
The accompanying notes are an integral part of the financial statements.
F-3
THE CANNAISSEUR GROUP, INC.
CONSOLDIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)
For the Three Months Ended March 31, 2023 and 2022
| Additional | Accumulated | Total | ||||||||||||||||||||||||||
| Common Stock | Paid in | Minority | Accumulated | Stockholders' | Mezzanine | |||||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | Equity | Equity | ||||||||||||||||||||||
| Balance, December 31, 2021 | 35,950,000 | $ | 3,595 | $ | 277,927 | $ | (45,941 | ) | $ | (237,366 | ) | $ | (1,785 | ) | $ | 37,875 | ||||||||||||
| Net loss | - | - | - | (1,416 | ) | (8,888 | ) | (10,304 | ) | - | ||||||||||||||||||
| Balance, March 31, 2022 | 35,950,000 | $ | 3,653 | $ | 280,769 | $ | (45,540 | ) | $ | (303,385 | ) | $ | (24,503 | ) | $ | 37,875 | ||||||||||||
| Balance, December 31, 2022 | 37,196,667 | $ | 3,720 | $ | 313,297 | $ | (59,807 | ) | $ | (317,513 | ) | $ | (60,303 | ) | $ | 37,875 | ||||||||||||
| Shares issued for cash | 333,334 | 33 | 9,967 | - | - | 10,000 | - | |||||||||||||||||||||
| Capital contribution | - | - | 10,482 | - | - | 10,482 | - | |||||||||||||||||||||
| Net loss | - | - | - | (15,873 | ) | (16,521 | ) | (32,394 | ) | - | ||||||||||||||||||
| Balance, March 31, 2023 | 37,530,001 | 3,753 | $ | 333,746 | $ | (75,680 | ) | $ | (334,034 | ) | $ | (72,215 | ) | $ | 37,875 | |||||||||||||
The accompanying notes are an integral part of the financial statements.
F-4
THE CANNAISSEUR GROUP, INC.
CONSOLDIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2023 and 2022
| Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income (Loss) | $ | (32,394 | ) | $ | (10,304 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | 786 | 1,307 | ||||||
| Amortization of right to use asset | 5,020 | 4,518 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 807 | - | ||||||
| Due from related party | - | 1,848 | ||||||
| Inventory | (171 | ) | (948 | ) | ||||
| Deposits | (6,084 | ) | - | |||||
| Accounts payable and accrued expenses | 1,779 | 2,727 | ||||||
| Right of use liability | (5,566 | ) | - | |||||
| Net Cash Used in Operating Activities | (35,823 | ) | (852 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | 10,000 | - | ||||||
| Proceeds from short term loan | 4,095 | - | ||||||
| Payments on short term loan | (1,362 | ) | - | |||||
| Contributed capital related party | 10,482 | - | ||||||
| Payments on note payable - related party | (950 | ) | - | |||||
| Net Cash Provided By Financing Activities | 22,265 | - | ||||||
| Net increase (decrease) in cash and cash equivalents | (13,558 | ) | (852 | ) | ||||
| Cash and cash equivalents, beginning of period | 18,534 | 6,024 | ||||||
| Cash and cash equivalents, end of period | $ | 4,976 | $ | 5,172 | ||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | 266 | $ | - | ||||
| Cash paid for taxes | $ | - | $ | - | ||||
| Non-cash investing and financing activities: | ||||||||
| $ | - | $ | - | |||||
The accompanying notes are an integral part of the financial statements.
F-5
THE CANNAISSEUR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended March 31, 2023 and 2022
1. Organization and Basis of Presentation
Organization and Combination
The Cannaisseur Group, Inc. (the Company) was incorporated in the State of Delaware on December 22, 2020.
On January 4, 2021, the Company acquired 51% of the common stock of Atlanta CBD, Inc. (“Atlanta CDB”), (the “Atlanta CBD Acquisition”). Atlanta CBD, Inc. was incorporated in the State of Georgia on October 17, 2018.
Basis of Presentation
The Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and include the accounts of The Cannaisseur Group, Inc. and Atlanta CBD.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its majority owned subsidiary Atlanta CBD. At the time of the Atlanta CBD Acquisition, Floretta Gogo and Xavier Carter owned the majority of Atlanta CBD and controlled the voting rights. Ms. Gogo and Mr. Carter also controlled 38% of The Cannaisseur Group’s voting rights and were the CEO and COO, respectively, of both Companies both before and after the transaction. Pursuant to the guidance of ASC 250 Accounting Changes and Error Corrections (“ASC 250”) the acquisition of Atlanta CBD by The Cannaisseur Group resulted in a change in the reporting entity of the combined companies. The Company relied upon the guidance of ASC 805 Business Combinations (“ASC 805”) in the presentation of the combined entities. Pursuant to ASC 805-50-05-5, the pooling-of-interests method of accounting provides relevant guidance when an exchange of shares between entities under common control results in a change in the reporting entity. Under the pooling-of-interests method, the transferred assets and liabilities are recorded at their historical carrying amounts, and the equity accounts of the separate entities are combined. Pursuant to ASC 805-50-45-2, the transaction should be presented as if it occurred on the first day of the period reported; accordingly, we have reported the Atlanta CBD transaction as if it occurred on January 1, 2020.
Business Operations
The Company operates a retail CBD store in Atlanta, Georgia.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a cumulative net loss since inception of $334,034, a working capital deficit of $26,243, and has required additional capital raises to support its operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to create positive cash flows from operations and its ability to continue receiving capital from shareholders and other related parties and obtain financing from third parties. No assurance can be given that the Company will be successful in these efforts.
F-6
As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying financial statements are issued. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to obtain funds, if available, although there can be no certainty, from its shareholders or officers.
2. Summary of Significant Accounting Policies
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 at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
Cash
Cash and cash equivalents include short-term investments with original maturities of 90 days or less. The recorded value of our cash and cash equivalents approximates their fair value.
Inventory
Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. The Company calculates depreciation expense using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their useful lives or the initial lease term. Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
| Classification | Estimated Useful Lives | |
| Equipment | 3 to 5 years | |
| Leasehold improvements | 3 to 5 years | |
| Furniture and fixtures | 3 to 5 years |
F-7
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company sells CBD related products in a retail location in Atlanta, Georgia and through e-commerce. Revenue is recognized based on the following model:
1. The Company sells products at their one retail location and via web site sales. A sale agreement exists when the customer purchases the product at the counter or via an online purchase. The price for and product to be received are known at time of purchase.
2. The performance obligations are to provide the product for the customer at the counter or ship the product to the customer. Product is shipped on the day of sale.
3. The price of the product is located on the label or presented on the web site and therefore is known at the time of purchase.
4. The price of the product is properly allocated to the sole performance of providing the product.
5. Revenue is recognized in the retail location at the point of sale where money is collected and product is in control of customer and from the web site upon settlement of the credit card transaction, which is effectively at the time of purchase.
Concentration of Risk
The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any agreements at December 31, 2022 or 2021.
Income Taxes
The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.
The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.
The Company is subject to U.S. federal income taxes and income taxes of the State of Georgia.
As the Company's net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the taxing authorities in which the Company currently operates. The Company had no unrecognized tax benefits as of March 31, 2023 and December 31, 2022 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is "more-likely-than-not" to be sustained by the taxing authority as of the reporting date. If the tax position is not considered "more-likely-than-not" to be sustained, then no benefits of the position are recognized. As of March 31, 2023 and December 31, 2022, the Company had not recorded any liability for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
F-8
The Tax Reform Act of 1986 limits the annual utilization of net operating loss and tax credit carry forwards, following an ownership change of the Company. Note that as a result of the Company's equity financings in recent years, the Company underwent changes in ownership for purposes of the Tax Reform Act. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any of the Company's net operating loss carry forwards may be limited if cumulative changes in ownership of more than 50% occur during any three-year period.
Impairment of Long-Lived Assets
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset should no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and estimated fair value.
Stock-Based Compensation
The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.
As of March 31, 2023 and December 31, 2022 , the Company did not have any outstanding stock options.
Earnings (Loss) Per Share
The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because there is no convertible debt, convertible preferred stock, warrants or stock options outstanding.
F-9
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.
The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.
The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.
Leases
Effective January 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. ASU 2016-02 requires recognition in the statement of operations of a single lease cost that is calculated as a total cost of the lease allocated over the lease term, generally on a straight-line basis.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an "expected loss" model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management does not expect the adoption of ASU-2016-13 to have a material effect on the Company's financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. ASU 2020-06 will be effective January 1, 2024, and a cumulative-effect adjustment to the opening balance of retained earnings is required upon adoption. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s financial statement presentation or disclosures.
F-10
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants, did not or are not believed by management to have a material impact on the Company's present or future financial statements and related disclosures.
2. Property and Equipment
Property and equipment consists of the following:
| March
31, 2023 | December
31, 2022 | |||||||
| Equipment | $ | 5,140 | $ | 5,140 | ||||
| Leasehold improvements | 10,788 | 10,788 | ||||||
| Furniture and fixtures | 5,044 | 5,044 | ||||||
| Total | 20,972 | 20,972 | ||||||
| Less accumulated depreciation | 17,936 | 17,150 | ||||||
| Property and equipment, net | $ | 3,036 | $ | 3,822 | ||||
Depreciation expense for the three months ended March 31, 2023 and 2022 was $786 and $1,307, respectively.
3. Notes payable
Notes payable consists of the following:
| March 31, 2023 |
December 31, 2022 |
|||||||
| Loan in the amount of $4,095 payable to Lightspeed Capital (the “Lightspeed Loan”. The Lightspeed Loan is payable at the rate of 11% of the Company’s sales receipts until paid. | $ | 2,733 | $ | - | ||||
| Economic Injury Disaster Loan (EIDL), dated June 9, 2020. The note bears interest at 3.75%. Interest in the amount of $3,001 has been accrued as of March 31, 2023. Payments on the loan are deferred until June 2021, at which point monthly payments of principal and interest totaling $134 are due. The due date of the loan is June 9, 2030. | $ | 27,300 | $ | 27,300 | ||||
| Total | $ | 30,033 | $ | 27,300 | ||||
| Current portion | $ | 4,250 | $ | 1,517 | ||||
| Long term portion | $ | 25,783 | $ | 25,783 | ||||
Future principal payments of notes payable are as follows:
Twelve months ending March 31,
| 2024 | $ | 4,250 | ||
| 2025 | 1,517 | |||
| 2026 | 1,517 | |||
| 2027 | 1,517 | |||
| 2028 | 1,517 | |||
| Thereafter | 19,715 | |||
| Total | $ | 30,033 |
F-11
4. Right of Use Asset and Liability
The Company leases its retail store in Atlanta, Georgia under a five-year lease executed on January 24, 2019. The Company did not have any other leases with initial terms of 12 months or more at March 31, 2023 or December 31, 2022.
Operating lease right-of-use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and right-of-use lease liabilities represent the Company's obligation to make lease payments arising from the lease. Generally, the implicit rate of interest, equivalent to a discount rate, in lease arrangements is not readily determinable and the prevailing commercial property mortgage rate is utilized in determining the present value of lease payments.
The monthly cash payment for this operating lease is approximately $1,650 per month, and the lease term ends on December 24, 2023. The Company recorded right-of-use assets and liabilities of $84,994 on January 24, 2019, based on the present value of payments and an incremental borrowing rate of 10.0% per annum.
The following schedule sets forth the operating lease right of use activity for the years ended March 31, 2023 and December 31, 2022:
| March
31, 2023 | December
31, 2022 | |||||||
| Capitalized present value of lease payments | $ | 84,994 | $ | 84,994 | ||||
| Less amortization | (70,344 | ) | (65,324 | ) | ||||
| Operating lease right of use asset, net | $ | 14,650 | $ | 19,670 | ||||
The following schedule sets forth the current portion and long-term portion of operating lease liabilities as of March 31, 2023 and December 31, 2022:
| March
31, 2023 | December
31, 2022 | |||||||
| Current portion | $ | 14,284 | $ | 19,850 | ||||
| Long-term portion | - | - | ||||||
| Total lease liability | $ | 14,284 | $ | 19,850 | ||||
The following schedule sets forth the remaining annual future lease payments outstanding as of March 31, 2023:
| 2024 | $ | 18,050 | ||
| Less amount representing imputed interest | (3,766 | ) | ||
| Present value of lease liabilities | $ | 14,284 |
Aggregate lease expense for this operating lease charged to general and administrative expenses in the statement of operations was $5,470 for the three months ended March 31, 2023 and 2022.
5. Related Party Transactions
The Company has contracted with a related party, Liberty Management Investments (“Liberty”), which is owned by certain shareholders of the Company to provide administrative support to the Company. The Company has paid Liberty $0 and $145,033 for administrative services during the years ended December 31, 2022 and 2021, respectively, and $194,247 since inception. In addition, the Company has advanced Liberty funds for working capital purposes. The net amount due from Liberty is $0 as of March 31, 2023 and December 31, 2022, respectively.
On January 4, 2021, the Company executed a Stock Purchase Agreement (the “Purchase Agreement”), by and between the Company, Atlanta CBD, Inc. (“Atlanta”), and the controlling shareholders of Atlanta, Floretta Gogo and Xavier Carter (collectively referred to as the “Sellers”). In connection with the closing of the transactions contemplated by the Purchase Agreement (the “Atlanta Acquisition”), the Company acquired 51% of the outstanding common stock Atlanta from the Sellers in exchange for 13,600,000 shares of the Company’s common stock. The Sellers are officers of the Company and as a result, the Atlanta Acquisition is a related party transaction that was accounted for at book value.
F-12
On February 9, 2023, February 17, 2023 and March 9, 2023 the Company received capital contributions from a related party in the amounts of $1,797, $3,685 and $5,000, respectively.
6. Acquisition of Atlanta CBD, Inc.
On January 4, 2021, the Company executed a Stock Purchase Agreement (the “Purchase Agreement”), by and between the Company, Atlanta CBD, Inc. , and the controlling shareholders of Atlanta, Floretta Gogo and Xavier Carter (collectively referred to as the “Sellers”). In connection with the closing of the Atlanta CBD Acquisition, the Company acquired 51% of the outstanding common stock Atlanta from the Sellers in exchange for 13,600,000 shares of the Company’s common stock. The Sellers are officers of the Company and as a result, the Atlanta Acquisition is a related party transaction that was accounted for at book value under common control accounting.
The Purchase Agreement included standard and customary representations, warranties and indemnification rights.
Atlanta is in the business of providing CBD products in a retail store in Atlanta, Georgia.
The results of Atlanta are included in the consolidated financial statements effective January 1, 2021.
Under common control accounting, the financial statements of Atlanta are included in the consolidated financial statements of the Company effective January 1, 2020.
The following preliminary information summarizes the allocation of the fair values assigned to the assets at the purchase date:
| Amount | ||||
| Cash and cash equivalents | $ | 2,373 | ||
| Inventory | 16,198 | |||
| Deposits | 3,000 | |||
| Property, plant and equipment, net | 13,096 | |||
| Right of use asset | 55,457 | |||
| Total identifiable assets | 90,124 | |||
| Less: liabilities assumed | 125,125 | |||
| Total purchase price | $ | (35,001 | ) | |
7. Mezzanine Equity
Mezzanine equity as of March 31, 2023 and December 31, and 2022 consists of 1,518 shares of preferred stock of Atlanta CBD with redeemable features that allow the investors (Investors) to request repayment of their investment. The Investors are also entitled to profit distributions equal to the lesser of (i) 25% interest, (ii) the difference between the ownership percentage of management and 50%, which will be distributed to management, until a 35% profit goal achieved. Preferred shareholders are entitled to a return of their investment upon 15 days’ notice given to the Company after any distribution.
8. Stockholders' Equity
The Company is authorized to issue up to 100,000,000 shares of common stock, $0.0001 par value per share.
F-13
In January 2021, the Company entered into a Stock Purchase Agreement with the owners of Atlanta CBD, Inc. and acquired 51% of the common stock of Atlanta CBD, Inc. in exchange for 13,600,000 shares of the Company’s common stock. This transaction was accounted for using common control accounting; accordingly, the transaction was recorded as if it occurred on January 1, 2020. The amount of $55,412 was recorded to additional paid-in capital, $22,350 was charged to minority interest, and $23,263 was recorded to accumulated deficit.
Equity transactions during the three months ended March 31, 2023:
On February 16, 2023, the Company sold 333,334 shares of common stock in a private placement for gross proceeds of $10,000.
On February 9, 2023, February 17, 2023 and March 9, 2023 the Company received capital contributions from a related party in the amounts of $1,797, $3,685 and $5,000, respectively.
Equity transactions during the three months ended March 31, 2022:
None.
9. Commitments and Contingencies
Legal Matters
The Company is not currently subject to any material legal proceedings; however, it could be subject to legal proceedings and claims from time to time in the ordinary course of its business, or legal proceedings it considered immaterial may in the future become material. Regardless of the outcome, litigation can, among other things, be time consuming and expensive to resolve, and can divert management resources.
10. Subsequent Events
On May 10, 2023, we sold 1,066,666 shares of common stock at a price of $0.015 per share for cash proceeds of $16,000 to to each of two investors (a total of 2,133,332 shares of common stock for aggregate cash proceeds of $32,000).
F-14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of The Cannaisseur Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Cannaisseur Group, Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes stockholders’ equity / (deficit), and cash flows for each of the years in the two-year period ended December 31, 2022 and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company suffered a net loss from operations and had negative cash flows from operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
As discussed in Note 1 to the financial statements, the Company had a going concern due to a negative working capital and losses from operations.
Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated.
To evaluate the appropriateness of the going concern, we examined and evaluate the financial information that was the initial cause along with managements’ plans to mitigate the going concern and managements’ disclosure on going concern.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2020.
Houston, TX
July 18, 2023
F-15
THE CANNAISSEUR GROUP, INC.
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 18,534 | $ | 6,024 | ||||
| Accounts receivable | 807 | - | ||||||
| Inventory | 13,456 | 15,548 | ||||||
| Due from related party | - | 42,951 | ||||||
| Deposit | 3,000 | 3,000 | ||||||
| Total Current Assets | 35,797 | 67,523 | ||||||
| Property and equipment | 20,972 | 20,972 | ||||||
| Accumulated depreciation | (17,150 | ) | (12,892 | ) | ||||
| Property and equipment, net | 3,822 | 8,080 | ||||||
| Right of Use Asset | 19,670 | 38,476 | ||||||
| TOTAL ASSETS | $ | 59,289 | $ | 114,079 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | 32,009 | 9,386 | ||||||
| Notes payable, current portion | 1,517 | - | ||||||
| Notes payable, related party | 950 | - | ||||||
| Operating lease liability, current portion | 19,850 | 19,845 | ||||||
| Dividends payable | 1,608 | 1,608 | ||||||
| Total current liabilities | 55,934 | 30,839 | ||||||
| Long Term Notes Payable, less current portion | 25,783 | 27,300 | ||||||
| Operating lease, less current portion | - | 19,850 | ||||||
| Total long term liabilities | 25,783 | 47,150 | ||||||
| TOTAL LIABILITIES | 81,717 | 77,989 | ||||||
| Mezzanine Equity | 37,875 | 37,875 | ||||||
| Stockholders' Equity (Deficit) | ||||||||
| Common Stock, $0.0001 par value, 100,000,000,000 shares authorized 37,196,667 and 35,950,000 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 3,720 | 3,595 | ||||||
| Additional paid in capital | 313,297 | 277,927 | ||||||
| Accumulated deficit | (317,513 | ) | (237,366 | ) | ||||
| Minority interest | (59,807 | ) | (45,941 | ) | ||||
| Total Stockholders' Deficit | (60,303 | ) | (1,785 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 59,289 | $ | 114,079 | ||||
The accompanying notes are an integral part of the financial statements.
F-16
THE CANNAISSEUR GROUP, INC.
CONSOSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2022 and 2021
| Year Ended | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Revenue, net of discounts | 88,145 | 72,749 | ||||||
| Cost of revenue | 42,839 | 36,296 | ||||||
| Gross profit | 45,306 | 36,453 | ||||||
| Operating Expenses | ||||||||
| General and administrative expenses | 132,949 | 213,109 | ||||||
| Depreciation & amortization | 4,258 | 5,564 | ||||||
| Total operating expenses | 137,207 | 218,673 | ||||||
| Operating Loss | (91,901 | ) | (182,220 | ) | ||||
| Other Income (expense) | ||||||||
| Grant income | - | 29,571 | ||||||
| Interest expense | (2,112 | ) | (2,119 | ) | ||||
| Total other income (expense) | (2,112 | ) | 27,452 | |||||
| Net Income (loss) before taxes | (94,013 | ) | (154,768 | ) | ||||
| Income tax benefit | - | - | ||||||
| Net Income (Loss) | $ | (94,013 | ) | $ | (154,768 | ) | ||
| Net income (loss) attributable minority interest | (13,866 | ) | (1,095 | ) | ||||
| Net income (Loss) attributable to TCGI | $ | (80,147 | ) | $ | (153,673 | ) | ||
| Weighted average of common shares - basic and diluted | 36,167,699 | 34,049,375 | ||||||
| Net loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
The accompanying notes are an integral part of the financial statements.
F-17
THE CANNAISSEUR GROUP, INC.
CONSOLDIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)
For the Years Ended December 31, 2022 and 2021
| Additional | Accumulated | Total | ||||||||||||||||||||||||||
| Common Stock | Paid in | Minority | Accumulated | Stockholders' | Mezzanine | |||||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | Equity | Equity | ||||||||||||||||||||||
| Balance, December 31, 2020 | 33,550,000 | 3,355 | 203,417 | (44,846 | ) | (83,693 | ) | 78,233 | 36,000 | |||||||||||||||||||
| Shares issued for cash | 2,400,000 | 240 | 74,510 | - | - | 74,750 | 1,875 | |||||||||||||||||||||
| Net loss | - | - | - | (1,095 | ) | (153,673 | ) | (154,768 | ) | - | ||||||||||||||||||
| Balance, December 31, 2021 | 35,950,000 | $ | 3,595 | $ | 277,927 | $ | (45,941 | ) | $ | (237,366 | ) | $ | (1,785 | ) | $ | 37,875 | ||||||||||||
| Shares issued for cash | 1,246,667 | 125 | 22,775 | - | - | 22,900 | - | |||||||||||||||||||||
| Proceeds from capital contributions | - | - | 12,595 | - | - | 12,595 | - | |||||||||||||||||||||
| Net loss | - | - | - | (13,866 | ) | (80,147 | ) | (94,013 | ) | - | ||||||||||||||||||
| Balance, December 31, 2022 | 37,196,667 | $ | 3,720 | $ | 313,297 | $ | (59,807 | ) | $ | (317,513 | ) | $ | (60,303 | ) | $ | 37,875 | ||||||||||||
The accompanying notes are an integral part of the financial statements.
F-18
THE CANNAISSEUR GROUP, INC.
CONSOLDIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2022 and 2021
| Year Ended | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income (Loss) | (94,013 | ) | (154,768 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | 4,258 | 5,564 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Due from related party | 42,951 | 70,033 | ||||||
| Accounts receivable | (807 | ) | - | |||||
| Inventory | 2,092 | 650 | ||||||
| Accounts payable and accrued expenses | 22,623 | 8,789 | ||||||
| Right of use asset | 18,806 | 16,981 | ||||||
| Right of use liability | (19,845 | ) | (16,929 | ) | ||||
| Net Cash Used in Operating Activities | (23,935 | ) | (69,680 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | - | (548 | ) | |||||
| Net Cash provided by Investing Activities | - | (548 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | 22,900 | 75,000 | ||||||
| Proceeds from sale of mezzanine equity units | - | 1,875 | ||||||
| Proceeds from capital contributions | 12,595 | - | ||||||
| Preferred dividend | - | 1,608 | ||||||
| Proceeds from notes payable - related party | 950 | - | ||||||
| Proceeds from notes payable | 4,550 | (4,604 | ) | |||||
| Proceeds repayments of notes payable | (4,550 | ) | - | |||||
| Net Cash Provided By Financing Activities | 36,445 | 73,879 | ||||||
| Net increase (decrease) in cash and cash equivalents | 12,510 | 3,651 | ||||||
| Cash and cash equivalents, beginning of period | 6,024 | 2,373 | ||||||
| Cash and cash equivalents, end of period | $ | 18,534 | $ | 6,024 | ||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest | $ | 250 | $ | - | ||||
| Cash paid for taxes | $ | - | $ | - | ||||
| Non-cash investing and financing activities: | ||||||||
| $ | - | $ | - | |||||
The accompanying notes are an integral part of the financial statements.
F-19
THE CANNAISSEUR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2022 and 2021
1. Organization and Basis of Presentation
Organization and Combination
The Cannaisseur Group, Inc. (the Company) was incorporated in the State of Delaware on December 22, 2020.
On January 4, 2021, the Company acquired 51% of the common stock of Atlanta CBD, Inc. (“Atlanta CDB”), (the “Atlanta CBD Acquisition”). Atlanta CBD, Inc. was incorporated in the State of Georgia on October 17, 2018.
Basis of Presentation
The Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and include the accounts of The Cannaisseur Group, Inc. and Atlanta CBD.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its majority owned subsidiary Atlanta CBD. At the time of the Atlanta CBD Acquisition, Floretta Gogo and Xavier Carter owned the majority of Atlanta CBD and controlled the voting rights. Ms. Gogo and Mr. Carter also controlled 38% of The Cannaisseur Group’s voting rights and were the CEO and COO, respectively, of both Companies both before and after the transaction. Pursuant to the guidance of ASC 250 Accounting Changes and Error Corrections (“ASC 250”) the acquisition of Atlanta CBD by The Cannaisseur Group resulted in a change in the reporting entity of the combined companies. The Company relied upon the guidance of ASC 805 Business Combinations (“ASC 805”) in the presentation of the combined entities. Pursuant to ASC 805-50-05-5, the pooling-of-interests method of accounting provides relevant guidance when an exchange of shares between entities under common control results in a change in the reporting entity. Under the pooling-of-interests method, the transferred assets and liabilities are recorded at their historical carrying amounts, and the equity accounts of the separate entities are combined. Pursuant to ASC 805-50-45-2, the transaction should be presented as if it occurred on the first day of the period reported; accordingly, we have reported the Atlanta CBD transaction as if it occurred on January 1, 2020.
Business Operations
The Company operates a retail CBD store in Atlanta, Georgia.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a cumulative net loss since inception of $317,513, a working capital deficit of $20,137, and has required additional capital raises to support its operations. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to create positive cash flows from operations and its ability to continue receiving capital from shareholders and other related parties and obtain financing from third parties. No assurance can be given that the Company will be successful in these efforts.
F-20
As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the date that the accompanying financial statements are issued. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan, and to ultimately achieve sustainable operating revenues and profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to obtain funds, if available, although there can be no certainty, from its shareholders or officers.
2. Summary of Significant Accounting Policies
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 at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates are expected to include those related to assumptions used in calculating accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
Cash
Cash and cash equivalents include short-term investments with original maturities of 90 days or less. The recorded value of our cash and cash equivalents approximates their fair value.
Inventory
Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. The Company calculates depreciation expense using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their useful lives or the initial lease term. Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
| Classification | Estimated Useful Lives | |
| Equipment | 3 to 5 years | |
| Leasehold improvements | 3 to 5 years | |
| Furniture and fixtures | 3 to 5 years |
F-21
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue From Contracts With Customers. ASC Topic 606 requires companies to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company sells CBD related products in a retail location in Atlanta, Georgia and through e-commerce. Revenue is recognized based on the following model:
1. The Company sells products at their one retail location and via web site sales. A sale agreement exists when the customer purchases the product at the counter or via an online purchase. The price for and product to be received are known at time of purchase.
2. The performance obligations are to provide the product for the customer at the counter or ship the product to the customer. Product is shipped on the day of sale.
3. The price of the product is located on the label or presented on the web site and therefore is known at the time of purchase.
4. The price of the product is properly allocated to the sole performance of providing the product.
5. Revenue is recognized in the retail location at the point of sale where money is collected and product is in control of customer and from the web site upon settlement of the credit card transaction, which is effectively at the time of purchase.
Concentration of Risk
The Company may periodically contract with consultants and vendors to provide services related to the Company's business development activities. Agreements for these services may be for a specific time period or for a specific project or task. The Company did not have any agreements at December 31, 2022 or 2021.
Income Taxes
The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.
The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Alternatively, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.
The Company is subject to U.S. federal income taxes and income taxes of the State of Georgia.
As the Company's net operating losses in the respective jurisdictions in which it operates have yet to be utilized, all previous tax years remain open to examination by the taxing authorities in which the Company currently operates. The Company had no unrecognized tax benefits as of December 31, 2022 and 2021 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months.
The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is "more-likely-than-not" to be sustained by the taxing authority as of the reporting date. If the tax position is not considered "more-likely-than-not" to be sustained, then no benefits of the position are recognized. As of December 31, 2022 and 2021, the Company had not recorded any liability for uncertain tax positions. In subsequent periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
F-22
The Tax Reform Act of 1986 limits the annual utilization of net operating loss and tax credit carry forwards, following an ownership change of the Company. Note that as a result of the Company's equity financings in recent years, the Company underwent changes in ownership for purposes of the Tax Reform Act. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any of the Company's net operating loss carry forwards may be limited if cumulative changes in ownership of more than 50% occur during any three-year period.
Impairment of Long-Lived Assets
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset should no longer be appropriate. The Company assesses recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and estimated fair value.
Stock-Based Compensation
The Company issues common stock and intends to issue stock options to officers, directors and consultants for services rendered. Options will vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, will be measured at the grant date fair value and charged to operations ratably over the vesting period.
The fair value of stock options granted as stock-based compensation will be determined utilizing the Black-Scholes option-pricing model, and can be affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Estimated volatility will be based on the historical volatility of the Company's common stock over an appropriate calculation period, or, if not available, by reference to the volatility of a representative sample of comparable public companies. The risk-free interest rate will be based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock will be determined by reference to the quoted market price of the Company's common stock on the grant date, or, if not available, by reference to an appropriate alternative valuation methodology.
The Company will recognize the fair value of stock-based compensation awards in general and administrative costs or in software development costs, as appropriate, in the Company's consolidated statements of operations. The Company will issue new shares of common stock to satisfy stock option exercises.
As of December 31, 2022 and 2021, the Company did not have any outstanding stock options.
Earnings (Loss) Per Share
The Company's computation of earnings (loss) per share ("EPS") includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes payable, convertible preferred stock, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because there is no convertible debt, convertible preferred stock, warrants or stock options outstanding.
F-23
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.
The Company will determine the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company will perform an analysis of the assets and liabilities at each reporting period end.
The carrying value of financial instruments (consisting of cash and accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.
Leases
Effective January 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases (Topic 842) ("ASU 2016-02"), which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. ASU 2016-02 requires recognition in the statement of operations of a single lease cost that is calculated as a total cost of the lease allocated over the lease term, generally on a straight-line basis.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts and notes receivables. ASU 2016-13 will replace the current "incurred loss" approach with an "expected loss" model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the provisions of ASU 2016-13 as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. As small business filer, ASU 2016-13 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022. Management does not expect the adoption of ASU-2016-13 to have a material effect on the Company's financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. ASU 2020-06 will be effective January 1, 2024, and a cumulative-effect adjustment to the opening balance of retained earnings is required upon adoption. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s financial statement presentation or disclosures.
F-24
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants, did not or are not believed by management to have a material impact on the Company's present or future financial statements and related disclosures.
2. Property and Equipment
Property and equipment consists of the following:
| December
31, 2022 | December
31, 2021 | |||||||
| Equipment | $ | 5,140 | $ | 5,140 | ||||
| Leasehold improvements | 10,788 | 10,788 | ||||||
| Furniture and fixtures | 5,044 | 5,044 | ||||||
| Total | 20,972 | 20,972 | ||||||
| Less accumulated depreciation | 17,150 | 12,892 | ||||||
| Property and equipment, net | $ | 3,822 | $ | 8,080 | ||||
Depreciation expense for the years ended December 31, 2022 and 2021, was $4,258 and $5,564, respectively.
3. Notes payable
Notes payable consists of the following:
| December
31, 2022 | December
31, 2021 | |||||||
| On August 12, 2022, the Company received a short term loan in the amount of $950 bearing interest at the rate of 10% per year and due upon demand. During the year ended December 31, 2022, the Company made principal payments on this loan in the amount of $950. This loan has been paid in full as of December 31, 2022. | $ | - | $ | - | ||||
On August 15, 2022, the Company received a short term loan in the amount of $2,000 due upon demand. During the year ended December 31, 2022, the Company made principal payments on this loan in the amount of $2,000. This loan has been paid in full as of December 31, 2022. | - | - | ||||||
| On September 15, 2022, the Company received a short term loan in the amount of $2,550 with an interest rate of 10% per year and due on October 31, 2022. During the year ended December 31, 2022, the Company made principal payments on this loan in the amount of $2,550. This loan has been paid in full as of December 31, 2022. | - | - | ||||||
| Economic Injury Disaster Loan (EIDL), dated June 9, 2020. The note bears interest at 3.75%. Payments on the loan are deferred until June 2021, at which point monthly payments of principal and interest totaling $134 are due. The due date of the loan is June 9, 2030. | 27,300 | 27,300 | ||||||
| Current portion | $ | 1,517 | $ | - | ||||
| Long term portion | $ | 25,783 | $ | 27,300 | ||||
Future principal payments of notes payable are as follows:
Year Ending December 31,
| 2023 | $ | 1,517 | ||
| 2024 | 1,517 | |||
| 2025 | 1,517 | |||
| 2026 | 1,517 | |||
| 2027 | 1,517 | |||
| Thereafter | 19,715 | |||
| Total | $ | 27,300 |
4. Right of Use Asset and Liability
The Company leases its retail store in Atlanta, Georgia under a five-year lease executed on January 24, 2019. The Company did not have any other leases with initial terms of 12 months or more at December 31, 2022 or 2021.
F-25
Operating lease right-of-use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Right-of-use assets represent the Company's right to use an underlying asset for the lease term, and right-of-use lease liabilities represent the Company's obligation to make lease payments arising from the lease. Generally, the implicit rate of interest, equivalent to a discount rate, in lease arrangements is not readily determinable and the prevailing commercial property mortgage rate is utilized in determining the present value of lease payments.
The monthly cash payment for this operating lease is approximately $1,650 per month, and the lease term ends on December 24, 2023. The Company recorded right-of-use assets and liabilities of $84,994 on January 24, 2019, based on the present value of payments and an incremental borrowing rate of 10.0% per annum.
The following schedule sets forth the operating lease right of use activity for the years ended December 31, 2022 and 2021:
| December
31, 2022 | December
31, 2021 | |||||||
| Capitalized present value of lease payments | $ | 84,994 | $ | 84,994 | ||||
| Less amortization | (65,324 | ) | (46,518 | ) | ||||
| Operating lease right of use asset, net | $ | 19,670 | $ | 38,476 | ||||
The following schedule sets forth the current portion and long-term portion of operating lease liabilities as of December 31, 2022 and 2021:
| December
31, 2022 | December
31, 2021 | |||||||
| Current portion | $ | 19,850 | $ | 19,845 | ||||
| Long-term portion | - | 19,850 | ||||||
| Total lease liability | $ | 19,850 | $ | 39,695 | ||||
The following schedule sets forth the remaining annual future lease payments outstanding as of December 31, 2022:
| 2023 | $ | 20,056 | ||
| Less amount representing imputed interest | (206 | ) | ||
| Present value of lease liabilities | $ | 19,850 |
Aggregate lease expense for this operating lease charged to general and administrative expenses in the statement of operations was $22,962 and $28,041 years ended December 31, 2022 and 2021, respectively.
5. Related party transactions
The Company has contracted with a related party, Liberty Management Investments (“Liberty”), which is owned by certain shareholders of the Company to provide administrative support to the Company. The Company has paid Liberty $0 and $145,033 for administrative services during the years ended December 31, 2022 and 2021, respectively, and $194,247 since inception. In addition, the Company has advanced Liberty funds for working capital purposes. The net amount due from Liberty is $0 and $42,951 as of December 31, 2022 and 2021, respectively.
On January 4, 2021, the Company executed a Stock Purchase Agreement (the “Purchase Agreement”), by and between the Company, Atlanta CBD, Inc. (“Atlanta”), and the controlling shareholders of Atlanta, Floretta Gogo and Xavier Carter (collectively referred to as the “Sellers”). In connection with the closing of the transactions contemplated by the Purchase Agreement (the “Atlanta Acquisition”), the Company acquired 51% of the outstanding common stock Atlanta from the Sellers in exchange for 13,600,000 shares of the Company’s common stock. The Sellers are officers of the Company and as a result, the Atlanta Acquisition is a related party transaction that was accounted for at book value.
F-26
6. Acquisition of Atlanta CBD, Inc.
On January 4, 2021, the Company executed a Stock Purchase Agreement (the “Purchase Agreement”), by and between the Company, Atlanta CBD, Inc. , and the controlling shareholders of Atlanta, Floretta Gogo and Xavier Carter (collectively referred to as the “Sellers”). In connection with the closing of the Atlanta CBD Acquisition, the Company acquired 51% of the outstanding common stock Atlanta from the Sellers in exchange for 13,600,000 shares of the Company’s common stock. The Sellers are officers of the Company and as a result, the Atlanta Acquisition is a related party transaction that was accounted for at book value under common control accounting.
The Purchase Agreement included standard and customary representations, warranties and indemnification rights.
Atlanta is in the business of providing CBD products in a retail store in Atlanta, Georgia.
The results of Atlanta are included in the consolidated financial statements effective January 1, 2021.
Under common control accounting, the financial statements of Atlanta are included in the consolidated financial statements of the Company effective January 1, 2020.
The following preliminary information summarizes the allocation of the fair values assigned to the assets at the purchase date:
| Amount | ||||
| Cash and cash equivalents | $ | 2,373 | ||
| Inventory | 16,198 | |||
| Deposits | 3,000 | |||
| Property, plant and equipment, net | 13,096 | |||
| Right of use asset | 55,457 | |||
| Total identifiable assets | 90,124 | |||
| Less: liabilities assumed | 125,125 | |||
| Total purchase price | $ | (35,001 | ) | |
7. Mezzanine Equity
Mezzanine equity as of December 31, 2022 and 2021 consists of 1,518 shares of preferred stock of Atlanta CBD with redeemable features that allow the investors (Investors) to request repayment of their investment. The Investors are also entitled to profit distributions equal to the lesser of (i) 25% interest, (ii) the difference between the ownership percentage of management and 50%, which will be distributed to management, until a 35% profit goal is achieved.
Preferred shareholders are entitled to a return of their investment upon 15 days’ notice given to the Company after any distribution.
During the year ended December 31, 2021, the Company sold 618 Mezzanine Equity units for gross proceeds of $1,875.
8. Stockholders' Equity
The Company is authorized to issue up to 100,000,000 shares of common stock, $0.0001 par value per share.
In January 2021, the Company entered into a Stock Purchase Agreement with the owners of Atlanta CBD, Inc. and acquired 51% of the common stock of Atlanta CBD, Inc. in exchange for 13,600,000 shares of the Company’s common stock. This transaction was accounted for using common control accounting; accordingly, the transaction was recorded as if it occurred on January 1, 2020. The amount of $55,412 was recorded to additional paid-in capital, $22,350 was charged to minority interest, and $23,263 was recorded to accumulated deficit.
In July 2021, the Company sold 2,400,000 shares of common stock in a private placement for gross proceeds of $75,000.
F-27
In August 2022, the Company sold 580,000 shares of common stock in a private placement for gross proceeds of $2,900.
In November 8, 2022, the Company sold 666,667 shares of common stock in a private placement for gross proceeds of $20,000.
During the year ended December 31, 2022. the Company received cash in the aggregate amount of $13,751 from a related party investor for capital contributions.
9. Grant Income
PPP Loan Forgiveness
In January 2021, the Company applied for forgiveness of this loan under the terms of the PPP. The Company’s forgiveness request was approved in January 2021 and grant income in the amount of the loan, $4,354, was recognized during the year ended December 31, 2021.
On October 5, 2021, the Payroll Protection Program loan, dated March 5, 2021, in the amount of $7,464, was forgiven in full and grant income in the amount of the loan, $7,464, was recognized during the year ended December 31, 2021.
Invest Atlanta Grant
In November 2020, the Company applied for a grant from The Atlanta Development Authority d/b/a Invest Atlanta. Invest Atlanta administered funds designated for Atlanta, Georgia under the CARES Act of 2020. The proceeds from the grant are restricted to COVID-19 related expenditures and/or to reimburse the costs of business interruptions as a result of required closures or local closures, social distancing, or decreased customer demand due to the COVID-19 pandemic. In March 2021, the Company received a grant of $17,753 from Invest Atlanta, which was used by the Company to offset the cost of business interruption as a result of local closures due to the COVID-19 pandemic during 2020. Accordingly, the Company recorded the grant income during the year ended December 31, 2021, the period in which it was received.
10. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets as of December 31, 2022 and 2021 are summarized below.
| December
31, 2022 | December
31, 2021 | |||||||
| Net operating loss carryforwards | $ | 295,000 | $ | 238,000 | ||||
| 295,000 | 238,000 | |||||||
| Valuation allowance | (295,000 | ) | (238,000 | ) | ||||
| Net deferred tax assets | $ | – | $ | – | ||||
In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2022 and 2021, management was unable to determine if it is more likely than not that the Company's deferred tax assets will be realized and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.
No U.S. federal tax provision has been provided for the Company for the years ended December 31, 2022 and 2021 due to the losses incurred during the periods.
F-28
The reconciliation below presents the difference between the income tax rate computed by applying the U.S. federal statutory rate and the effective tax rate for the years ended December 31, 2022 and 2021.
| December
31, 2022 | December
31, 2021 | |||||||
| U. S. federal statutory tax rate | (21.0 | )% | (21.0 | )% | ||||
| Change in valuation allowance | 21.0 | % | 21.0 | % | ||||
| Effective tax rate | 0.0 | % | 0.0 | % | ||||
At December 31, 2022 and 2021, the Company has available net operating loss carryforwards for U.S. federal corporate income tax purposes of approximately $295,000 and $191,000. U.S. federal net operating losses, if not utilized earlier, expire through 2040.
11. Commitments and Contingencies
Legal Contingencies
The Company has no known commitments and contingencies.
12. Subsequent Events
The Company has evaluated subsequent events through the date of this report and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.
F-29
* Previously filed.
II-2
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
| (i) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that subparagraphs (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
II-3
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Act, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the State of Georgia on July 18, 2023.
| The Cannaisseur Group, Inc. | ||
Date: July 18, 2023 |
By: | /s/ Floretta Gogo |
| Floretta Gogo | ||
| Chief Executive Officer | ||
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated and, on the dates, indicated:
| Signature | Title | Date | ||
| /s/ Xavier Carter | Chief Operating Officer/Interim Chief Financial Officer | July 18, 2023 | ||
| Xavier Carter | (Principal Executive Officer) | |||
| /s/ Valarie M. Grant | Corporate Secretary | July 18, 2023 | ||
| Valarie M. Grant | ||||
| /s/ Jamie Brown | Board Member | July 18, 2023 | ||
| Jamie Brown | ||||
| /s/ Keijiro Valera | Board Member | July 18, 2023 | ||
| Keijiro Valera | ||||
| /s/ Harold Woolfolk | Board Member | July 18, 2023 | ||
| Harold Woolfolk |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation in this Registration Statement on Form S-1 of our report dated July 18, 2023, of The Cannaisseur Group, Inc. relating to the audit of the consolidated financial statements as of December 31, 2022 and 2021, and for the periods then ended, and the reference to our firm under the caption “Experts” in the Registration Statement.
/s/ M&K CPA’s, PLLC
Houston, TX
July 18, 2023
Exhibit 10.3
OPERATING AGREEMENT
OF
ATLANTA CBD INC.
THIS OPERATING AGREEMENT of Atlanta CBD Inc, a corporation organized under the laws of the State of Georgia, is made and entered into and shall be effective as of July 20,2020, by and among the persons executing this Agreement as Members of the Company.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION SET FORTH IN SECTION 10-5-9(13) OF SUCH ACT. IN ADDITION, THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM SUCH REGISTRATION SET FORTH IN THE SECURITIES ACT OF 1933 PROVIDED BY SECTION 4(2) THEREOF, NOR HAVE THEY BEEN REGISTERED WITH THE SECURITIES COMMISSION OF CERTAIN STATES IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT AND IN A TRANSACTION WHICH IS EITHER EXEMPT FROM REGISTRATION UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS.
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the following meanings (unless otherwise expressly provided herein);
"Additional Member." A member other than an Initial Member, who has acquired a Membership Interest from the Company.
“Additional Capital Contributions.” With respect to each Member, all additional Capital Contributions made by such Member pursuant to Section 8.02 of this Agreement.
"Articles of Organization." The Articles of Organization of ATLANTA CBD INC., as filed with the Secretary of State of Georgia as the same may be amended from time to time.
"Affiliate." (i) In the case of an individual, any relative of such Person, (ii) any officer, director, trustee, partner, manager, employee or holder of ten percent (10%) or more of any class of the voting securities of or equity interest in such Person; (iii) any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person; or (iv) any officer, director, trustee, partner, manager, employee or holder of ten percent (10%) or more of the outstanding voting securities of any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person.
"Capital Account." A capital account maintained in accordance with the rules contained in Treas. Reg. Section 1.704-1(b)(2) as maintained in accordance with applicable rules under the Code and as set forth in Treas. Reg. Section 1-704-1(b)(2)(4) as amended from time to time.
"Capital Contribution." Any contribution, as defined in Section 14-11-101(4) of the Georgia Act, to the capital of the Company in cash or property by a Member whenever made.
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“Capital Transaction.” Any transaction not in the ordinary course of business which results in the Company’s receipt of cash or other consideration other than Capital Contributions, including, without limitation, proceeds of sales or exchanges or other dispositions of property not in the ordinary course of business, financings, refinancings, condemnations, recoveries of damage awards and insurance proceeds.
"Code." The Internal Revenue Code of 1986, as amended from time to
time. "Company." Atlanta CBD.
"Distributable Cash." All cash, revenues and funds received by the Company from Company operations, less the sum of the following to the extent paid or set aside by the Company: (i) all principal and interest payments on indebtedness of the Company and all other sums paid to lenders; (ii) all cash expenditures incurred incident to the normal operation of the Company's business; (iii) such Reserves as the Managers deem reasonably necessary to the proper operation of the Company's business.
"Economic Interest." A Member's or Economic Interest Owner's share of one or more of the Company's Profits, Losses and distributions of the Company's assets pursuant to this Operating Agreement and the Georgia Act, but shall not include any right to vote on, consent to or otherwise participate in any decision of the Members or Managers.
"Economic Interest Owner." The owner of an Economic Interest who is not a Member.
"Entity." Any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization.
“Estimated Payback Period.” 36 months. The length of time from the date of investment until Distributable Cash returns 100% of Capital Contribution.
"Fiscal Year." The Company's fiscal year, which shall be the calendar year.
"Georgia Act." The Georgia Limited Liability Company Act at O.C.G.A. § 14-11-100, et seq.
"Initial Capital Contribution." The initial contribution to the capital of the Company made by a Member pursuant to this Operating Agreement.
"Initial Members." Those persons identified on Exhibit “A” attached hereto and made a part hereof by this reference, who have executed this Agreement.
“Liquidity Events.” Capital Transactions, sales or exchanges or other dispositions of property, the expiration of the Average Payback Period, or the periodic accumulation of excess cash from operations above the required reserves determined by the Manager.
"Majority Interest." Membership Interests of Members which, taken together, exceed fifty percent (50%) of the aggregate of all Membership Interests.
"Manager." One or more managers designated pursuant to this Agreement. Specifically, Manager shall mean Brock Harvey, or any other person(s) that succeed such person(s) in the capacity as Manager.
"Member." Each of the parties who executes a counterpart of this Operating Agreement as a Member and each of the parties who may hereafter become Members. To the extent a Manager has purchased a Membership Interest in the Company, he will have all the rights of a Member with respect to such Membership Interest, and the term "Member" as used herein shall include a Manager to the extent he has purchased such Membership Interest in the Company. If a Person is a Member immediately prior to the purchase or other acquisition by such Person of an Economic Interest, such Person shall have all the rights of a Member with respect to such purchased or otherwise acquired Membership Interest or Economic Interest, as the case may be.
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"Membership Interest." A Member's entire interest in the Company including such Member's Economic Interest and the right to participate in the management of the business and affairs of the Company, including the right to vote on, consent to, or otherwise participate in any decision or action of or by the Members granted pursuant to this Operating Agreement or the Georgia Act.
“Net Capital Contributions.” An account maintained for each Member equal to (i) the Initial Capital Contribution to the Company made by such Member, plus (ii) the aggregate Additional Capital Contributions to the Company made by such Member, less (iii) the aggregate distributions to such Member pursuant to Section 9.01(b) of this Agreement.
"Operating Agreement." This Operating Agreement as originally executed and as amended from time to time.
"Ownership Percentage." Subject to adjustment pursuant to other provisions of this Agreement, the Ownership Percentage of each Member is as described on Exhibit "A."
"Person." Any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such "Person" where the context so permits.
"Profits" and "Losses." For each Fiscal Year, an amount equal to the Company's taxable income or loss for such Fiscal Year, determined in accordance with Section 703(a) of the Code.
“Profit Goal.” An amount equal to 20% of the Capital Contribution. All management fees shall be included in this amount.
"Reserves." With respect to any fiscal period, funds set aside or amounts allocated during such period to reserves which shall be maintained in amounts deemed sufficient by the Managers for working capital and to pay taxes, insurance, debt service or other costs or expenses incident to the ownership or operation of the Company's business.
"Schedule of Membership Interests." The schedule attached hereto as Exhibit “A”, as it may be amended from time to time, setting forth the respective interests owned by Persons in the Company.
"Transferring Member." A Member or Economic Interest Owner who sells, assigns, pledges, hypothecates or otherwise transfers for consideration or gratuitously all or any portion of its Membership Interest or Economic Interest.
"Treasury Regulations" or "Regulations." The Federal Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
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ARTICLE II
FORMATION OF COMPANY
2.01 On October 23, 2018, Floretta Gogo, organizer, formed the Company as a Georgia Corporation by executing and delivering Articles of Organization to the Secretary of State of Georgia in accordance with the provisions of the Georgia Act.
2.02 The name of the Company is ATLANTA CBD Inc. The Company may do business under that name and under any other name or names upon which the Members select. If the Company does business under a name other than that set forth in its Articles or Organization, then the Company shall file a trade name certificate as required by law.
2.03 The principal place of business of the Company within the State of Georgia is 1039 Grant St. Suite B-24, Atlanta, GA 30315. The Company may locate its places of business and registered office at any other place or places as the Manager or Managers may from time to time deem advisable.
2.04 The Company's initial registered office shall be at the office of its registered agent at 4240 Sweetwater Pky. Ellenwood, Ga, and the name of its initial registered agent at such address is Floretta Gogo. The registered office and registered agent may be changed from time to time by filing the address of the new registered office and/or the name of the new registered agent with the Secretary of State of Georgia pursuant to the Georgia Act and the applicable rules promulgated there under.
2.04 The term of the Company shall commence on the date the Articles of Organization are filed with the Secretary of State of Georgia and shall continue thereafter in perpetuity unless earlier dissolved in accordance with the provisions of this Operating Agreement or the Georgia Act.
ARTICLE III
BUSINESS OF COMPANY
3.01 Permitted Businesses. The business of the Company shall be:
a. To accomplish any lawful business whatsoever, or which shall at any time appear conducive to or expedient for the protection or benefit of the Company and its assets.
b. To exercise all other powers necessary to or reasonably connected with the Company's business, which may be legally exercised by limited liability companies under the Georgia Act.
c. To engage in all activities necessary, customary, convenient, or incident to any of the foregoing.
d. To purchase products, resale products, manufacture products, and the related financing activities.
ARTICLE IV
NAMES AND ADDRESSES OF INITIAL MEMBERS
The names and addresses of the Initial Members are set forth on Exhibit “A” attached hereto and by this reference made a part hereof.
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ARTICLE V
RIGHTS AND DUTIES OF MANAGERS
5.01 Management. Except for the powers retained by the Members enumerated in Section 7.07 below, the business and affairs of the Company shall be managed by its Manager. Except for situations in which the approval of the Members is expressly required by this Operating Agreement or by nonwaivable provisions of applicable law, the Manager shall be responsible for and have authority to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business.
5.02 Number, Tenure and Qualifications. The Company shall initially have one (1) Manager. Floretta Gogo shall serve as Manager. Subject to the foregoing, the number of Managers of the Company shall be fixed from time to time by the affirmative vote of Members holding a Majority Interest, but in no instance shall there be less than one (1) Manager. Subject to the foregoing, each Manager shall hold office until his successor shall have been elected and qualified or until his earlier death, resignation, or removal. Subject to the foregoing and Section 5.10, Managers shall be elected by the affirmative vote of Members holding at least a Majority Interest.
5.03 Certain Powers of Manager. Except for the powers retained by the Members enumerated in Section 7.07 below and, without limiting the generality of Section 5.01, the Manager shall have power and authority, on behalf of the Company:
a. To purchase liability and other insurance to protect the Company's property and business.
b. To invest any Company funds (by way of example but not limitation) in time deposits, short-term governmental obligations, commercial paper or other investments.
c. To sell or otherwise dispose of all or substantially all of the assets of the Company as part of a single transaction or plan so long as such disposition can be shown to be consistent with the Profit Goal, and is not in violation of or a cause of a default under any other agreement to which the Company may be bound.
d. To execute on behalf of the Company all instruments and documents, including, without limitation, checks; drafts; notes and other negotiable instruments; mortgages or deeds of trust; security agreements; financing statements; deeds, contracts, settlement statements, agreements, affidavits and any other documents providing for the acquisition, mortgage or disposition of the Company's property; assignments; bills of sale; leases; partnership agreements; operating agreements of other limited liability companies; and any other instruments or documents necessary, in the opinion of the Manager, to the business of the Company.
e. To employ accountants, legal counsel, managing agents or other experts to perform services for the Company and to compensate them from Company funds, which will all be available for Member review.
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f. To create offices and designate officers, who need not be Members. Any such persons appointed to be officers of the Company may or may not be employees of the Company, any Member, or any Affiliate thereof. Any officers so appointed shall have such authority and perform such duties as the Manager may, from time to time, delegate to them and the officers so appointed shall serve at the pleasure of the Manager.
g. To borrow money for the Company from banks, other lending institutions, Managers, Members, or Affiliates of the Manager or Members on such terms as the Manager deem appropriate, and in connection therewith, to hypothecate, encumber and grant security interest in the assets of the Company to secure repayment of the borrowed sums. No debt shall be contracted or liability incurred by or on behalf of the Company except by the Managers or, by agents or employees of the Company expressly authorized by the Managers to contract such debts or incur such liability by the Manager; and
h. To acquire property from any Person as the Members may determine. The fact that a Member is directly or indirectly affiliated or connected with any such Person shall not prohibit the Members from dealing with that Person.
i. To do and perform all other acts as may be necessary or appropriate to the conduct of the Company's business. Unless authorized to do so by this Operating Agreement or by a Manager or Managers of the Company, no attorney-in-fact, employee or other agent of the Company shall have any power or authority to bind the Company in any way, to pledge its credit or to render it liable pecuniary for any purpose. No Member shall have any power or authority to bind the Company unless the Member has been authorized by the Manager or Members to act as an agent of the Company in accordance with the previous sentence.
5.04 Liability for Certain Acts. Each Member shall act in a manner he or she believes in good faith to be in the best interest of the Company and with such care as an ordinarily prudent person in a like position would use under similar circumstances. A Manager is not liable to the Company, its Members, or other Managers for any action taken in managing the business or affairs of the Company if he or she performs the duty of his or her office in compliance with the standard contained in this Section. No Manager has guaranteed nor shall have any obligation with respect to the return of a Member's Capital Contributions or profits from the operation of the Company. No Manager shall be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member except loss or damage resulting from intentional misconduct or knowing violation of law or a transaction for which such Manager received a personal benefit in violation or breach of the provisions of this Operating Agreement. Each Manager shall be entitled to rely on information, opinions, reports or statements, including but not limited to financial statements or other financial data prepared or presented in accordance with the provisions of Section 14-11-305 of the Georgia Act.
5.05 Managers Have No Exclusive Duty to Company. The Manager shall not be required to manage the Company as his sole and exclusive function and he (or any Manager) may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Member shall have any right, by virtue of this Operating Agreement, to share or participate in such other investments or activities of the Manager or to the income or proceeds derived therefrom. The Manager shall incur no liability to the Company or to any of the Members as a result of engaging in any other business or venture.
5.06 Bank Accounts. The Manager may from time to time open bank accounts, brokerage accounts and other accounts in the name of the Company, and the Manager shall be the sole signatory thereon, unless the Manager determines otherwise.
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5.07 Indemnity of the Manager, Employees and Other Agents. To the fullest extent permitted under Section 14-11-306 of the Georgia Act, the Company shall indemnify each Manager and Member and make advances for expenses to each Manager and Member arising from any loss, cost, expense, damage, claim or demand, in connection with the Company, the Manager's or Member's status as a Manager or Member of the Company, the Manager's or Member's participation in the management, business and affairs of the Company or such Manager's or Member's activities on behalf of the Company. To the fullest extent permitted by Section 14-11-306 of the Georgia Act, the Company shall also indemnify its employees and other agents who are not Managers or Members arising from any loss, cost, expense, damage, claim or demand in connection with the Company, any such Person's participation in the business and affairs of the Company or such Person's activities on behalf of the Company.
5.08 Resignation. Any Manager of the Company may resign at any time by giving written notice to the Members of the Company. The resignation of any Manager shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The resignation of a Manager who is also a Member shall not affect the Manager's rights as a Member and shall not constitute a withdrawal of a Member.
5.09 Removal. Subject to Section 5.02 hereof, at a meeting called expressly for that purpose, all or any lesser number of Managers may be removed at any time, with or without cause, by the affirmative vote of Members holding a Majority Interest. The removal of a Manager who is also a Member shall not affect the Managers' rights as a Member and shall not constitute a withdrawal of a Member.
5.10 Vacancies. Any vacancy occurring for any reason in the number of Managers of the Company may be filled by the affirmative vote of a majority of the remaining Managers then in office, provided that if there are no remaining Managers, the vacancy(ies) shall be filled by the affirmative vote of Members holding a Majority Interest. Any Manager's position to be filled by reason of an increase in the number of Managers shall be filled by the affirmative vote of a majority of the Managers then in office or by Members holding a Majority Interest at a meeting of Members called for that purpose. A Manager elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office and shall hold office until the expiration of such term and until his successor shall be elected and shall qualify or until his earlier death, resignation or removal. A Manager chosen to fill a position resulting from an increase in the number of Managers shall hold office until his successor shall be elected and shall qualify, or until his earlier death, resignation or removal.
5.11 Profit Goal and Estimated Payback Period. The primary financial goal of the Manager shall be to generate the Distributable Cash from investments which liquidates Capital Contributions for Members and Economic Interest Owners within the Estimated Payback Period. The Manager’s next goal shall be to achieve the Profit Goal. Manager shall project regularly on any deviations from these objectives. The failure to achieve these goals shall not be considered a breach of this Agreement by Manager.
5.12 Compensation. The compensation of the Manager shall be fixed from time to time by a unanimous vote of Members, and no Manager shall be prevented from receiving such compensation by reason of the fact that he is also a Member of the Company. A procurement fee of no greater than 6% of the sum of Capital Contributions, debt principal utilized, and Company capital expenditures prior to investment, in exchange for the pre-investment financial and intellectual capital spent or put at risk to secure the investment. The procurement fee shall be paid to Manager over the first 6 months of investment. A development management fee of no greater than 6% of the sum of Capital Contributions, debt principal utilized, and Company capital expenditures, shall be paid to Manager over the entire term of investment, in exchange for managing the performance of the investment. A property management fee of no greater than 3% of cash revenue and expenditures received from Company operations, shall be paid as they are incurred, in exchange for all property management services required for Company operations. Manager reserves the right to compensate a third-party with a portion of the property management fees in exchange for property management services. All fees shall be included in the Profit Goal.
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5.12 Periodic Deliverables to Members. Manager shall distribute to Members on a quarterly basis beginning September 2021, (a) an investment update and asset report, (b) a statement of Member’s valuation and cash accounts, (c) project valuation details and Member priority list, (d) a budget status update and cash flow summary. Distributions will be made in electronic format via email.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
6.01 Limitation on Liability. Each Members' liability shall be limited as set forth in this Operating Agreement, the Georgia Act and other applicable law.
6.02 Use Rights of Company Property. Members have the right to reserve future use of Company property that is not encumbered by a lease or another use agreement at the time of reservation and date of Member use. A Member may make a reservation to the extent that (i) the market value of Member’s use in that calendar year of Member use is less than 1% of Member’s Capital Contributions, and (ii) Member is in good standing with the Company. This market value shall include rent and all expenses necessary to return the property to its condition before Member use. All reservations will be made through Manager, who will manage all use rights at his full discretion.
6.03 No Liability for Company Obligations. No Member will have any personal liability for any debts or losses of the Company beyond his respective Contributions, except as provided by law or otherwise provided by separate agreement among the Members.
6.04 List of Members. Upon written request of any Member, the Company shall provide a list showing the Membership Interest and Economic Interest of all Members and any other information required by Section 14-11-313 of the Georgia Act and maintained pursuant to Section 11.02.
6.05 Approval of Merger. The Members shall have the right, by the affirmative vote of Members holding a Majority Interest to approve the merger of the Company.
6.06 Dissenters' Rights. No Member shall have dissenters' rights pursuant to O.C.G.A. § 14-11-1001 et seq.
ARTICLE VII
MEETINGS OF MEMBERS
7.01 Meetings. Meetings of the Members, for any purpose or purposes, may only be called by the Manager or a Member or Members holding at least twenty-five percent (25%) of the Ownership Percentages.
7.02 Place of Meetings. The Persons calling any meeting may designate any place, either within or outside the State of Georgia, as the place of meeting for any meeting of the Members. If no designation is made, the place of meeting shall be the principal executive office of the Company in the State of Georgia.
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7.03 Notice of Meetings. Written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than two (2) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the Manager or Person calling the meeting, to each Member entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered two calendar days after being deposited in the United States mail, addressed to the Member at its address as it appears on the books of the Company, with postage thereon prepaid. Notice provided in accordance with this Section shall be effective notwithstanding anything in Section 14-11-311 of the Georgia Act to the contrary.
7.04 Meeting of all Members. If all of the Members shall meet at any time and place, either within or outside of the State of Georgia, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any lawful action may be taken.
7.05 Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any distribution, or in order to make a determination of Members for any other purpose, the date on which notice of the meeting is mailed or the date on which such distribution is made, as the case may be, shall be the record date for such determination of Members unless the Manager shall otherwise specify another record date. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Section, such determination shall apply to any adjournment thereof.
7.06 Quorum. Members holding a Majority Interest represented in person or by proxy, shall constitute a quorum at any meeting of Members. In the absence of a quorum at any such meeting, a majority of the Ownership Percentages so represented may adjourn the meeting from time to time for a period not to exceed sixty (60) days without further notice. However, if at the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The Members present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of that number of Ownership Percentages whose absence would cause less than a quorum to be present.
7.07 Manner of Acting. The affirmative vote of Members holding a Majority Interest shall be the act of the Members:
a. The following powers are expressly reserved to the Members, and the affirmative vote of Members holding a Majority Interest shall be required to approve these actions:
(i) possess property of the Company, or assign rights in specific property of the Company, for other than Company purposes;
(ii) file a voluntary petition or otherwise initiate proceedings (a) to have the Company adjudicated insolvent; (b) seeking an order for relief of the Company as debtor under the United States Bankruptcy Code; (c) file any petition seeking any composition, reorganization, readjustment, liquidation, dissolution, or similar relief under the present or any future federal bankruptcy laws or any other present or future applicable federal, state, or other statute or law relative to bankruptcy, insolvency, or other relief for debtors with respect to the Company; (d) or seek the appointment of any trustee, receiver, conservator, assignee, sequestrator, custodian, liquidator (or other similar official) of the Company, or if all or any substantial part of the Property, or make any general assignment for the benefit of creditors of the Company, or admit in writing the inability of the Company to pay its debts generally as they become due, or declare or effect a moratorium on the Company’s debt or take any action in furtherance of any prescribed action; or
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(v) acquire property from any Person as the Members may determine. The fact that a Manager or a Member is directly or indirectly affiliated or connected with any such Person shall not prohibit the Members from dealing with that Person.
b. Section 14-11-307 of the Georgia Act (relating to conflicting interest transactions) shall not apply in the case of the Company and Members who have an interest (economic or otherwise) in the outcome of any particular matter upon which the Members vote or consent may vote or consent upon any such matter and their Ownership Percentage, vote or consent, as the case may be, shall be counted in the determination of whether the requisite matter was approved by the Members.
7.08 Proxies. A Member may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact. Such written proxy shall be delivered to the Company.
7.09 Action by Members Without a Meeting. Action required or permitted to be taken by the Members at a meeting may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by the Members entitled to vote and having the requisite Ownership Percentage required to approve such action. Action take under this Section is effective when the Members required to approve such action have signed the consent, unless the consent specifies a different effective date. The record date for determining Members entitled to take action without a meeting shall be the date the first Member signs a written consent.
7.10 Waiver of Notice. In lieu of any procedures contained in Section 14-11-312 of the Georgia Act, when any notice is required to be given to any Member, a waiver thereof in writing signed by the person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice.
7.11 Meeting by Telephone; Action by Consent. In lieu of any procedures contained in Section 14-11-310(b)(3) of the Georgia Act, Members may also meet by conference telephone call if all Members can hear one another on such call and the requisite notice is given or waived.
ARTICLE VIII
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
8.01 Members' Capital Contributions.
a. Each Initial Member shall contribute such amount as is set forth in Exhibit “A” hereto as its share of the Initial Capital Contribution.
b. Each Additional Member shall make the Initial Capital Contribution to which such Additional Member has agreed at the time or times and upon the terms to which the Manager and the Additional Member agree, which agreement shall be set forth in an amendment to Exhibit “A” to this Agreement.
8.02 Additional Contributions. If the Manager determines, at any time or from time to time, that the Company requires Additional Capital Contributions, then the Manager shall give notice to each Member of (i) the total amount of additional Capital Contributions required and the capital appreciation of the current Capital Contributions payable to current Members, (ii) the reason the additional Capital Contribution is required, (iii) each Member’s proportionate share of the total Capital Contribution (determined in accordance with each Member’s relative Ownership Percentage), (iv) each Member’s proportionate share of capital appreciation of the current Capital Contributions payable to current Members, and (v) the date each Member’s total payment is due and payable, which date shall be no sooner than fifteen (15) days after the notice has been given. A Member’s Additional Capital Contribution shall be payable in cash, by certified check, or immediately available wire funds.
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8.03 Remedy for Elections Not to Make Additional Capital Contribution. If a Member elects not to pay when due all or any portion of any Capital Contribution as provided in Section 8.02 above, the Manager shall request the electing Members to pay the unpaid amount of the non-electing Member’s Capital Contribution (the “Unpaid Contribution”) in chronological order starting with the Member with the oldest date of Initial Capital Contribution. To the extent the Unpaid Contribution is contributed by any other Member, the non-electing Member’s Ownership Percentage shall be reduced and the Ownership Percentage of each Member who makes up the Unpaid Contribution shall be increased, so that each Member’s Ownership Percentage is equal to a fraction, the numerator of which is that Member’s total Capital Contribution and the denominator of which is the total Capital Contributions of all Members. If existing Members do not elect to make up the entire Unpaid Contribution within fifteen (15) days, the Manager may admit one or more new Member(s) whose Initial Capital Contribution shall make up the remaining Unpaid Contribution, the defaulting Member’s Ownership Percentage shall be reduced and the Ownership Percentage of each Member who makes up the Unpaid Contribution shall be increased, and the Member’s Ownership Percentages shall be adjusted so that each Member’s Ownership Percentage is equal to a fraction, the numerator of which is that Member’s total Capital Contribution and the denominator of which is the total Capital Contributions of all Members. The Manager shall amend Exhibit A accordingly. This remedy is in addition to any other remedies allowed by law or by this Agreement.
8.04 Loans to Company. To the extent approved by the Manager, any Member may make a secured or unsecured loan to the Company.
8.05 Withdrawal or Reduction of Members' Contributions to Capital.
a. A Member shall not receive out of the Company's property any part of such Member's Net Capital Contributions until all liabilities of the Company, except liabilities to Members on account of their Capital Contributions, have been paid or there remains property of the Company sufficient to pay them.
b. Within fifteen (15) days of the date of a distribution as provided in Section 9.01 hereof, a Member, unless otherwise prohibited by applicable law, a Member has the right to request a return of all or a portion of the Member’s Capital Contribution by providing written request of such to the Manager. The Members’ Ownership Percentages shall be adjusted so that each Member’s Ownership Percentage is equal to a fraction, the numerator of which is that Member’s total Capital Contribution and the denominator of which is the total Capital Contributions of all Members. The Manager shall amend Exhibit A accordingly.
8.06 Maintenance of Capital Accounts. The Company shall establish and maintain a Capital Account for each Member and Economic Interest Owner. Each Member's Capital Account shall be increased by (a) the amount of any money contributed by the Member to the capital of the Company, (b) the fair market value of any property, as determined by the Company and the Member by arm's length agreement at the time of contribution (net of liabilities assumed by the Company or subject to which the Company takes such property within the meaning Section 752 of the Code), and (c) the Member's share of Profits and of any separately allocated items of income or gain, except adjustments of the Code (including any gain and income from unrealized income with respect to accounts receivable allocated to the Member to reflect the difference between the book value and tax basis of assets contributed by such Member). Each Member's Capital Account shall be decreased by (a) the amount of any money distributed to the Member by the Company, (b) the fair market value of any property distributed to the Member (net of liabilities of the Company assumed by the Member or subject to which the Member takes such property within the meaning of Section 752 of the Code), and (c) the Member's share of losses and of any separately allocated items of deduction or loss (including any loss or deduction allocated to the Member to reflect the difference between the book value and tax basis of assets contributed by the Member).
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8.07 Sale or Exchange of Interest. In the event of a sale or exchange of some or all of a Member's Membership Interests in the Company, the Capital Account of the Transferring Member shall become the Capital Account of the Economic Interest Owner, to the extent that it relates to the Membership Interests so transferred.
8.08 Compliance with Section 704(b) of the Code. As they relate to the maintenance of Capital Accounts, the provisions of this Article are intended, shall be construed, and if necessary, modified to cause the allocations of Net Profits, Net Losses, income, gain and credit pursuant to Article VIII to have substantial economic effect under the regulations promulgated under Section 704(b) of the Code, in light of any distributions made to the Members and Economic Interest Owners and the Capital Contributions made pursuant to this Article.
ARTICLE IX
DISTRIBUTIONS TO MEMBERS
9.01 Distributions. Except with respect to distributions made in accordance with Section 14.03 following the dissolution of the Company, all distributions of Distributable Cash or other property shall be made to the Members and Economic Interest Owners as follows:
a. First, to the Members and Economic Interest Owners in proportion to their respective Ownership Percentages of each such Members and Economic Interest Owners until such Members and Economic Interest Owners Net Capital Contributions balances are reduced to zero; and
b. Next, to all Members and Economic Interest Owners pro rata in accordance with their Ownership Percentages, until the Profit Goal is achieved.
c. Next, to all Members and Economic Interest Owners pro rata in accordance with their Ownership Percentages, less the lesser of (a) 25% Interest, (b) the difference between the Manager’s Ownership Percentage and 50%, which shall transfer to Manager, until a 35% profit goal is achieved. In this event, the Manager is responsible for maintaining this extraordinary profit goal for Owners.
d. Finally, to all Members and Economic Interest Owners pro rata in accordance with their Ownership Percentages, less the difference between the Manager’s Ownership Percentage and 50%, which shall transfer to Manager. In this event, the Manager is responsible for maintaining this extraordinary profit goal for Owners.
9.02 Timing of Distributions. Notification of a distribution of Distributable Cash shall be made by Manager within fifteen (15) days after the date of a Liquidity Event and at such other times as the Manager deems appropriate. Members will have fifteen (15) days to return their election to Manager. Members’ election decisions will transfer to Manager after the fifteen (15) day period.
9.03 Limitation Upon Distributions. No distribution shall be made to Members if prohibited by Section 14-11-407 of the Georgia Act.
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9.04 Interest On and Return of Capital Contributions. No Member shall be entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein. This Section shall not apply to loans (as distinguished from Capital Contributions) that a Member has made to the Company.
ARTICLE X
ALLOCATIONS
All items of net income or loss of the Company, as determined for federal income tax purposes for any taxable year of the Company, and all other items of income gain, loss, deduction or credit realized, incurred or earned by the Company shall be allocated among the Members in proportion to their respective Ownership Percentages.
ARTICLE XI
BOOKS AND RECORDS
11.01 Accounting Period. The Company's accounting period shall be the calendar year.
11.02 Records, Audits and Reports. Proper and complete records and books of accounts shall be kept or shall be caused to be kept by the Manager in which shall be entered fully and accurately all transactions and other matters relating to the Company's business in such detail and completeness as is customary and usual for businesses of the type engaged in by the Company. The Company shall keep at its principal place of business the following records:
a. A current list of the full name and last known address of each Member, Economic Interest Owner and Manager;
b. Copies of records to enable a Member to determine the relative voting rights, if any, of the Members;
c. A copy of the Articles of Organization of the Company and all amendments thereto;
d. Copies of the Company's federal, state and local income tax returns and reports, if any, for the three most recent years;
e. Copies of the Company's written Operating Agreement, together with any amendments thereto;
f. Copies of any financial statements of the Company for the three (3) most recent years. The books and records shall at all times be maintained at the principal office of the Company and shall be open to the reasonable inspection and examination of the Members, Economic Interest owners, or their duly authorized representatives during reasonable business hours.
11.03 Tax Returns. The Managers shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Members within a reasonable time after the end of the Company's fiscal year.
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ARTICLE XII
TRANSFERABILITY
12.01 General Prohibition. No Member or Economic Interest Owner may assign, convey, sell, transfer, liquidate, encumber, or in any way alienate (collectively a "Transfer"), all or any part of its Interest without the prior written consent of all of the Managers which consent may be given or withheld in the sole discretion of each Manager. Any attempted Transfer of all or any portion of an Interest without the necessary consent, or as otherwise permitted hereunder, shall be null and void and shall have no effect whatsoever.
12.02 Conditions of Transfer and Assignment. A transferee of an Interest shall become a Member only if the following conditions have been satisfied:
a. the transferor, his legal representative or authorized agent must have executed a written instrument of transfer of such Interest in form and substance satisfactory to the Managers;
b. the transferee must have executed a written agreement, in form and substance satisfactory to the Managers to assume all of the duties and obligations of the transferor under this Operating Agreement with respect to the transferred Interest and to be bound by and subject to all of the terms and conditions of this Operating Agreement;
c. the transferor, his legal representative or authorized agent, and the transferee must have executed a written agreement, in form and substance satisfactory to the Managers to indemnify and hold the Company, the Managers and the other Members harmless from and against any loss or liability arising out of the transfer;
d. the transferee must have executed such other documents and instruments as the Managers may deem necessary to effect the admission of the transferee as a Member; and
e. unless waived by the Managers, the transferee or the transferor must have paid the expenses incurred by the Company in connection with the admission of the transferee to the Company.
12.03 Transferee Not Member in Absence of Consent of Members Holding a Majority Interest.
a. To the extent that Section 12.01 is not effective to prevent any alienation of an interest in the Company, or in the case where a transfer of only an Economic Interest is approved by the Managers, the transferee shall have no right to participate in the management of the business and affairs of the Company or to become a Member, but instead the transferee or donee shall be merely an Economic Interest Owner.
b. A permitted transferee of an Economic Interest who does not become a Member shall be an Economic Interest Owner only and shall be entitled only to the transferor's Economic Interest to the extent assigned. Such transferee shall not be entitled to vote on any question regarding the Company, and the Ownership Percentage associated with the transferred Economic Interest shall not be considered to be outstanding for voting purposes.
12.04 Successors as to Economic Rights. References in this Operating Agreement to Members shall also be deemed to constitute a reference to Economic Interest Owners where the provision relates to economic rights and obligations. By way of illustration and not limitation, such provisions would include those regarding Capital Accounts, distributions, allocations, and contributions. A transferee shall succeed to the transferor's Capital Contributions and Capital Account to the extent related to the Economic Interest transferred, regardless of whether such transferee becomes a Member.
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12.05 Right of First Refusal.
a. If a Member (individually a “Transferor”) receives a bona fide offer (the “Transferee Offer”) from any other Person (a “Transferee”) to purchase all or a portion of any interest or rights in the Transferor’s Membership Interests (the “Transferor Interest”), then prior to any transfer of the Transferor Interest, the Transferor shall give the remaining Member(s) (the “Remaining Members”) written notice (the “Transfer Notice”) containing each of the following:
i. The Transferee’s identity;
ii. A complete copy of the Transferee Offer; and
iii. The Transferor’s offer to (the “Offer”) to sell the Transferor Interest to the Remaining Members for a total price equal to the price set forth in the Transferee Offer (the “Transfer Purchase Price”), which shall be payable on terms of payment substantially similar to those set forth in the Transferee Offer.
b. The Offer shall be and remain irrevocable for a period (the “Offer Period”) ending on the thirtieth (30th) day following the date the Transfer Notice is delivered to the Remaining Members. At any time during the Offer Period, a Remaining Member may accept the offer by notifying the Transferor in writing that the Remaining Member intends to purchase all, but not less than all, of the Transferor Interest. If two (2) or more Remaining Members desire to accept the Offer, then, in the absence of an agreement between or among them, each such Remaining Member shall purchase the Transferor Interest in the proportion that his respective Ownership Percentage bears to the total Ownership Percentages of all the remaining Members who desire to accept the Offer. If one or more Remaining Member accept the Offer, then the parties shall fix a closing date (the “Transfer Closing Date”) for the purchase, which shall not be less than seven (7) or more than sixty (60) days after the expiration of the Offer Period.
c. If no Remaining Member accepts the Offer within the time period specified in this Section, then the Transferor shall be free for a period (the “Free Transfer Period”) of sixty (60) days after the expiration of the Offer Period to transfer the Transferor Interest to the Transferee, for the same or greater price and on the same terms and conditions as set forth in the Transfer Notice. The Transferee shall not be required to obtain the approval in accordance with Section 12.01 and 12.03 in order to become a Member.
d. Any transfer by the Transferor after the expiration of the Free Transfer Period or without compliance with this Section and the other terms, provisions, and conditions of this Agreement, shall be null and void and of no force or effect.
ARTICLE XIII
ISSUANCE OF ADDITIONAL MEMBERSHIP INTERESTS
Except as otherwise provided for herein, any Person approved by the Managers may become a Member in the Company by the issuance by the Company of Membership Interests for such consideration as the Managers shall determine. The consideration must be in the form of cash or property at current fair value in proportion to the Interest conveyed. No new Members shall be entitled to any retroactive allocation of losses, income or expense deductions incurred by the Company. The Manager or Manager(s) may, at his or their option, at the time a Member is admitted, close the Company books (as though the Company's tax year had ended) or make pro rata allocations of loss, income and expense deductions to a new Member for that portion of the Company's tax year in which a Member was admitted in accordance with the provisions of Section 706(d) of the Code and the Treasury Regulations promulgated thereunder.
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ARTICLE XIV
DISSOLUTION AND TERMINATION
14.01 Dissolution.
| a. | The Company shall be dissolved upon the occurrence of any of the following events: |
| (i) | by the unanimous written agreement of all Members; or |
| (ii) | by a decree of judicial dissolution. |
Notwithstanding the provisions of Section 14-1—602(b)(4) of the Georgia Act, the Company shall not dissolve upon an event of dissociation with respect to the last remaining Member, but instead the legal successor to such Member shall automatically become a Member of the Company with all rights and obligations appurtenant thereto.
b. If a Member who is an individual dies or a court of competent jurisdiction adjudges him to be incompetent to manage his person or his property, the Member's executor, administrator, guardian, conservator, or other legal representative may exercise all of the Member's rights for the purpose of settling his estate or administering his property, but such person shall be a holder of an Economic Interest and shall not have the rights of a Member. Further, such Person shall be subject to the provisions of Article 12.
14.02 Effect of Dissolution. Upon dissolution, the Company shall cease to carry on its business, except as permitted by Section 14-11-605 of the Georgia Act. Upon dissolution, the Manager shall file a statement of commencement of winding up pursuant to Section 14-11-606 of the Georgia Act and publish the notice permitted by Section 14-11-608 of the Georgia Act.
14.03 Winding Up, Liquidation and Distribution of Assets.
a. Upon dissolution, an accounting shall be made by the Company's independent accountants of the accounts of the Company and of the Company's assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution. The Manager or if none, the Person or Persons selected by majority vote of the Members (the "Liquidators") shall immediately proceed to wind up the affairs of the Company.
b. If the Company is dissolved and its affairs are to be wound up, the Liquidators shall:
i. Sell or otherwise liquidate all of the Company's assets as promptly as practicable (except to the extent the Liquidators may determine to distribute any assets to the Members in kind);
ii. Allocate any profit or loss resulting from such sales to the Members' and Economic Interest Owners' in accordance with Article X hereof;
iii. Discharge all liabilities of the Company, including liabilities to Members and Economic Interest Owners who are creditors, to the extent otherwise permitted by law, other than liabilities to Members and Economic Interest Owners for distributions, and establish such Reserves as may be reasonably necessary to provide for contingent or liabilities of the Company;
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iv. Distribute the remaining assets in the following order:
a. If any assets of the Company are to be distributed in kind, the net fair market value of such assets as of the date of dissolution shall be determined by independent appraisal or by agreement of the Members. Such assets shall be deemed to have been sold as of the date of dissolution for their fair market value, and the Capital Accounts of the Members and Economic Owners shall be adjusted pursuant to the provisions of this Operating Agreement to reflect such deemed sale.
b. The positive balance (if any) of each Member's and Economic Interest Owner's Capital Account (as determined after taking into account all capital Account adjustments for the Company's taxable year during which the liquidation occurs) shall be distributed to the Members, either in cash or in kind, as determined by the Liquidators, with any assets distributed in kind being valued for this purpose at their fair market value. Any such distributions to the Members in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
c. Notwithstanding anything to the contrary in this Operating Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member's Capital Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever.
d. Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated.
e. The Liquidators shall comply with any applicable requirements of applicable law pertaining to the winding up of the affairs of the Company and the final distribution of its assets.
14.04 Certificate of Termination. When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefor and all of the remaining property and assets have been distributed to the Members, a Certificate of Termination may be executed and filed with the Secretary of State of Georgia in accordance with Section 14-11-610 of the Georgia Act.
14.05 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Operating Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash contribution of one or more Members, such Member or Members shall have no recourse against any other Member.
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ARTICLE XV
MISCELLANEOUS PROVISIONS
15.01 Application of Georgia Law. This Operating Agreement, and the application and interpretation thereof, shall be governed exclusively by its terms and by the laws of the State of Georgia, and specifically the Georgia Act.
15.02 No Action for Partition. No Member or Economic Interest Owner has any right to maintain any action for partition with respect to the property of the Company.
15.03 Execution of Additional Instruments. Each Member hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations.
15.04 Construction. Whenever the singular number is used in this Operating Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa.
15.05 Headings. The headings in this Operating Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Operating Agreement or any provision hereof.
15.06 Waivers. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Operating Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.
15.07 Rights and Remedies Cumulative. The rights and remedies provided by this Operating Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right not to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.
15.08 Severability. If any provision of this Operating Agreement or the application thereof to any person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Operating Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.
15.09 Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Operating Agreement, their respective heirs, legal representatives, successors and assigns.
15.10 Creditors. None of the provisions of this Operating Agreement shall be for the benefit of or enforceable by any creditors of the Company or by any Person not a party hereto.
15.11 Counterparts. This Operating Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
15.12 Federal Income Tax Elections. All elections required or permitted to be made by the Company under the Code shall be made by Members holding a Majority Interest. For all purposes permitted or required by the Code, the Members constitute and appoint CFO for Tax Matters Partner or, if the CFO is no longer a Manager, then such other Member as shall be designated by the Members by Majority Vote. The provisions on limitations of liability of the Managers and Members and indemnification set forth in Article VI hereof shall be fully applicable to the Tax Matters Partner in his or her capacity as such. The Tax Matters Partner may resign at any time by giving written notice to the Company and each of the other Members. Upon the resignation of the Tax Matters Partner, a new Tax Matters Partner may be elected by majority vote of the Members.
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15.13 Certification of Non-Foreign Status. In order to comply with Section 1445 of the Code and the applicable Treasury Regulations thereunder, in the event of the disposition by the Company of a United States real property interest as defined in the Code and Treasury Regulations, each Member shall provide to the Company, an affidavit stating, under penalties of perjury, (i) the Member's address, (ii) United States taxpayer identification number, and (iii) that the Member is not a foreign person as that term is defined in the Code and Treasury Regulations. Failure by any Member to provide such affidavit by the date of such disposition shall authorize the Manager to withhold ten percent (10%) of each such Member's distributive share of the amount realized by the Company on the disposition.
15.14 Notices. Any and all notices, offers, demands or elections required or permitted to be made under this Agreement ("Notices") shall be in writing, signed by the party giving such Notice, and shall be deemed given and effective (i) when hand-delivered (either in person by the party giving such notice, or by its designated agent, or by commercial courier) or (ii) on the third (3rd) business day (which term means a day when the United States Postal Service, or its legal successor ("Postal Service") is making regular deliveries of mail on all of its regularly appointed week-day rounds in Atlanta, Georgia) following the day (as evidenced by proof of mailing) upon which such notice is deposited, postage pre-paid, certified mail, return receipt requested, with the Postal Service, and addressed to the other party at such party's respective address as set forth below, or at such other address as the other party may hereafter designate by Notice.
15.15 Amendments. Any amendment to this Agreement shall be made in writing and signed by Members holding all of the Ownership Percentages.
15.16 Invalidity. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and the Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. If any particular provision herein is construed to be in conflict with the provisions of the Georgia Act. The Georgia Act shall control and such invalid or unenforceable provisions shall not affect or invalidate the other provisions hereof, and this Agreement shall be construed in all respects as if such conflicting provision were omitted.
15.17 Captions. Titles and captions are inserted for convenience only and in no way define, limit, extend or describe the scope or intent of this Agreement or any of its provisions and in no way are to be construed to affect the meaning or construction of this Agreement or any of its provisions.
15.18 Banking. All funds of the Company shall be deposited in its name in an account or accounts as shall be designated from time to time by the Manager. All funds of the Company shall be used solely for the business of the Company. All withdrawals from the Company bank accounts shall be made only upon check signed by the Manager or by such other persons as the Manager may designate from time to time.
15.19 Arbitration. Any dispute, controversy or claim arising out of or in connection with, or relating to, this Agreement or any breach or alleged breach hereof shall, upon the request of any party involved, be submitted to, and settled by, arbitration in the County of Fulton, State of Georgia, pursuant to the commercial arbitration rules then in effect of the American Arbitration Association (or at any time or at any other place or under any other form of arbitration mutually acceptable to the parties so involved). Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in the highest court of the forum, state or federal, having jurisdiction. The expenses of the arbitration shall be borne equally by the parties to the arbitration, provided that each party shall pay for and bear the cost of its own experts, evidence and counsel's fees, except that in the discretion of the arbitrator, any award may include the cost of a party's counsel if the arbitrator expressly determines that the party against whom such award is entered has caused the dispute, controversy or claim to be submitted to arbitration as a dilatory tactic.
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15.20 Determination of Matters Not Provided For In This Agreement. The Managers shall decide any questions arising with respect to the Company and this Agreement that are not specifically or expressly provided for in this Agreement.
15.21 Further Assurances. The Members each agree to cooperate, and to execute and deliver in a timely fashion any and all additional documents necessary to effectuate the purposes of the Company and this Agreement.
15.22 Time. TIME IS OF THE ESSENCE OF THIS AGREEMENT, AND TO ANY PAYMENTS, ALLOCATIONS AND DISTRIBUTIONS SPECIFIED UNDER THIS AGREEMENT.
15.23 Investment Representations and Indemnity Agreement. In addition to the restrictions on transfer set forth above, each Member understands that Members must bear the economic risk of this investment for an indefinite period of time because the Membership Interests are not registered under the Securities Act of 1933, as amended (the "1933 Act") or the securities laws of any state or other jurisdiction. Each Member has been advised that there is no public market for the Membership Interests and that the Membership Interests are not being registered under the 1933 Act upon the basis that the transactions involving its sale are exempt from such registration requirements and that reliance by the Company on such exemption is predicated in part on the Member's representations set forth in this Agreement. Each Member acknowledges that no representations of any kind concerning the future intent or ability to offer or sell the Membership Interest in a public offering or otherwise have been made to the Member by the Company or any other Person or entity. The Member understands that the Company makes no covenant, representation or warranty with respect to the registration of securities under the Securities Exchange Act of 1933, as amended, or its dissemination to the public of any current financial or other information concerning the Company. Accordingly, the Member acknowledges that there is no assurance that there will ever by any public market for the Membership Interest, and that the Member may not be able to publicly offer or sell any thereof. Furthermore, each Member (and his/her/its assignees and transferees) agrees to indemnify the other Members, the Manger, the Company and any director, officer, employee, affiliate or legal counsel of such parties, from any and all losses, damage, liability, claims and expenses incurred, suffered or sustained by any of them in any manner because of the falsity of any representation contained in this Section including, without limitation, liability, for violation of the Securities Laws of the United States or of any state which violation would not have occurred had such representation been true.
15.24 No Partnership Interest for Non-Tax Purposes. The Members have formed the Company under the Georgia Act and expressly disavow any intention to form a partnership under Georgia’s Uniform Partnership Act, Georgia’s Uniform Limited Partnership Act, or the Partnership Act or laws of any other state. The Members do not intend to be partners one to another or partners as to any third party. To the extent any Member, by word or action, represents to another person that any other Member is a partner or that the Company is a partnership, the Member making such wrongful representations shall be liable to any other Member who incurs personal liability by reason of such wrongful representation.
15.25 This agreement allows Milton Wells to purchase 125 of available member shares @ $40.00 per share for a price of $5,000.00 payable to Atlanta CBD. Initial purchase must be completed by July 31,2020.
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BILL OF SALE
Dated: 07/20/2020
Atlanta CBD Inc., referred to as "SELLER," sells, bargains and conveys all of SELLER'S right, title and interest in:
125 shares of at a price of $40.00 ea.
To Milton Wells, referred to as "BUYER," BUYER's heirs and assigns. SELLER acknowledges receipt of a total of $ 5,000.00 from BUYER, in full payment of the purchase price of the stock conveyed hereby.
The parties agree to the terms and conditions stated herein:
| /s/ Atlanta CBD |
Atlanta CBD, SELLER (authorized signature)
| /s/ Milton Wells |
Milton Wells, BUYER
Exhibit 99.1
LIST OF SELLING SHAREHOLDERS
| Shareholder | Relationship to Company | Offering | Number of Shares owned Before Offering | Number of Shares after Offering * | ||||||||||
| Friction & Heat LLC | N/A | 2,500,000 | 2,500,000 | 0 | ||||||||||
| Hollis Capital Services LLC | N/A | 2,500,000 | 2,500,000 | 0 | ||||||||||
| Henrietta Point LLC | N/A | 2,000,000 | 2,000,000 | 0 | ||||||||||
| Norman Law Firm PLC | Counsel to the Company | 1,400,000 | 1,400,000 | 0 | ||||||||||
| TJC Consulting, LLC | N/A | 1,400,000 | 1,400,000 | 0 | ||||||||||
| Ridolfo Brown | N/A | 1,022,000 | 1,022,000 | 0 | ||||||||||
| Eddie R. Cheeks, M.D., P.C. | Greater than 5% shareholder | 800,000 | 800,000 | 0 | ||||||||||
| The Cheeks Agency, Inc. | Greater than 5% shareholder | 800,000 | 800,000 | 0 | ||||||||||
| Harold Woolfolk | Board Member | 500,000 | 500,000 | 0 | ||||||||||
| Michael Premazon | N/A | 200,000 | 200,000 | 0 | ||||||||||
| Oudray Hervey | N/A | 125,000 | 125,000 | 0 | ||||||||||
| Joel Bellot | N/A | 100,000 | 100,000 | 0 | ||||||||||
| Natasha Cleveland | N/A | 75,000 | 75,000 | 0 | ||||||||||
| Ricco Brown | N/A | 64,000 | 64,000 | 0 | ||||||||||
| Vincent Brown | N/A | 64,000 | 64,000 | 0 | ||||||||||
| Total | 13,550,000 | 13,550,000 | 0 | |||||||||||
*Assumes all shares are sold in the offering.