Forward-looking Statements
Statements made in this Quarterly Report which are not purely historical are
forward-looking statements with respect to the goals, plan objectives,
intentions, expectations, financial condition, results of operations, future
performance and our business, including, without limitation, (i) our ability to
raise capital, and (ii) statements preceded by, followed by or that include the
words "may," "would," "could," "should," "expects," "projects," "anticipates,"
"believes," "estimates," "plans," "intends," "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond our control) that could cause actual
results to differ materially from those set forth in the forward-looking
statements, including the following, general economic or industry conditions,
nationally and/or in the communities in which we may conduct business, changes
in the interest rate environment, legislation or regulatory requirements,
conditions of the securities markets, our ability to raise capital, changes in
accounting principles, policies or guidelines, financial or political
instability, acts of war or terrorism, other economic, competitive,
governmental, regulatory and technical factors affecting our current or
potential business and related matters.
Accordingly, results actually achieved may differ materially from expected
results in these statements. Forward-looking statements speak only as of the
date they are made. We do not undertake, and specifically disclaim, any
obligation to update any forward-looking statements to reflect events or
circumstances occurring after the date of such statements.
Company Business - Intellectual Property
The Company's business is now focused on the business of its wholly-owned
subsidiary, High Sierra Technologies, Inc. ("High Sierra"). High Sierra was
incorporated in the State of Nevada in August of 2018. It was formed with the
intention that it would become the assignee, owner and licensor of certain
Intellectual Property that was, prior to assignment, the property of Vincent C.
Lombardi, Ph.D. (the "Intellectual Property") who is an officer, director and
co-founder of High Sierra. High Sierra was further formed with the goal that it
would continue to develop and expand its intellectual property portfolio with an
emphasis on the recreational cannabis industry as well as the industrial hemp
industry.
The current Intellectual Property portfolio consists of all of the rights, title
and interest that Dr. Lombardi had in certain two Provisional Patent
Applications (collectively, the "Applications"). Assignments of both of these
applications, which assign their ownership to High Sierra, have been filed with
the United States Patent & Trademark Office. The Applications have since been
incorporated into and converted into two all-encompassing Utility Patent
Applications which have been filed with numerous governmental agencies in the
United States, Canada and multiple other countries as is discussed below
(collectively the "Utility Patent Applications"). As of the date hereof, there
have been two United States Patents issued based on the Utility Patent
Application as is also discussed below. As of the date hereof, the Company also
has several ongoing Utility Patent Applications in the United States, Europe and
Canada. For important information concerning the Company's Intellectual
Property, please refer to the Company's most recent Annual Report on Form 10-K.
On March 25, 2020, the Company received an International Preliminary Report of
Patentability for its Patent Cooperation Treaty Application Number
PCT/US2019/014778, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC
COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, in which Claims Numbered
1-84 were characterized as novel and Claims Numbered 1-17, 63-70, 83 and 84 were
characterized as inventive steps.
On June 5, 2020, the United States Patent and Trademark Office, by way of an
Office Action dated May 29, 2020, notified the Company that Claims Numbered
1-17, 63-70 and 83-84 of Patent Application Number 16/255,157, CANNABIS PRODUCTS
MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED
HYDROCARBONS, were now allowed. These are four of the seven main claims in
Patent Application Number 16/255,157. In response to this, the Company's outside
Patent Counsel, Oliff PLC, has filed an Amendment to Patent Application Number
16/255,157 so that these Claims can be issued a formal Notice of Allowance which
would then lead to the issuance of a Utility Patent for these Claims. As a
result of this action by our attorneys at Oliff PLC, on June 19, 2020, the
United States Patent and Trademark Office issued a formal Notice of Allowance
and Fee(s) Due which will allow the Utility Patent to be issued once the fees
are paid. This Patent was issued as United States Patent Number 10,737,198 on
August 11, 2020. The Company's attorneys at Oliff PLC also prepared a
Continuation Application for Claims Numbered 18-62 and 71-82 so that the Company
can continue to prosecute these Claims separately. This Continuation Application
has resulted in the issuance of United States Patent Number 10,835,829 on
November 17, 2020.
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On August 11, 2020, the United States Patent and Trademark Office issued United
States Patent Number 10,737,198 to the Company as assignee of Application Number
16/255.157, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS
AND ADDING VOLATILE UNSATURATED HYDROCARBONS, filed by Vincent Lombardi, one of
the founders of the Company and its current President and Chief Executive
Officer.
On November 17, 2020, the United States Patent and Trademark Office issued
United States Patent Number 10,835,839 to the Company as assignee of Application
Number 16/255.157, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC
COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, filed by Vincent
Lombardi, one of the founders of the Company and its current President and Chief
Executive Officer.
On May 24, 2022, the United States Patent and Trademark Office issued United
States Patent Number 11,338,222 to the Company as assignee of Application Number
16/255.157, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE ORGANIC COMPOUNDS
AND ADDING VOLATILE UNSATURATED HYDROCARBONS, filed by Vincent Lombardi, one of
the founders of the Company and its current President and Chief Executive
Officer.
Now United States Patent Numbers 10,737,198, 10,835,839 and 11,338,222 have been
formally issued, the Company intends to begin actively marketing and licensing
its patented technologies in both the cannabis and hemp market spaces as well as
pursuing its own uses of its patented technologies in relation to various end
user products that can benefit from its patented technologies. In regards to the
issuance of United States Patents Numbered 10,737,198, 10.835,839 and
11,338,222, Vincent C. Lombardi, President and Chief Executive Officer of the
Company, has stated that "we believe the effect of the issuance of Patents
Numbered 10,737, 198, 10,835,839 and 11,338,222 is that it will allow the
Company to be able to effectively control the marketplace for low, or no, odor
cannabis and hemp products in the United States which will allow the Company to
start generating licensing revenue from the technology disclosed in United
States Patents Numbered 10,737,198, 10,835,839 and 11,338,222."
The Company has received a First Office Action on its Canadian Patent
Application Number 3,031,123, CANNABIS PRODUCTS MODIFIED BY REMOVING VOLATILE
ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS, and that its
attorneys at Oliff PLC and Bereskin & Parr in Canada have responded to it. The
Company has also recently amended its Canadian Patent Application so that it
accurately reflects the claims embodied in United States Patents Numbered
10,737,198 and 10,835,839 as well as the Continuation Application Number
17,098/539 filed on November 16, 2020. The Company has received a second Office
Action to this Amended Canadian Patent Application and, in concert with its
attorneys, has recently responded to it. The Company has received a third Office
Action to this Amended Canadian Patent Application and, in concert with its
attorneys, has responded to it.
The Company's outside Patent Counsel, Oliff PLC has completed the Application to
the European Patent Office ("EPO") based on Patent Cooperation Treaty
Application Number PCT/US2019/014778, CANNABIS PRODUCTS MODIFIED BY REMOVING
VOLATILE ORGANIC COMPOUNDS AND ADDING VOLATILE UNSATURATED HYDROCARBONS. It has
been filed as European Patent Office Application Number 19743904.5. The Company
has also recently amended its EPO Application so that it accurately reflects the
claims embodied in United States Patents Numbered 10,737,198 and 10,835,839 as
well as the Continuation Application Number 17,098/539 filed on November 16,
2020. This EPO Application, as amended, will allow the Company to simultaneously
prosecute its PCT Application in a total of 44 different countries in Europe and
the surrounding areas as well as Hong Kong. The Company has received a First
Office Action to its European Patent Office Application Number 19743904.5. The
Company and its attorneys at Oliff PLC and Astrum Element One Limited in the
United Kingdom are in the process of preparing a response to it.
The Company has prepared and filed, on April 22, 2022, a Continuation-in-Part of
Application Number 17/098,539 based on further changes to the processes referred
to in Application Number 17/098,539 which should result in the Company receiving
a fourth United States Patent in due time. The Company believes that the
Continuation-in-Part will provide the Company additional protection of its
current intellectual property portfolio.
Marketing Plans to License the Intellectual Property
High Sierra is now marketing the licensing of its technology in states in the
U.S. where cannabis and/or hemp has been legalized both for medicinal and/or
recreational use. It also plans to use a similar marketing strategy in all
provinces in Canada which has legalized both the medicinal and recreational uses
of cannabis as of October 17, 2018. Hemp has long been legal in Canada. High
Sierra is targeting entities that are licensed to produce, process and/or
manufacture cannabis and/or hemp related products. High Sierra also believes
that its technology will be of interest to tobacco companies in the United
States, Canada and other places if those companies choose to enter the cannabis
and/or hemp marketplaces as the legalization of cannabis and/or hemp progresses.
22
On October 14, 2020, we entered into an exclusive Letter Agreement with Artemis
Holdings, LLC pursuant to which Artemis Holdings, LLC was to assist us in
maximizing the value of our patents and patents pending for odorless cannabis.
Artemis was to provide a detailed market analysis of the patents and to assist
with any licensing or sale of the patents. The agreement was for a period of
nine months, and then it was to automatically renew for additional one month
periods until either party terminates it. The Company agreed to pay Artemis a
fee of $5,000 per month during the term, and a transaction fee of 7.5% of the
gross proceeds of any transaction (sale, license, etc.) arranged by Artemis. The
parties mutually agreed to terminate the agreement effective April 1, 2021, and
neither party owes any obligations to the other following the termination.
Agreement with Boustead Securities
On November 9, 2022, the Company executed an Agreement with Boustead Securities
for a Proposed Pre-IPO Financing, Initial Public Offering and Corporate
Transactions (The "Agreement"). The Agreement contemplates that Boustead
Securities could act as the underwriter of a future public offering of the
Company's securities based on certain terms and conditions described in the
Agreement. The Agreement describes, among other things, the success fees or
compensation that the Company will be obligated to pay to Boustead Securities in
the event that the Company engages in certain transactions described in the
Agreement such as a private placement offering, a public offering, merger,
acquisition, joint venture, license, etc., during the term of the agreement or
during a tail period (12 months following termination of the Agreement)
thereafter. The Agreement terminates upon the later of: (a) eighteen months from
the date of the Agreement; (b) twelve months from the closing date of a public
offering of the Company's securities (if one is engaged in); or (c) the mutual
agreement of the parties. The Agreement does not contain any obligation on the
part of the Company to engage in any such transactions or for Boustead
Securities to participate in any such transactions with the Company. In the
Agreement, the Company grants to Boustead Securities an irrevocable right of
first refusal for approximately two years following the termination of the
Agreement to act as the sole investment banker, sole book-runner, sole financial
advisor and/or sole placement agent, at Boustead's sole discretion, for each
transaction described in the Agreement. A copy of the agreement is attached to
the Company's Current Report on Form 8-K as Exhibit 10.1 filed on November 14,
2022.
Consulting Agreement
On August 14, 2020, we entered into a non-exclusive Consulting Agreement with
Stanley Berk/Steven Leatherman ("SBSL Consultants") and Jeff Baclet/Tom Prutzman
("Consultants") pursuant to which the SBSL Consultants and other Consultants
agreed to review short term and long term business forecasts for the Company,
review documents for due diligence purposes, seek out private and public funding
for the Company, and seek out potential licensing partners and potential buyers
of the Company's intellectual property. They referred the Company to Artemis
Holdings, LLC. See above. The term of the Agreement was for six months. The
Company agreed to pay a consulting fee of $7,500 per month (to be deferred until
the Company has raised at least $500,000), and 5.0% of funds raised from any
source brought to the Company by the Consultants. The Consultants were also
granted warrants to purchase 5.0% of the securities sold in such fundraising at
the same price, which is exercisable for a period of 5 years. This August 14,
2020 Consulting Agreement was amended on December 28, 2020 to now be effective
as of January 1, 2021. Under the terms of this amendment the term of the
Agreement became one year ending on December 31, 2021. The consulting fees were
reduced to $1,200.00 per month, a potential bonus of $45,000 was incorporated,
the referral fees were reduced to 2% and the warrants to be issued were set at
2.5% of the value of certain transactions caused by Admiral Investment Banking
and 2% of the value of certain transactions caused by Artemis Holdings Group,
LLC. A copy of the Amended Consulting Agreement is attached to our Annual Report
for the year ended December 31, 2020 as Exhibit 10.7. This Agreement terminated
on its own terms on December 31, 2021 and the parties have no further
obligations to each other.
Admiral Investment Banking Agreement
On December 28, 2020, the Company entered into an Agreement with Admiral
Investment Banking ("Admiral") to market our Private Placement Offering of
2,000,000 shares of common stock to accredited investors. The Agreement is for
the period of one year and has certain renewal provisions. The Agreement
provided for commissions of 8% of monies generated by Admiral to be paid to
Admiral. It also provided for an override of 2% to be payable to Admiral in the
event of the inclusion of another broker/dealer in a transaction. The Agreement
also provided for the issuance of warrants to Admiral or its principals in
certain instances if so designated by Admiral. The warrants are exercisable at
$0.01 per share for a period of five (5) years after the issuance date and cover
a total of 50,000 shares. The Company terminated the Agreement effective as of
November 10, 2021, but the outstanding warrants are still in effect.
23
Vestech Securities. Inc. Finders Fee Agreement
On February 24, 2022, the Company entered into a non-exclusive Finders Fee
Agreement (the "Agreement") with Vestech Securities, Inc. ("Vestech") under
which Vestech will work to introduce parties to the Company who may be
interested in purchasing common stock in the Company, providing capital
financing and/or purchasing or licensing some, or all, of the Company's Patented
and Patent Pending technologies. The Agreement is for the period of six months
and provides for a Finders Fee of 8% for capital raising transactions and a
Finders Fee of 4% for Merger and Acquisitions transactions. This Agreement
expired in August of 2022. A copy of this Agreement is attached hereto as
Exhibit 10.17.
Joint Venture Hemp Cigarette Business; Related Agreements
On November 17, 2022, the Company's wholly owned subsidiary, High Sierra
Technologies, Inc. ("HSTI"), a Nevada corporation, executed a Joint Venture
Agreement ("Joint Venture Agreement") with Hempacco Co., Inc. ("Hempacco"), a
Nevada corporation with its principal office located in San Diego, California,
for the production, marketing and sales of Hemp Smokables that will use the
Company's patented and patent pending technologies as well as certain patented
and patent pending technologies held by Hempacco. Pursuant to this Joint Venture
Agreement, HSTI and Hempacco formed a new Nevada corporation known as
Organipure, Inc. ("Organipure") on November 7, 2022. HSTI and Hempacco each own
one half of the equity interests of Organipure. HSTI appointed the Company's two
directors to serve as two of the directors of Organipure. Hempacco has also
designated two persons to serve as two of the directors of Organipure. HSTI and
Hempacco shall mutually agree on a fifth person to serve as a director of
Organipure as soon as practicable following the date of the Joint Venture
Agreement. The Joint Venture Agreement specifies the rights and responsibilities
of HSTI and Hempacco. It is intended that the Joint Venture Agreement will
continue indefinitely until Organipure is dissolved in accordance with the Joint
Venture Agreement or applicable law.
In concert with the execution of said Joint Venture Agreement, Hempacco also
entered into a Hemp Smokables Manufacturing Agreement with Organipure
("Manufacturing Agreement") pursuant to which Hempacco will manufacture hemp
smokables for Organipure as the worldwide manufacturer and supplier of hemp
smokables for Organipure, subject to the terms and conditions of the
Manufacturing Agreement. The hemp smokables will be manufactured according to
product specifications and packaging described in the Manufacturing Agreement.
It is intended that Organipure will sell the hemp smokables and be responsible
for paying for all manufacturing expenses, shipping expense, sales expenses, and
other related expenses. The Manufacturing Agreement has a term of ten years, and
automatically renews for successive ten-year terms unless either party gives
written notice of termination.
Also, in concert with the execution of said Joint Venture Agreement, HSTI
entered into a Patent License Agreement with Organipure which granted to
Organipure a non-exclusive license of HSTI's patented and patent pending
technologies to be used in connection with the hemp smokable products. The
annual license fee shall be five percent (5.0%) of Organipure's gross receipts
of the use of the HSTI patents by Organipure. The term of the license expires
December 31, 2033, unless terminated earlier for reasons specified in the Patent
License Agreement. The license may be terminated earlier for certain reasons
specified in the license such as: (a) termination of the Organipure joint
venture; (b) Organipure's failure to achieve annualized revenues of at least One
Million Dollars per year within one year from the effective date of the
agreement; or (c) failure of Organipure to increase its annualized revenues by
at least thirty percent per year during the first five years of the agreement.
Similarly, Hempacco entered into a Patent License Agreement with Organipure
which granted to Organipure a non-exclusive license of Hempacco's patented
technologies to be used in connection with the hemp smokable products. The
annual license fee shall be five percent (5.0%) of Organipure's gross receipts
of the use of the Hempacco patents by Organipure. The term of the license
expires December 31, 2033, unless terminated earlier for reasons specified in
the Patent License Agreement. The license may be terminated earlier for certain
reasons specified in the license such as: (a) termination of the Organipure
joint venture; (b) Organipure's failure to achieve annualized revenues of at
least One Million Dollars per year within one year from the effective date of
the agreement; or (c) failure of Organipure to increase its annualized revenues
by at least thirty percent per year during the first five years of the
agreement.
24
In order to assist in the financing of the Organipure joint venture, HSTI
entered into a Series Promissory Note with Organipure which allows Organipure to
borrow up to $500,000 from HSTI at an interest rate equal to the Short Term
Applicable Federal Rate (currently 4.1% per annum), with principal and interest
due and payable in three years on November 17, 2025. The Series Promissory Note
is unsecured. The Company is seeking to raise additional capital so that HSTI
will be able to fulfill its obligations under the Promissory Note.
Similarly, Hempacco entered into a Series Promissory Note with Organipure which
allows Organipure to borrow up to $500,000 from Hempacco at an interest rate
equal to the Short Term Applicable Federal Rate (currently 4.1% per annum), with
principal and interest due and payable in three years on November 17, 2025. The
Series Promissory Note is unsecured.
Copies of the Joint Venture Agreement, Manufacturing Agreement, two License
Agreements and two Series Promissory Notes are attached to this Quarterly Report
as Exhibits 10.20 through 10.25.
Lease Agreement
The Company has two places of business. The corporate office is located at 1495
Ridgeview Drive, Suite 230A, Reno, Nevada 89519. The space at that location
rented by the Company consists of office space with a fixed monthly payment for
rent and utilities. The Company is also leasing a research and development and
warehousing facility located at 229 East 5th Street in Reno, Nevada 89512.
On November 9, 2021, the Company entered into a Lease Agreement with 3
Squirrels, LLC to rent approximately 1,475 square feet of commercial space which
the Company plans to use for research and development purposes. Due to the
inability of the Landlord to deliver the Premises as called for in the Lease
Agreement on time, a First Amendment to that Lease was signed on January 30,
2022 which changed some terms in the original Lease. The Lease is now for a
period of one (1) year commencing February 1, 2022, and contains options for two
(2) additional years. The monthly rent is $1,253.75 plus $203.50 in estimated
CAM charges.
Plan of Operation
Our plan of operation for the next 12 months is to: (i) market the licensing of
the Company's technology in states in the U.S. where cannabis and/or hemp has
been legalized for medicinal and/or recreational use, and in the Canadian
provinces; and (ii) seek to raise additional equity funding so that the Company
may pursue the construction and operation of a facility to produce and market
hemp cigarettes to be located in Northern Nevada; (iii) complete the
transactions which are the subjects of the two letters of intent signed by the
Company which include acquiring an Oregon company which specializes in
hemp-related products and forming a joint venture to produce, market and
distribute hemp cigarettes and hemp-based products in the United States, Canada
and Mexico using the Company's Patented and Patent Pending Technologies and
25
(iv) begin the production and distribution of hemp cigarettes in accordance with
the Letter of Intent that the Company entered into on February 18, 2022. During
the next 12 months, our cash requirements include expenses to market our
technology; expenses to construct and operate a facility to produce and market
hemp cigarettes to be located in Northern Nevada; the payment of our SEC
reporting filing expenses, including associated legal and accounting fees; and
costs incident to maintaining our good standing as a corporation in our state of
organization. We anticipate that we will need to raise additional equity funds
to successfully commence and operate a facility to produce and market hemp
cigarettes. We have no commitments to raise any additional funds at the present
time, and we can offer to assurances that we will be able to raise additional
funds on terms acceptable to the Company.
Results of Operations - Three Months Ended September 30, 2022 and Three Months
Ended September 30, 2021
We have generated no revenues since inception. We hope to start earning revenues
during the fiscal year ending December 31, 2023.
General and administrative expenses were $24,446 for the three month period
ended September 30, 2022, a decrease of $86,145 from the $110,590 of general and
administrative expenses incurred during the three months ended September 30,
2021. Most of the general and administrative expenses incurred in the earlier
period were to pay for contract services and consultants. The Company did not
have such expenses in the later period. We incurred depreciation of $10,429 in
the three months ended September 30, 2022, which is an increase of $1,592 from
the $8,837 of depreciation incurred in the three month period ended September
30, 2021.
We incurred interest expense of $17,132 in the three months ended September 30,
2022, an increase of $2,016 from the $15,116 of interest expense incurred in the
three months ended September 30, 2021. This is due to the fact that the Company
increased its borrowing from unrelated parties through issuing an additional
$100,000 in its Notes Payable-Series 2 Senior Convertible Secured Promissory
Notes in February 2022. We incurred interest expense-related party of $402 in
the three months ended September 30, 2022, which is the same as the interest
expense-related party of $402 incurred in the three months ended September 30,
2021.
We incurred a net loss of $52,408 during the three months ended September 30,
2022, a decrease of $82,537 from the $134,945 net loss incurred during the three
months ended September 30, 2021. The Company's decrease in net loss in the
current period is largely due to the decrease in general and administrative
expenses in the current period partially offset by modest increases in interest
expense and depreciation in the current period.
Results of Operations - Nine Months Ended September 30, 2022 and Nine Months
Ended September 30, 2021
We have generated no revenues since inception. We hope to start earning revenues
during the fiscal year ending December 31, 2023.
General and administrative expenses were $139,277 for the nine month period
ended September 30, 2022, a decrease of $71,119 from the $210,396 of general and
administrative expenses incurred during the nine months ended September 30,
2021. Most of the decrease in general and administrative expenses incurred in
the later period were for decreases in contract services and consultants and for
a decrease in the issuance of shares for services in the later period. We
incurred depreciation of $28,103 in the nine months ended September 30, 2022, an
increase of $1,591 from the $26,512 of depreciation incurred in the nine month
period ended September 30, 2021.
We incurred interest expense of $49,808 in the nine months ended September 30,
2022, an increase of $6,564 from the $43,244 of interest expense incurred in the
nine months ended September 30, 2021. This is due to the fact that the Company
increased its borrowing from unrelated parties through issuing an additional
$100,000 in its Notes Payable-Series 2 Senior Convertible Secured Promissory
Notes in February 2022. We incurred interest expense-related party of $1,194 in
the nine months ended September 30, 2022, a decrease of $555 from the interest
expense-related party of $1,749 in the nine months ended September 30, 2021.
This is due to the fact that the Company repaid $10,000 of its notes
payable-related party during the second quarter of 2021.
We incurred a net loss of $218,382 during the nine months ended September 30,
2022, a decrease of $63,519 from the $281,901 net loss incurred during the nine
months ended September 30, 2021. The Company's decrease in net loss in the
current period is largely due to the decrease in general and administrative
expenses partially offset by modest increases in interest expense and
depreciation in the later period.
26
Liquidity and Capital Resources
At September 30, 2022, we had total current assets of $3,561 consisting of
$2,307 in cash and $1,254 in a deposit. We had $513,885 in total current
liabilities as of September 30, 2022. Our total current liabilities consisted of
notes payable-current maturities of $375,500, notes payable-related party of
$13,306, accounts payable and accrued expenses of $116,518 and accounts payable
and accrued expenses-related party of $8,561. We had property, plant and
equipment, net of $105,677 as of September 30, 2022. We had long term
liabilities consisting of convertible notes payable of $200,000 as of September
30, 2022. See our Plan of Operation above for information about our cash
requirements for the next 12 months.
The cash flows from operating activities consisted of the following: During the
nine months ended September 30, 2022, we had an increase in accounts payable and
accrued expenses of $28,018, an increase in accounts payable and accrued
expenses-related party of $1,195, depreciation expense of $28,103 and a decrease
in deposit of $1,457. When this is combined with our net loss of $218,382 for
the nine months ended September 30, 2022, it results in net cash used in
operating activities of $159,609.
During the nine months ended September 30, 2021, we had an increase in accounts
payable and accrued expenses of $106,070, a decrease in accounts payable and
accrued expenses - related party of $5,750, depreciation expense of $26,512 and
issuance of common stock for services of $30,000. When this is combined with our
net loss of $281,901 for the nine months ended September 30, 2021, it results in
net cash used in operating activities of $125,069.
In the nine months ended September 30, 2022, we received proceeds from
convertible notes payable of $100,000 and proceeds from the sale of common stock
of $50,000 which resulted in net cash provided by financing activities of
$150,000. During the same nine month period we paid $43,435 for property, plant
and equipment in our investing activities.
In the nine months ended September 30, 2021, we received proceeds from the
exercise of warrants of $100, proceeds from the sale of common stock of $90,000,
proceeds from notes payable of $50,000 and we made a payment on notes payable -
related party of $10,000 which resulted in net cash provided by financing
activities of $130,100 in the same nine month period.
Going Concern
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has sustained
operating losses during the current year-to-date and may not achieve the level
of profitable operations to sustain its activities. These factors raise
substantial doubt as to its ability to obtain debt and/or equity financing and
achieve profitable operations.
Management intends to raise additional operating funds from the planned sale of
our hemp farming equipment, and from raising funds through equity and/or debt
offerings to fund operations for the next 12 months. However, there can be no
assurance management will be successful in its endeavors. Ultimately, the
Company will need to achieve profitable operations in order to continue as a
going concern.
There are no assurances that the Company will be able to either (1) achieve a
level of revenues adequate to generate sufficient cash flow from operations; or
(2) obtain additional financing through either private placement, public
offerings and/or bank financing necessary to support its working capital
requirements. To the extent that funds generated from operations and any
private placements, public offerings and/or bank financing are insufficient, the
Company will have to raise additional working capital. No assurance can be
given that additional financing will be available, or if available, will be on
terms acceptable to the Company. If adequate working capital is not available
to the Company it may be required to curtail its operations.
Emerging Growth Company Critical Accounting Policy Disclosure
The Company qualifies as an "emerging growth company" under the 2012 JOBS Act.
Section 107 of the JOBS Act provides that an emerging growth company can take
advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act for complying with new or revised accounting standards. As an
emerging growth company, the Company can delay the adoption of certain
accounting standards until those standards would otherwise apply to private
companies. The Company may elect to take advantage of the benefits of this
extended transition period in the future.
27
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements of any kind for the nine month period
ended September 30, 2022.
Potential Impact of COVID-19
The Company is now less concerned that the COVID-19 virus may impact the
Company's ability to raise additional equity capital due to the uncertainty of
the virus' effects on the economy and capital markets, which may make potential
investors less likely to invest during the pandemic. This may affect the
Company's ability to raise equity capital to meet its financial obligations,
implement its business plan and continue as a going concern. This concern has
eased significantly as vaccinations to protect against the virus have increased,
and business has generally recovered from the effects of Covid-19 throughout the
country.
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