UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
☐QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to __________
Commission file number: 000-33467number: 000-1144546
FICAAR, INCHFactor, Inc.
(Exact name of registrant as specified in its charter)
Georgia | 58-2634747 | |
(State or other jurisdiction of | ( | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) |
(929)930-3969
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class | Trading Symbol(s) | Name of each exchange on which registered/ | ||
HFactor, Inc. Common Stock | HWTR | OTC Markets: PINK |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to thesuch filing requirements for the past 90 days. Yesþ☒ No o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationRegulations S-T (§232.405(232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso☒ No o☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,”filer”, “smaller reporting company” and “emerging growth company” in rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | |||
Non-accelerated filer☒ | Smaller reporting company | ||
Emerging | |||
Growth Company ☒ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).: Yes o☐Noþ☒
As of October 15, 2018, there were 44,093,276November 11, 2023 the Registrant had issued and outstanding shares of the Company’ s common stock.
FICAAR, INC.
HFactor, Inc.
FORM 10-Q
TABLE OF CONTENTS
FICAAR,HFACTOR, INC.
(A development stage enterprise)
Condensed Consolidated Balance Sheets
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
-Unaudited- | -Audited- | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | $ | 124,708 | $ | 148,055 | ||||
Accounts receivable, net of allowance for doubtful accounts | 33,278 | 124,109 | ||||||
Inventories | 409,493 | 461,194 | ||||||
Prepaid expenses and other current assets | 206,582 | 71,042 | ||||||
Total Current Assets | 774,061 | 804,400 | ||||||
Fixed Assets, net of accumulated depreciation | 210,260 | 198,192 | ||||||
Intangible Asset, net of accumulated amortization | 619,667 | 673,292 | ||||||
Total Assets | $ | 1,603,988 | $ | 1,675,884 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 3,405,486 | $ | 3,137,177 | ||||
Accrued Interest | 493,478 | 408,722 | ||||||
Current portion of notes payable-third parties, net of debt discount | 851,032 | 847,566 | ||||||
Note payable-related parties | 9,313 | 870,429 | ||||||
Derivative liabilities | 801,449 | 801,449 | ||||||
Total Current Liabilities | 5,560,757 | 6,065,343 | ||||||
Long-Term Liabilities | ||||||||
Government loans payable | 160,000 | 160,000 | ||||||
Note payable-related parties | 595,918 | – | ||||||
Total Long-Term Liabilities | 755,918 | 160,000 | ||||||
Total Liabilities | 6,316,675 | 6,225,343 | ||||||
Commitments and Contingencies | – | – | ||||||
Stockholders' Deficit | ||||||||
Preferred stock | , $ par value shares authorized, shares issued and outstanding as follows:||||||||
Series C voting, convertible Preferred stock, $ | par value shares authorized; and shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively0 | 1,000 | ||||||
Series D non-voting, convertible Preferred stock, $ | par value shares authorized; and shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively5 | 4 | ||||||
Common stock | , $ par value shares authorized; and shares issued and outstanding on September 30, 2023 and December 31, 2022, respectively50,467 | 49,766 | ||||||
Additional paid-in capital | (404,331 | ) | (404,628 | ) | ||||
Accumulated deficit | (4,358,828 | ) | (4,195,601 | ) | ||||
Total Stockholders' Deficit | (4,712,687 | ) | (4,549,459 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 1,603,988 | $ | 1,675,884 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
-Unaudited- | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | $ | - | $ | - | ||||
Total Assets | $ | - | $ | - | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 9,862 | $ | 12,830 | ||||
Accrued Interest | 11,629 | 9,647 | ||||||
Advances payable -officer | 485 | 425 | ||||||
Total Current Liabilities | 21,976 | 22,902 | ||||||
Long-Term Liabilities | ||||||||
Note payable - Third party | 57,734 | 44,234 | ||||||
Note payable - Related party | 6,525 | 6,525 | ||||||
Total Long-Term Liabilities | 64,259 | 50,759 | ||||||
Total Liabilities | $ | 86,234 | $ | 73,661 | ||||
Commitments and Contingencies | - | - | ||||||
Stockholders' Deficit | ||||||||
Preferred stock 10,000,000, $.001 par value shares | ||||||||
authorized, no shares issued and outstanding | ||||||||
Common stock 200,000,000, $.001 par value shares | ||||||||
authorized; 44,093,276 shares issued and outstanding at | 44,093 | 44,093 | ||||||
June 30, 2018 and December 31, 2017 | ||||||||
Additional paid-in capital | (44,093 | ) | (44,093 | ) | ||||
Accumulated deficit | (86,234 | ) | (73,661 | ) | ||||
Total Stockholders' Deficit | (86,234 | ) | (73,661 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | - | $ | - |
3 |
Going Concern (Note 2)
HFACTOR, INC.
Condensed Consolidated Statements of Operations
-Unaudited-
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
REVENUES | $ | $ | $ | $ | ||||||||||||
Sales, net | 171,488 | 272,329 | 964,910 | 1,468,447 | ||||||||||||
TOTAL REVENUES | 171,488 | 272,329 | 964,910 | 1,468,447 | ||||||||||||
COST OF REVENUES | 69,606 | 161,877 | 421,008 | 704,272 | ||||||||||||
GROSS PROFIT | 101,882 | 110,452 | 543,902 | 764,175 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Manufacturing expenses | 597 | 71,356 | 137,739 | 159,720 | ||||||||||||
Sales and marketing expenses | 142,614 | 375,824 | 833,992 | 1,445,291 | ||||||||||||
General and administrative expenses | 97,015 | 149,832 | 397,656 | 735,013 | ||||||||||||
Total expenses | 240,227 | 597,012 | 1,369,388 | 2,340,024 | ||||||||||||
Loss from operations | (138,345 | ) | (486,560 | ) | (825,486 | ) | (1,575,849 | ) | ||||||||
Other (income) expense | ||||||||||||||||
Amortization of debt discount | – | 72,420 | – | 383,426 | ||||||||||||
Derivative (income) expense | – | – | – | 7,452 | ||||||||||||
Change in FMV of derivatives | – | – | – | – | ||||||||||||
Interest expense | 30,343 | 66,830 | 100,092 | 157,472 | ||||||||||||
Other Income | (17,780 | ) | (814 | ) | (762,352 | ) | (36,900 | ) | ||||||||
Total Other (income) expense | 12,564 | 138,436 | (662,259 | ) | 511,450 | |||||||||||
Net Loss | $ | (150,909 | ) | $ | (624,996 | ) | $ | (163,226 | ) | $ | (2,087,299 | ) | ||||
Net Loss per common shares outstanding- Basic and diluted: | ||||||||||||||||
Net earning/(loss) per share attributable to common stockholders - basic & diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Weighted average shares outstanding |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FICAAR, INC.HFACTOR, Inc.
(A development stage enterprise)Consolidated Statements of Stockholders' Deficit
Condensed Consolidated Statement of OperationsUnaudited-
For The | For The | For The | For The | |||||||||||||
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
-Unaudited- | -Unaudited- | -Unaudited- | -Unaudited- | |||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
Operating expenses: | ||||||||||||||||
Other operating expenses | 2,310 | 2,060 | 6,592 | 2,710 | ||||||||||||
Professional fees: | ||||||||||||||||
Audit fees | 2,000 | - | 4,000 | - | ||||||||||||
Research and development | - | - | - | - | ||||||||||||
Total expenses | 4,310 | 2,060 | 10,592 | �� | 2,710 | |||||||||||
Loss from operations | (4,310 | ) | (2,060 | ) | (10,592 | ) | (2,710 | ) | ||||||||
Interest expense | (996 | ) | (548 | ) | (1,981 | ) | (1,090 | ) | ||||||||
Net loss | $ | (5,306 | ) | $ | (2,608 | ) | $ | (12,573 | ) | $ | (3,800 | ) | ||||
Net Loss per common shares outstanding-Basic and dilutued: | ||||||||||||||||
Net Loss per share attributable to common stockholders | $ | (0.0001 | ) | $ | (0.0001 | ) | $ | (0.0003 | ) | $ | (0.0001 | ) | ||||
Weighted average shares outstanding | 44,093,276 | 44,093,276 | 44,093,276 | 44,093,276 |
Series C | Series D | Common Stock | Additional | |||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common stock | Subscribed | Paid-In | Accumulated | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | 1,000,000 | $ | 1,000 | 3,054 | $ | 3 | 47,631,164 | $ | 47,631 | 400,000 | $ | 400 | $ | (2,873,543 | ) | $ | (1,774,108 | ) | $ | (4,598,617 | ) | |||||||||||||||||||||||
Sale of common shares | – | – | – | – | 325,000 | 325 | 45,000 | 45 | 369,630 | – | 370,000 | |||||||||||||||||||||||||||||||||
Issuance of subscribed shares | – | – | – | – | 400,000 | 400 | (400,000 | ) | (400 | ) | – | – | – | |||||||||||||||||||||||||||||||
Cancellation of shares | – | – | – | – | (400,000 | ) | (400 | ) | – | – | 400 | – | – | |||||||||||||||||||||||||||||||
Cancellation of warrants in exchange for preferred stock | – | – | 200 | – | – | – | – | – | 335,651 | �� | – | 335,651 | ||||||||||||||||||||||||||||||||
Net loss for the 3 months ended March 31, 2022 | – | – | – | – | – | – | – | – | – | (806,873 | ) | (806,873 | ) | |||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | 1,000,000 | 1,000 | 3,254 | 3 | 47,956,164 | 47,956 | 45,000 | 45 | (2,167,862 | ) | (2,580,981 | ) | (4,699,839 | ) | ||||||||||||||||||||||||||||||
Sale of common shares | – | – | – | – | 150,000 | 150 | – | – | 149,850 | – | 150,000 | |||||||||||||||||||||||||||||||||
Issuance of preferred and subscribed shares | – | – | 100 | – | 45,000 | 45 | (45,000 | ) | (45 | ) | – | – | – | |||||||||||||||||||||||||||||||
Cancellation of shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Cancellation of warrants in exchange for preferred stock | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Net loss for the 3 months ended June 30, 2022 | – | – | – | – | – | – | – | – | – | (655,430 | ) | (655,430 | ) | |||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | 1,000,000 | 1,000 | 3,354 | 3 | 48,151,164 | 48,151 | – | – | (2,018,012 | ) | (3,236,411 | ) | (5,205,269 | ) | ||||||||||||||||||||||||||||||
Sale of common shares | – | – | – | – | – | – | 600,000 | 600 | 599,400 | – | 600,000 | |||||||||||||||||||||||||||||||||
Shares issued for purchase of Intellectual Property | – | – | – | – | – | – | 715,000 | 715 | 714,285 | – | 715,000 | |||||||||||||||||||||||||||||||||
Net loss for the 3 months ended September 30, 2022 | – | – | – | – | – | – | – | – | (624,996 | ) | (624,996 | ) | ||||||||||||||||||||||||||||||||
Balance as of September 30, 2022 | 1,000,000 | $ | 1,000 | 3,354 | $ | 3 | 48,151,164 | $ | 48,151 | 1,315,000 | $ | 1,315 | $ | (704,327 | ) | $ | (3,861,407 | ) | $ | (4,515,265 | ) |
5 |
Series C | Series D | Common Stock | Additional | |||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common stock | Subscribed | Paid-In | Accumulated | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | 1,000,000 | $ | 1,000 | 4,349 | $ | 4 | 49,766,164 | $ | 49,766 | – | $ | – | $ | (404,628 | ) | $ | (4,195,601 | ) | $ | (4,549,459 | ) | |||||||||||||||||||||||
Sale of common shares | – | – | – | – | 701,250 | 701 | – | – | (701 | ) | – | – | ||||||||||||||||||||||||||||||||
Cancellation of shares | (999,999 | ) | (1,000 | ) | – | – | – | – | – | – | 1,000 | – | – | |||||||||||||||||||||||||||||||
Issuance of preferred and subscribed shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Net profit for the 3 months ended 31 March 2023 | – | – | – | – | – | – | – | – | – | 359,662 | 359,662 | |||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | 1 | – | 4,349 | 4 | 50,467,414 | 50,467 | – | – | $ | (404,330 | ) | $ | (3,835,939 | ) | $ | (4,189,797 | ) | |||||||||||||||||||||||||||
Sale of common shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Cancellation of shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Issuance of preferred and subscribed shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Net loss for the 3 months ended 30 June 2023 | – | – | – | – | – | – | – | – | – | (371,980 | ) | (371,980 | ) | |||||||||||||||||||||||||||||||
– | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2023 | 1 | – | 4,349 | 4 | 50,467,414 | 50,467 | – | – | (404,330 | ) | (4,207,919 | ) | (4,561,778 | ) | ||||||||||||||||||||||||||||||
Sale of common shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Cancellation of shares | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Issuance of preferred shares | – | – | 1,300 | 1 | – | – | – | – | (1 | ) | – | – | ||||||||||||||||||||||||||||||||
Net loss for the 3 months ended 30 Sep 2023 | – | – | – | – | – | – | – | – | – | (150,909 | ) | (150,909 | ) | |||||||||||||||||||||||||||||||
Balance as of September 30, 2023 | 1 | $ | – | 5,649 | $ | 5 | 50,467,414 | $ | 50,467 | – | $ | – | $ | (404,331 | ) | $ | (4,358,827 | ) | (4,712,687 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FICAAR,HFACTOR, INC.
(A development stage enterprise)
Condensed Consolidated StatementStatements of Cash Flows
Unaudited-
Six Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | Nine Months Ended | Nine Months Ended | |||||||||||||
-Unaudited- | -Unaudited- | September 30, 2023 | September 30, 2022 | |||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (12,573 | ) | $ | (3,800 | ) | ||||||||||
Adjustments for changes in working capital: | ||||||||||||||||
Net Income/(Loss) | $ | (163,226 | ) | $ | (2,087,299 | ) | ||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization | 70,393 | 60,565 | ||||||||||||||
Other income | (763,419 | ) | – | |||||||||||||
Accrued Interest | 100,092 | 127,329 | ||||||||||||||
Amortization of debt discount on convertible notes | – | 383,426 | ||||||||||||||
Change in fair market value of derivative liabilities | – | 7,452 | ||||||||||||||
Other Non-cash expenses | 172,849 | – | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 90,831 | (81,383 | ) | |||||||||||||
Inventories | 566,728 | 75,230 | ||||||||||||||
Prepaid expenses | (135,540 | ) | (89,710 | ) | ||||||||||||
Accounts payable and accrued expenses | (2,968 | ) | 2,600 | 566,728 | 155,572 | |||||||||||
Accrued interest | 1,982 | 1,090 | ||||||||||||||
Advances payable-officer | 60 | 110 | ||||||||||||||
NET CASH (USED) IN OPERATING ACTIVITIES | (8,010 | ) | (1,448,818 | ) | ||||||||||||
Net cash (used ) in operating activities | (13,500 | ) | - | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Proceeds from sale of fixed assets | 42,858 | – | ||||||||||||||
NET CASH (USED) IN INVESTING ACTIVITIES | 42,858 | – | ||||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from borrowing | 13,500 | - | ||||||||||||||
Cash flows from financing activities | 13,500 | - | ||||||||||||||
Sales of common stock | – | 1,120,000 | ||||||||||||||
Repayment of principal and interest of loans | (39,656 | ) | – | |||||||||||||
Repayment of debt lease obligation | (18,539 | ) | – | |||||||||||||
Proceeds from related parties | – | 100,000 | ||||||||||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (58,195 | ) | 1,220,000 | |||||||||||||
Increase (decrease) in cash and cash equivalents | - | - | (23,347 | ) | (228,818 | ) | ||||||||||
Cash and cash equivalents - Beginning | - | - | 148,055 | 250,854 | ||||||||||||
Cash and cash equivalents - Ending | $ | - | $ | - | $ | 124,708 | $ | 22,036 | ||||||||
Supplemental disclosures: | ||||||||||||||||
Supplemental Disclosure of Cash Flow Information | ||||||||||||||||
Cash paid for interest | $ | - | $ | - | $ | 15,337 | $ | 30,143 | ||||||||
Cash paid for income taxes | $ | - | $ | - | $ | – | $ | – | ||||||||
NON-CASH TRANSACTIONS: | ||||||||||||||||
Preferred stock issued in exchange for cancellation of Warrant Liabilities, net of unamortized discount | $ | – | $ | 335,651 | ||||||||||||
Common stock subscribed in exchange for assignment of Intellectual Property | $ | – | $ | 715,000 | ||||||||||||
Issuance of preferred stock | $ | 1 | $ | – |
The accompanying notes are an integral part of these condensed consolidated financial statements.
FICAAR,
HFACTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS
History
HFactor, Inc. formerly known as Ficaar, Inc. (the "Company"“Company” or "Ficaar"“Ficaar” or “HFactor”) was incorporated in July 2001 under the name OwnerTel, Inc. The name of the Company was changed to Ficaar, Inc. in December of 2007.2007 and to HFactor, Inc. on November 8, 2022.
The Company operates its business through its wholly owned subsidiary, Standard Canna, Inc. ("Standard"On May 28, 2022, David Cicalese (“Cicalese”), a Florida corporation formed in 2014,an officer and its wholly owned subsidiaries, Standard Cultivation Systems Inc., a Colorado corporation formed in 2014; and Standard Property Group Inc., a California corporation formed in 2014; as well as Precious Holdings, Inc. which was formed in April of 2011 in the state of Delaware and is wholly owned by the Company.
In August 2012, certain shareholders of the Ficaar (the "Shareholders"), representing a majority of the issued and outstanding common stockBoard member of Ficaar entered into an agreement with Gail Levy whereby Cicalese agreed to sell 29,900,000 shares, representing a majority interest in Ficaar, to Levy. Acting as the majority shareholder of the Company, Levy then caused Ficaar to enter into an Agreement and consummated such agreement with Sneaker Charmz,Plan of Merger (the “Merger Agreement”) between the Company, FCAA Merger Sub I, Inc. (“Merger Sub”), a Delaware corporation whereby 72,020,000 shares of common stockand wholly owned subsidiary of Ficaar, was assigned byand HyEdge, Inc. (“Target” or “HyEdge”), a Delaware corporation, wherein Merger Sub and Target would merge, with Target surviving the Shareholders to Sneaker Charmz. Thereafter, Sneaker Charmz, Ficaar and David Cicalese consummated a transaction where the shares of common stock of Ficaar owned by Sneaker Charmz were transferred and assigned to Mr. Cicalese and Mr. Cicalese transferred his ownership of Sneaker Charmz to Ficaar. Thus, Sneaker Charmz becameas a wholly owned subsidiary of Ficaar (the “Merger”). The Merger Agreement was executed on August 6, 2022 and Mr. Cicalese owns 85%the Merger closed on August 9, 2022. The Merger effected a change in control and was accounted for as a "reverse acquisition" whereby Target is the accounting acquiror for financial statement purposes. Accordingly, for all periods subsequent to the Closing Date, the financial statements of the total issuedCompany reflect the historical financial statements of HyEdge and outstanding common stockany operations of Ficaar. In addition, the Company divested Medical Cannabis Network, Inc., a company incorporated pursuantsubsequent to the laws of Delaware and Ficaar's former wholly-owned subsidiary. Mr. Jason Draizin resigned as an officer and member of Ficaar's board of directors and Mr. David Cicalese (President and sole member ofMerger.
Immediately following the Board of Directors of Sneaker Charmz) was appointed as President and a member of the Board of Directors of Ficaar. Following the consummation of the Agreement, Ficaar is engaged inMerger, the business of Sneaker Charmz,HyEdge became the development, marketing and sales of designer charms for footwear.
In January 2014, Mr. David Cicalese, President, a memberbusiness of the Board of Directors and majority shareholder of Ficaar, contributed 100 shares of Precious Holdings, Inc., a Delaware corporation, which consists of all of the issued and outstanding equity of Precious Holdings, Inc. Thus, Precious Holdings Inc. became a wholly owned subsidiary of the Company.
On November 16, 2014, we acquired 100% of the outstanding common stock of Standard Canna, Inc. ("Standard"), a Florida corporation, and its wholly owned subsidiaries, Standard Cultivation Systems Inc., a Colorado corporation; and Standard Property Group Inc., a California corporation, in exchange for 110,000 shares of our common stock pursuant to a Transfer Agreement (the "Agreement"), by and among, the Company and Jonas Zetzel, sole shareholder of Standard.
In June 2015, the Board of Directors and shareholders representing a majority of the issued and outstanding common stock of the Company appointed Dawn Cames as President of the Company and a member of its Board of Directors
In connection with the reverse acquisition and recapitalization, all share and per share amounts have been retroactively restated. Since the transaction is considered a reverse acquisition and recapitalization, accounting guidance does not apply for purposes of presenting pro-forma financial information.
On September 2, 2021, the Company filed an amendment in its articles of incorporation to change its name to HFactor Inc. The Company was able to secure an OTC Bulletin Board symbol HWTR from Financial Industry Regulatory Authority (FINRA).
Present Operations
In connection with the transactions contemplated by the Agreement, the businessThe Company, as a result of the Company,Merger, changed its business focus and commenced operating entirely through its wholly owned subsidiary, Standard, will concentrate onHyEdge, Inc., a Delaware Corporation. The Company engages in the purchase, developmentmanufacturing, marketing, distribution and operationselling of acquiring and developing growing space and related facilities and leasing our facilities to marijuana growers and dispensary owners for their operations in jurisdictions where such operations are consistent with state and local law.HFactor® hydrogen infused drinking water.
FICAAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying (a) condensed consolidated balance sheet at December 31, 2017,2022, has been derived from audited financial statements and (b) condensed consolidated unaudited financial statements as of JuneSeptember 30, 20182023 and 2017,2022, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Registration StatementAnnual Report on Form 10-12G/A10K for the yearsyear ended December 31, 2017 and 20162022 (the “2017 Registration Statement”“2022 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on August 7, 2018.April 14, 2023. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statementsstatement presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and six months ended JuneSeptember 30, 2018,2023, are not necessarily indicative of the results of operations expected for the year ending December 31, 2018.2023.
These condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”) and are expressed in United States dollars. These consolidated financial statements include the accounts of FicaarHFactor Inc. and its wholly owned subsidiaries, all of which are inactive, Standard Canna, Inc., a Florida corporation, and its wholly owned subsidiaries, Standard Cultivation Systems Inc., a Colorado corporation; and Standard Property Group Inc., a California corporation; and as well as Precious Holdings,subsidiary, HyEdge, Inc., a Delaware corporation. All inter-company balances and transactions have been eliminated on consolidation.
Development Stage
8 |
The Company is in the development stage as defined in Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 915, "Development Stage Entities." The fiscal year end is December 31.
The Company is a start-up venture with little or no operating history and has no revenues. In its development stages and infancy, the officers of the Company spent considerable time and effort in research and development in order to create a niche in the cannabis industry.
Going Concern
The financial statements have been prepared on a going concern basis, and do not reflect any adjustments related to the uncertainty surrounding the Company's development stage losses.Company’s recurring losses, working capital deficiency or accumulated deficit.
As of September 30, 2023, the Company had $124,708 in cash to fund its operations. The Company currently has no revenues and has incurred losses duringdoes not believe its development stage. As of June 30, 2018,current cash balance will be sufficient to allow the Company has yet to commence substantial operations. Infund its planned operating activities for the coursenext twelve months. The ability of its start-up activities, the Company has sustainedto continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses and expects to incur operating losses in 2018.until it becomes profitable. These principal factors raise substantial doubt concerning the Company'sCompany’s ability to continue as a going concern. Management has financed the Company'sCompany’s operations principally through government loans, third party loans and from its President who is also a principal shareholderrelated parties, and third part financing. through equity investments into the Company.
It is the Company'sCompany’s intent to continue to attempt to raise funds in this manner and to raise funds through the sale of equity securities until the Company attains profitability. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if
Cash
For purposes of reporting cash flows, the Company is unableconsiders all short-term investments with an original maturity of three months or less when purchased to continue asbe cash equivalents. As of September 30, 2023 and December 31, 2022, the Company held a going concern.cash balance of $124,708 and $148,055, respectively.
Revenue Recognition
Revenue Recognitionfrom sales of the Company’s products is recorded when title and risk of loss have passed to the buyer and criteria for revenue recognition is met. The Company sells its products to individual consumers and resellers upon receipt of a written order. The Company has a limited return policy for defective items that requires that buyers give the Company notice within 30 days after receipt of the products. Due to the immaterial quantities of returned products historically, for the periods ended September 30, 2023 and 2022, the Company recognized revenue at the time of delivery without providing any reserve.
Accounts Receivable
Accounts receivable represents amounts due from the Company’s customers. The Company recognizes revenue when persuasive evidencemaintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management utilizes a specific customer identification methodology. Management also considers historical losses adjusted for current market conditions and the customers’ financial condition and the current receivables aging and current payment patterns. Account balances are charged off against the allowance after all means of an arrangement exists, servicescollection have been rendered,exhausted and the sales pricepotential for recovery is fixedconsidered remote. The Company does not have any off-balance sheet credit exposure related to its customers. As of September 30, 2023 and December 31, 2022, the allowance for doubtful accounts was not material.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out basis) or determinable,market value. The stated cost is comprised of finished goods of HFactor®hydrogen infused drinking water, its related raw material and collectibility is reasonably assured. To datespare parts for machinery. Reserves, if necessary, are recorded to reduce inventory to market value based on assumptions about consumer demand, current inventory levels and product life cycles for the Company has not generated any revenue.various inventory items. These assumptions are evaluated annually and are based on the Company’s business plan and from feedback from customers and the product development team. As of September 30, 2023 and December 31, 2022, the inventory reserves were not material.
FICAAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)Fixed Assets
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)Fixed assets are stated at cost, less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which is generally three to five years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income or expense.
The Company will periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs for the periods ended September 30, 2023 and 2022 were $45,586 and $ $107,342, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period, which includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions. This first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately anticipate actual outcomes.
Based on its evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The Company's evaluation was performed for the tax years ended December 31, 2018 through 2022, The Company does not expect any changes in its unrecognized tax benefits in the current year.
The Company’s policy for recording interest and penalties related to unrecognized tax benefits is to record such expenses as a component of current income tax expense. As of June 30, 2023 and December 31, 2022 the Company has no accrued interest or penalties related to uncertain tax positions.
Use of Estimates
The preparation of consolidated 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates. The accounting estimates that require management’s most subjective judgments include: income taxes, including the estimate of the annual effective tax rate at interim periods and evaluation of uncertain tax positions; the valuation of acquired intangible assets, impairment assessment, and going concern assessment. As of September 30, 2023, there continues to be significant global macroeconomic and geopolitical uncertainty which may impact the Company’s business, results of operations, and financial condition. As a result, many of the Company’s estimates and judgments require increased judgment and carry a higher degree of variability and volatility. As additional information becomes available, the Company’s estimates may change materially in future periods.
Research and Development Expense
Costs related to research and development, which primarily consists of consulting for logo and packaging design, are charged to expense as incurred. The Company has notnot incurred any research and development for the threeperiods ended September 30, 2023 and six months ended June 30, 2018 and 2017.2022.
10 |
The Company computes net income (loss)loss per common share, in accordance with FASB ASC Topic 260, Earning perEarnings Per Share, formerly Statement of Accounting Standards SFAS No. 128, "Earnings per Share", which requires dual presentation of both basic and diluted earnings per share ("EPS") on the face of theshare. Basic income statement. Basic EPSor loss per common share is computed by dividing net income (loss) available to common shareholders (numerator) before and after discontinued operations,or loss by the weighted average number of common shares outstanding (denominator) during the period, including contingently issuable shares whereperiod. Diluted income or loss per common share is computed by dividing net income or loss by the contingency has been resolved. Diluted EPS gives effect to all dilutive potentialweighted average number of common shares outstanding, duringplus the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the numberissuance of common shares, assumed to be purchasedif dilutive, that could result from the exercise of outstanding stock options orand warrants. No potential dilutive common shares are included in the computation of any diluted per share amount when a loss is reported.
Income TaxesStock Based Compensation
The Company accountsapplies the fair value method of ASC 718, Compensation-Stock Compensation, in accounting for income taxes underits stock-based compensation. These standards state that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period, if any. The Company uses the Black-Scholes option pricing model to determine the fair value of its stock, stock option and warrant issuance. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected stock price, volatility over the term of the awards, actual employee exercise behaviors, risk-free interest rate and expected dividends.
Fair Value
FASB ASC 740 (formerly FASB 109) "Accounting820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for Income Taxes". Underall fair value measurements and expands disclosures related to fair value measurement and developments. ASC 740 deferred tax820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires that assets and liabilities measured at fair value are recognizedclassified and disclosed in one of the following three categories:
Level 1 — Quoted market prices for the future tax consequences attributable to differences between the financial statementidentical assets or liabilities in active markets or observable inputs;
Level 2 — Significant other observable inputs that can be corroborated by observable market data; and
Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data.
The carrying amounts of existing assetscash, loan receivable, accounts payable and other liabilities, and their respective tax bases. Deferred tax assetsaccrued interest payable approximate fair value because of the short-term nature of these items.
The fair value of the Company’s debt approximated the carrying value of the Company's debt as of September 30, 2023 and liabilities are measured using enacted tax rates expected to apply to taxable incomeDecember 31, 2022. Factors that the Company considered when estimating the fair value of its debt included market conditions, liquidity levels in the yearsprivate placement market, variability in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assetspricing from multiple lenders and liabilitiesterm of a change in tax rates in recognized in income in the period which includes the enactment date.debt.
Recent Accounting Pronouncements
In June, 2006,October 2021, the FinancialFASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting Standards Board issued FASB Interpretation No. 48 (FIN 48), "Accounting for UncertaintyContract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in Income Taxes" - An interpretation of FASB Statement No. 109 and codified under ASC 740. FIN 48 clarifies the accounting for uncertainty in income taxesa business combination to be recognized in an entity's financial statements in accordance with Statement of Financial Accounting Standards No. 109, "AccountingCodification (“ASC”) 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. ASU 2021-08 is effective for Income Taxes". This interpretation prescribed a recognition thresholdannual periods beginning after December 15, 2022, and measurement attribute for the financial statement recognition and measurement of a tax provision taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods disclosureswithin those years, and transition.
Based on its evaluation,was adopted by the Company has concluded that there are no significant uncertain tax positions regarding recognition in financial statements.on July 1, 2023. The Company's evaluation was performed for the tax years, ended December 31, 2017, 2016, 2015, 2014 and 2013 for US federal income tax and state income taxes, the years which remain subject to examination by major tax jurisdictions as of December 31, 2017.
Recent Accounting Pronouncements
We have considered all other recently issued accounting pronouncements during 2018 and 2017 and do not believe the adoption of such pronouncements willthe new standard did not have a material impact on ourthe Company’s consolidated financial statements.
In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. ASU 2023-05 provides decision-useful information to a joint venture’s investors and reduces diversity in practice by requiring that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). ASU 2023-05 is effective prospectively for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted. The Company does not expect the standard to have a material effect on its consolidated financial statements. All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
FICAAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 3 - NOTES PAYABLE -THIRD PARTY– FIXED ASSETS, NET
Fixed assets, net consist of the following:
Schedule of fixed assets | ||||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Machinery and equipment | $ | 556,261 | $ | 577,645 | ||||
Construction in progress | 3,089 | 3,089 | ||||||
Less accumulated depreciation | (349,090 | ) | (382,543 | ) | ||||
Fixed assets net | $ | 210,260 | $ | 198,192 |
Depreciation expense for the periods ended September 30, 2023 and 2022 was $33,453 and $48,648, respectively. |
TheNOTE 4 – NOTES PAYABLE-THIRD PARTIES
Third party convertible notes payable consists of the following:
Schedule of third party convertible notes payable | ||||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Convertible promissory note with interest at 8% per annum, convertible into common shares at the lesser of: (i) a 50% discount to market price for the Company’s stock or (ii) $ per share. Matures on June 30, 2022. (Currently in default) | $ | 121,369 | $ | 121,369 | ||||
$250,000 convertible promissory notes with interest at 10% per annum, convertible into common shares at any time after 180 days at 30% discount to the lowest daily VWAP during the 10-day period immediately preceding conversion. Matures on May 27, 2022, net of unamortized discount of $ -0- at December 31, 2022. (A) (D) (Currently in default) | 250,000 | 250,000 | ||||||
$152,000 convertible promissory notes with interest at 10% per annum, convertible into common shares at any time after 180 days at 30% discount to the lowest daily VWAP during the 10-day period immediately preceding conversion. Matures on July 22, 2022, net of unamortized discount of $ -0- at December 31, 2022. (B) (D) (Currently in default) | 152,000 | 152,000 | ||||||
$252,000 convertible promissory notes with interest at 10% per annum, convertible into common shares at any time after 180 days at 30% discount to the lowest daily VWAP during the 10-day period immediately preceding conversion. Matures on October 4, 2022, net of unamortized discount of $ -0- at December 31, 2022. (C) (D) (Currently in default) | 252,000 | 252,000 | ||||||
Unsecured promissory note for finder’s fee due with interest at 10% per annum, with monthly payments of $1,000. Matures May 1, 2022, or the earlier of the Company aggregate proceeds exceeding $1,000,000 from the sale of equity securities. (Currently in default) | 75,663 | 72,197 | ||||||
Total Notes Payable-Third Parties | $ | 851,032 | $ | 847,566 |
(A) Includes a warrant for the right to purchase an additional 250,000 shares of Company has issuedCommon Stock, subject to adjustments for anti-dilution. Each Warrant is exercisable for a note with a principal balance due inperiod of five years from the amountdate of $57,734 and $44,234 asissuance at June 30, 2018 and December 31, 2017, respectively. payable at 8% interest and due June 30, 2020. The note is convertible to common stock at the lesser of: (i) a 50% discount to market; and (ii) $0.01an initial exercise price of $1 per share. AsThe exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and recapitalizations. In the event the Company files a registration statement with the Securities and Exchange Commission, the Maturity Date shall be the earlier of June 30, 2018, and December 31, 2017(i) May 27, 2022; or (ii) the date on which the Company has determined that thereraised at least $1,250,000 under a registration statement. Interest is no beneficial conversion feature sincepayable at the Maturity Date. This note is in default and the Company is pursuing discussions with the lender for its extension.
(B)Includes a warrant for the right to purchase an additional 300,000 shares of Company Common Stock, subject to adjustments for anti-dilution. Each Warrant is exercisable for a period of five years from the date of issuance at an initial exercise price of $0.55 per share. The exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and recapitalizations. In the event the Company files a registration statement with the Securities and Exchange Commission, the Maturity Date shall be the earlier of (i) July 22, 2022; or (ii) the date on which the Company has no quoted market valueraised at least $1,500,000 under a registration statement. Interest is payable at the Maturity Date.
(C)Includes a warrant for the right to purchase an additional 300,000 shares of Company Common Stock, subject to adjustments for anti-dilution. Each Warrant is exercisable for a period of five years from the date of issuance at an initial exercise price of $0.55 per share. The exercise price is also subject to adjustment due to certain events, including stock dividends, stock splits and recapitalizations. In the event the Company files a registration statement with the Securities and Exchange Commission, the Maturity Date shall be the earlier of (i) October 4, 2022; or other means(ii) the date on which the Company has raised at least $1,500,000 under a registration statement. Interest is payable at the Maturity Date.
13 |
(D) On December 3, 2021, the Company entered into a Stock Purchase Agreement with Boot Capital LLC (“Boot”), lender for the three notes of (A), (B) and (C), whereby Boot agreed to determine market.retire all of its outstanding warrants (850,000 in total) in exchange for 200 shares of Series D Preferred stock. The Preferred stock shares were issued on March 29, 2022. Accordingly, the Warrant liability of $335,651 as of December 31, 2021 was written-off during the period ended June 30, 2022.
In accordance with ASC 470-20 “Debt with Conversion and Other Options”, the Company allocated $-0- and $654,000 of the derivative liability as discounts against the convertible notes for the period ended September 30, 2023 and year ended December 31, 2022, respectively. The discounts are being amortized to interest expense over the term of the notes using the straight-line method which approximates the effective interest method. The Company recorded $0 and $383,426 of interest expense pursuant to the amortization of the note discounts during the periods ended September 30, 2023 and 2022, respectively.
NOTE 4 - 5 – NOTES PAYABLE - RELATED PARTY
Notes payable to related parties consists of the following:
Schedule of notes payable related parties | ||||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Secured Promissory Note – RP, dated September 30, 2019 Note accrues interest at 10% per anum, due and payable on July 1, 2022 (Currently in default) (A) | $ | 405,918 | $ | 430,116 | ||||
Secured Promissory Note – LK, dated September 30, 2019 Note accrues interest at 10 % per annum, due and payable on July 1, 2022 (Currently in default) (A) | 100,000 | 100,000 | ||||||
Secured Promissory Note – C Lemen, dated July 23, 2020. Note accrues interest at 10% per annum, due and payable on July 1, 2022 (Currently in default) (A) | 90,000 | 90,000 | ||||||
Other Notes Payable-Related Party(Currently in default) (A) | 9,313 | 9,313 | ||||||
Total Notes Payable-Related Party | $ | 605,231 | $ | 605,231 |
(A) | Secured by all of Company’s accounts receivable and inventory. |
NOTE 6 – GOVERNMENT DEBT
Economic Injury Disaster Loan
On June 2, 2021, the Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster Loan program in the amount of $150,000. The loan is secured by all tangible and intangible assets of the Company and payable over 30 years at an interest rate of 3.75 % per annum. Installment payments, including principal and interest, totaling $731.00 monthly, will begin thirty (30) months from the date of the Note, with first payments applied to accumulated accrued interest. As part of the loan, the Company also received an advance of $10,000 from the SBA. While the SBA refers to this program as an advance, it was written into law as a grant. This means that the amount given through this program does not need to be repaid.
Future maturities of government debt are as follows:
Schedule of future maturities of debt | ||||
Period Ending September 30, | ||||
2024 | $ | – | ||
2025 | – | |||
2026 | – | |||
2027 | – | |||
Thereafter | 150,000 | |||
Total Principal Payments | $ | 150,000 |
14 |
NOTE 7 – DERIVATIVE LIABILITIES
The Company has issuedanalyzed the notes payable – related parties and convertible notes payable referred to in Notes 4 and 5 based on the provisions of ASC 815-15 and determined that the conversion options of the convertible notes qualify as embedded derivatives and required the recognition of derivative liabilities.
For the derivative instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date and any resulting gain or loss is recognized as a note payablecurrent period charge to its' majority shareholderthe consolidated statements of operations. The Company estimates the fair value of the embedded derivatives using a Monte Carlo simulation valuation model that combines expected cash outflows with market-based assumptions regarding risk-adjusted yields, stock price volatility, probability of a change of control and Presidentthe trading information of our common stock into which the notes are convertible, as appropriate to value the derivative instruments at inception and subsequent valuation dates and the value is reassessed at the end of each reporting period, in accordance with FASB ASC Topic 815-15.
The aggregate fair value of derivative liabilities as of September 30, 2023 and December 31, 2022 amounted to $801,449 and $801,449, respectively. The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a principal balance duesummary of the assets that are measured at fair value on a recurring basis.
Schedule of asset measured at fair value | ||||||||||||||||
Quoted | Quoted | |||||||||||||||
Prices in | Prices for | |||||||||||||||
Active | Similar | |||||||||||||||
Markets for | Assets or | |||||||||||||||
Identical | Liabilities in | Significant | ||||||||||||||
Consolidated | Assets or | Active | Unobservable | |||||||||||||
Balance | Liabilities | Markets | Inputs | |||||||||||||
Sheet | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Derivative Liabilities: | ||||||||||||||||
September 30, 2023 | $ | 801,449 | $ | – | $ | – | $ | 801,449 | ||||||||
December 31, 2022 | $ | 801,449 | $ | – | $ | – | $ | 801,449 |
The following table sets forth a summary of the changes in the amountfair value of $6,525 asthe Company’s Level 3 financial liabilities that are measured at June 30, 2018 and December 31,2017 payable at 7% interest maturing June 30, 2020.fair value on a recurring basis:
Summary of changes in fair value of liability | Period Ended | Year Ended | ||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Beginning balance | $ | 801,449 | $ | 793,997 | ||||
Aggregate fair value of conversion features upon issuance | – | – | ||||||
Fair value of derivatives reclassified to equity | – | – | ||||||
Net transfer into level 3 | – | – | ||||||
Fair value of warrants netted against common stock issued for stock | – | – | ||||||
Change in fair value of conversion features | – | 7,452 | ||||||
Change in fair value of warrant and stock option derivative liabilities | – | – | ||||||
Ending balance | $ | 801,449 | $ | 801,449 |
NOTE 8 – MERGER AND RELATED TRANSACTIONS
The Merger
On August 6, 2021, the Company, FCAA Merger Sub I, Inc, (‘Merger Sub”), a Delaware corporation and wholly owned subsidiary of Ficaar, and HyEdge, Inc. ("Target" or "HyEdge"), a Delaware corporation, entered into an Agreement and Plan of Merger (the "Merger Agreement") which closed on August 9, 2021 (the "Closing Date"). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into the Target and the separate corporate existence of Merger Sub ceased, with Target continuing its corporate existence as a wholly owned subsidiary of the Company. The Merger effected a change in control and was accounted for as a "reverse acquisition" whereby Target is the accounting acquiror for financial statement purposes. Accordingly, for all periods subsequent to the Closing Date, the financial statements of the Company reflect the historical financial statements of HyEdge and any operations of the Company subsequent to the Merger.
15 |
Prior to the Merger, the Company ceased being an operating company and became a "shell company". Pursuant to the Merger, the Company acquired the business of Target to engage in the business of the development, marketing, and sale of hydrogen-infused water and other consumer goods.
As consideration for the merger, Target shareholders exchanged 100% of Target Stock (as defined in the Merger Agreement) totaling 44,136,473 fully diluted shares into shares of Company Common Stock at a conversion rate of 0.7 As a result, an aggregate of
shares of the company’s Common Stock, shares of Series C Preferred Stock and shares of Series D Preferred Stock were to be issued to the shareholders of Target. As of December 31, 2021, there were of the planned Merger shares of common stock issued and the Series C and D Preferred shares issued.Changes to the Company's Officers and Directors
Effective May 27, 2021, the Company’s Board of Directors appointed Gail Levy as Chief Executive Officer of FICAAR, Inc. On June 1, 2021, in conjunction with the aforementioned change in control, David Cicalese resigned as Secretary and Chairman of the Board of Directors. On June 9, 2021, a majority of Company shareholders elected Gail Levy as Chairman and a member of the Board of Directors. These changes were reported on the Company's form 8-K that was filed on June 10, 2021.
In conjunction with the Merger, Dawn Cames resigned as President, James C. Sanborn was appointed as COO and as a member of the Board of Directors, and Leonard Klingbaum was appointed as a member of the Board of Directors.
On July 22, 2022, the Company entered into a Memorandum of Understanding (“MOU”) with Bear Face Capital LLC (“Bear Face”) and Concorde Consulting Corp (“Concorde”) for an influx of capital. In accordance with the terms of the MOU, the following changes were implemented: (i) Gail Levy resigned as Chief Executive Officer and assumed the position of President for the Company, subject to a two (2) year Employment Contract, renewable annually, at an annual salary of $120,000; (ii) Dawn Cames, former officer for the predecessor company (“FICAAR), was appointed to serve as a Director and Chairman of the Board for the Company and was assigned one (1) share of Series C Preferred stock; (iii) Gail Levy, James C. Sanborn, and Leonard Klingbaum resigned as members of the Board of Directors; (iv) James C. Sanborn resigned as COO; and (v) Gail Levy and James C. Sanborn returned 999,999 shares of Series C Preferred stock to the Company.
NOTE 5 - 9 – COMMITMENTS AND CONTINGENCIES
Legal
–To the best of our knowledge and belief, no material legal proceedings of merit are currently pending or threatened.
Legal Matters:
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business.
To the best of the Company’s knowledge and belief, no material legal proceedings of merit are currently pending or threatened.
Dispute:
The Company is disputing the validity of a convertible promissory note carried over from its merger in August 2021. Since it presently is not possible to determine the outcome of this matter, the note is disclosed in Note 4 to the financial statements with a net balance of $121,369 until its ultimate resolution.
Employment and Consulting Agreements:
On August 15, 2023, Chi Hua Lee is appointed to serve as the Chief Operating Officer of the Company.
Rental:
As a result of the COVID-19 pandemic, Company management and employees have been working remotely and accordingly, incurring no rental expense during the periods ended September 30, 2023, and 2022.
16 |
NOTE 6 - 10 – EQUITY
Common stock:
The Company has authorized $.001$ par value common stock and asstock. As of JuneSeptember 30, 20182023 and December 31, 2017,2022, the Company had 44,093,276 and shares, respectively, of common stock issued and outstanding.
On October 27, 2021,
shares of Common Stock of the Company held by the Company’s Chief Executive Officer were returned to treasury and retired.On December 10, 2021 and December 15, 2021, the Company received total proceeds of $650,000 for the sale of common stock shares at $1.00 per share. The December 15, 2021 sale of shares were issued on January 3, 2022 and accordingly, recorded as common stock subscribed in the accompanying financial statements.
On November 12, 2021, the U.S. Securities and Exchange Commission (“SEC”) issued a Notice of Qualification for the Company's Form 1-A Offering Circular for an offering of the Company’s Common Stock shares under Regulation A+ (the "Offering") of the Securities Act of 1933 (the “Act”). The purpose of the Offering is to allow both accredited and non-accredited potential investors the opportunity to invest directly in the Company. The Offering has a minimum and maximum investment of $25,000 to at a price of $1.00 per share.
During the year ended December 31, 2022, the Company received total proceeds of $1,420,000 for the sale of common stock shares at $1.00 per share.
During the first three quarters of 2023, the Company issued
shares of common stock shares. No cash proceeds from the issuance.Preferred Stock:
The Company has authorized 10,000,000 shares of $.001$ par value preferred stock. The
On August 6, 2021, the Company has no preferredamended its Articles of Incorporation to include Certificates of Designation for two new classes of Preferred Stock – Series C Preferred, authorized shares and, Series D Preferred, authorized shares.
In connection with the Merger with HyEdge, on September 15, 2021, the Company issued outstanding.outstanding calculated on a fully diluted basis at the time of conversion, (ii) divided by the total number of Series C Preferred shares issued and outstanding at the time of conversion.
Additionally, the Company issued
shares of Series D Convertible Preferred stock, non-dividend, with no voting rights. Each share of Series D Preferred stock is convertible into the number of shares of the Company’s common stock equal to 0.01% of the number of Common shares issued and outstanding at the time of conversion.During the year ended December 31, 2022,
shares of Series D Preferred Stock were issued to an investor in connection with the execution of a Leak Out Agreement.On July 22, 2022, the Company entered a Memorandum of Understanding (“MOU”) with Bear Face Capital LLC (“Bear Face”) and Concorde Consulting Corp (“Concorde”) for an influx of capital. In accordance with the terms of the MOU, Gail Levy and James C. Sanborn returned 999,999 shares of Series C Preferred stock to the Company. Dawn Cames, former officer for the predecessor company (“FICAAR”), was appointed to serve as a Director and Chairman of the Board for the Company and was assigned one (1) share of Series C Preferred stock. Impact of above arrangement was recognized in the three months ended March 31, 2023.
During the nine months period ended September 30, 2023,
shares of Series D Preferred Stock were issued without cash consideration.As of September 30, 2023, 999,999 shares of Series C Preferred stock and 17,994,351 shares of Series D Preferred remain unissued.
17 |
NOTE 7 - 11 – INCOME TAXES
The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During the current period, the Company incurred a net loss and therefore has no tax liability.
The Company has U.S. federal and state net operating loss carryovers (“NOL’s”) of approximately $16 million and $13 million at September 30, 2023 and December 31, 2022, respectively, which begin to expire in 2036. Section 382 of the Internal Revenue Code limits the amount of NOL’s available to offset future taxable income when a substantial change in ownership occurs.
The significant components of deferred income tax assets at September 30, 2023 and December 31, 2022 were as follows:
Schedule of components of deferred income tax asset | ||||||||
September 30, | December 31, | |||||||
2023 | 2022 | |||||||
Deferred tax asset: | ||||||||
Net operating loss carry-forward | $ | 3,612,000 | $ | 3,612,000 | ||||
Less: valuation allowance | (3,612,000 | ) | (3,612,000 | ) | ||||
Net deferred income tax asset | $ | – | $ | – |
The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more-likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in management’s judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in
current income.
NOTE 8 - 12 – RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. Details of transactions between the Company and related parties (other than those disclosed in Note 5 and Note 8) are disclosed below:
The following have been identifiedDuring the period ended September 30, 2023, the Company received funds, totaling $465,000, from Bear Face Capital LLC and Concorde Consulting Corp, the Company’s shareholders, to facilitate particular operating activities (2022: $241,000). These funds were classified as related parties:Other Payables as of September 30, 2023 due to their operational nature.
The following balances existed with related parties:NOTE 13 – SUBSEQUENT EVENTS
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
Balance sheet: | ||||||||
Advances Payable -officer | $ | 485 | $ | 425 | ||||
Accrued Interest | $ | 11,629 | $ | 9,647 | ||||
Income Statement | ||||||||
Interest expense | $ | 1,981 | $ | 2,404 |
The Company has evaluated subsequent events through November 14, 2023, which is the date the financial statements were issued, and has concluded that no such events or transactions took place which would require adjustment to or disclosure in the financial statements.
FICAAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 9 - RELATED PARTY TRANSACTIONS (continued)
The President of the company made payments on behalf of the Company. On November 9, 2017, $18,110 of Advances Payable to an officer of the Company and were subsequently reimbursed by the 3rd party holder of the Note Payable and added to its Note. Additionally, on December 31, 2017, $4,367 of Advances Payable to the Company’s attorney were reimbursed by the 3rd party holder of the Note Payable and added to its Note.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis (“MD&A”) is intended to provide an understanding of our financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year.This discussion should be read in conjunction with the Condensed Consolidated Unaudited Financial Statements contained in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related notes and MD&A of Financial Condition and Results of operations appearing in our Registration StatementAnnual Report on Form 10-12G/A10-K as of and for the years ended December 31, 20172022 and 2016.2021. The results of operations for an interim period may not give a true indication of results for future interim periods or for the year.
Cautionary Statement Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended. We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date this Quarterly Report on Form 10-Q is filed.
When this report uses the words “we,” “us,” “our,” or “FICAAR” and the “Company,” they refer to Ficaar, Inc.
Company History and Summary
HFactor, Inc., formerly known as Ficaar, Inc. (the “Company” or “HFactor” or “Ficaar”) was incorporated in July 2001 in the State of Georgia under the name OwnerTel, Inc. The name of the Company was changed to Ficaar, Inc. in December of 2007 and to HFactor, Inc. on September 2, 2022.
The Company’s fiscal year end is December 31.
On May 28, 2021, David Cicalese (“Cicalese”), an officer and Board member of Ficaar entered into an agreement with Gail Levy whereby Cicalese agreed to sell 29,900,000 shares, representing a majority interest in Ficaar, to Levy. Acting as the majority shareholder of the Company, Levy then caused Ficaar to enter into an Agreement and Plan of Merger (the "Merger Agreement") between the Company, FCAA Merger Sub I, Inc. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of Ficaar, and HyEdge, Inc. ("Target" or "HyEdge"), a Delaware corporation, wherein Merger Sub and Target would merge, with Target surviving the transaction as a wholly owned subsidiary of Ficaar (the "Merger"). The Merger Agreement was executed on August 6, 2021 and the Merger closed on August 9, 2021. The Merger effected a change in control and was accounted for as a "reverse acquisition" whereby Target is the accounting acquiror for financial statement purposes. Accordingly, for all periods subsequent to the Closing Date, the financial statements of the Company reflect the historical financial statements of HyEdge and any operations of the Company subsequent to the Merger.
Plan of Operations
Proposed ActivitiesBUSINESS DESCRIPTION
We areHFactor water was created by Gail Levy, HyEdge's founder and CEO. Gail is a successful serial entrepreneur who was looking for a new product that could alleviate the toxic side effects of the cancer chemotherapeutic drugs that had riddled a dear friend. As she researched the properties of hydrogen water, she became more and more enthralled by its potential. Ms. Levy felt she could honor her friend by making hydrogen water immaculate, effective, and accessible to everyone. Enlivened by this mission, she collected a team of experts to help her engineer a natural process to combine hydrogen with water with zero impurities and optimal impact. In 2017, she launched her flagship product through retail and ecommerce channels. HFactor was developed and is manufactured by a team of experts in the U.S. and utilizes a patented chemical-free and magnesium-free process of identifying properties for purchase in Colorado, Washingtonto infuse free hydrogen into its water. Its award winning, environmentally friendly ergonomic pouch keeps the hydrogen potent and California. These projects include the purchase of existing, currently operating facilities, as well as proposed new construction projects. With the assistance of our consultants, cannabis industry experts, we have developed specific criteria in terms of the suitability of existing structures as well as plans for new constructions projects.pure and makes it extremely portable.
More importantly with the assistance of our consultants, we have developed a fully scalable design model centered around maximizing yields and meeting the needs of cannabis cultivators which will be our tenants. We believe that the cornerstone of our model is maximizing yields by properly implementing cutting edge technology that will maintain an ideal controlled environment for our tenant cultivators. It is anticipated that each property will be remodeled, in the case of existing structures; and designed, in the case of new construction, to contain numerous independent growers.
Each space will be a full-scale commercial cultivating facility with bay door access, adequate flowering, vegetative growth and propagating space including but not limited to access to large areas for harvesting and state of the art curing chambers. Our security will be on premise 24 hours per day. An IT camera system will be operational monitoring the inside and outside of the facility. Our design model is fully scalable. We believe that the cornerstone of our model is maximizing yields by properly implementing cutting edge technology that will maintain an ideal controlled environment for our tenant cultivators. This begins with an advanced controlled environment that is protected from the 18 outside environment. Specialized HVAC systems will maintain a constant temperature, humidity, airflow and CO2 with precise controls. High intensity discharge lighting systems will provide the ideal environment for growing. An integrated irrigation system can be modified to each tenant’s specifications and requirements.
Our design model anticipates that our building will have “state of the art” security systems that will fully protect our tenant cultivator’s crops and property as well as allow our tenants to view and monitor their crops remotely. In addition, our tenant cultivators will have a fully secure ingress and egress to our facility. Our design model also features solar power system in order to be more cost efficient and provide less of a carbon footprint. Our design model will ensure that our tenant cultivators will maximize their yields.
Management is currently seeking to identify a suitable warehouse building in the county of Los Angeles, California to “test” the business model. The ideal location will have 10,000 square foot in an area properly zoned for cannabis cultivation. Management estimates that such a location may cost approximately $3,000,000.00. Management expects to locate a suitable location during the fiscal quarter ending September 30, 2018 and entering into a purchase agreement for such property.
ManagementHFactor’s anti-inflammatory and antioxidant benefits appeal to a wide population across every age group, positioning HFactor to capture a significant share in an expanding market. The global market for bottled water is projected to reach $215B by 2025. HFactor has been engageddemonstrated significant market traction, with $2.87M sales in discussions2020, 30M+ followers across Social Media channels.
The quality of our product is achieved through a proprietary manufacturing process. A reverse osmosis filtering system and patent-protected infusion process ensures efficacy, purity, and taste. The efficacy of hydrogen water is backed by over 1,000 published peer reviewed studies demonstrating that hydrogen positively impacts fitness, health, lifestyle, recovery, and wellness.
Our sales strategy involves a diversified, multi-channel approach. Our products are currently on shelves in approximately 5,000+ retail stores across 20 chains in addition to our growing ecommerce presence. Our company prides itself on having a low carbon footprint, primarily due to our eco-conscious packaging and free mail-in recycling program through our partnership with private debt lenders with respectTeracycle.
Our mission statement is to build a brand and corporate culture that, at its essence, exhibits strength in oneself and in one's community. We promote a foundation of "doing well by doing good". This foundation enables HFactor to produce and distribute the highest quality "better for you" consumer products that are conscious to the financing ofcommunity, mind, body, and the initial building locations. Although no agreements or commitments for such funding have been offered, Management believes that it will be able to obtain financing of the initial property; however, the terms of such financing will be less favorable than those offered to non-cannabis business due to the current state of Federal laws as set forth herein. Management believes that, assuming a suitable property is located and secured with a purchase agreement, the property purchase can be closed during the first quarter of 2019.environment
Upon the closingComparison of the property purchase, the company will execute its build out pursuantThree Months Ended September 30, 2023 to the business plans set forth above (i.e., dividing the property into separate leasable growing space for tenant cultivators; each leasable “unit” containing all of the necessary equipment and features for a full scale commercial cultivating facility; including but not limited to:Three Months Ended September 30, 2022
Management anticipatesResults of Operations
Three Months ended September 30, | Percent | |||||||||||||||
2023 | 2022 | Change | Change | |||||||||||||
Revenues | $ | 171,488 | $ | 272,329 | $ | (100,841 | ) | (37% | ) | |||||||
Gross profit | 101,882 | 110,452 | (8,570 | ) | (8% | ) | ||||||||||
Operating expenses | (240,227 | ) | (597,012 | ) | 356,785 | 60% | ||||||||||
Other income (expense) | (12,564 | ) | (138,436 | ) | 125,872 | 91% | ||||||||||
Net loss | $ | (150,909 | ) | $ | (624,996 | ) | $ | 474,087 | 76% |
Net revenues for the three months ended September 30, 2023 were $171,488 as compared to $272,329 for the three months ended September 30, 2022 which resulted from intermittent manufacturing interruptions that the buildout of the property will take at least six (6) months following the date of the consummation of the purchase of the property. Prior to the consummation of the buildout of the property, Management anticipates hiring employees to manage the property and engage the tenant cultivators. Assuming a suitable property is located and secured with a purchase agreement and the property purchase is closed during the first quarter of 2019, the property will be ready to lease to tenant cultivators byoccurred throughout the third quarter of 2019 which would generate2023.
Gross profit for the initialthree months ended September 30, 2023 was $101,882 as compared to $110,452 for the three months ended September 30, 2021. With the Company’s continued effort on improving its margin, its overall gross profit rate has improved from 41% in the three months ended September 30, 2022, to 59% in the current reporting period.
Total operating expenses were $240,227 for the three months ended September 30, 2023 compared to $597,012 for the three months ended September 30, 2022. The 60% decrease was primarily attributable to a reduction in expenses in line with the revenue decrease.
Other expenses were $(12,564) for the three months ended September 30, 2023 compared to $(138,436) for the three months ended September 30,2022. The $125,872 decrease was primarily related to the decline in related party debt obligations.
For the three months ended September 30, 2023, the Company reported a net loss of $150,909 as compared to a net loss of $624,996 for the three months ended September 30, 2022. The significant decline in net loss of $474,087 was attributable to reduction in manufacturing, marketing, payroll and compensation expenses. Last period’s expenses were slightly higher due to the one-off impact of the Company. The company expects to utilize private funding sources to finance the build out of the property. No agreements or commitments for such funding have been offered. Management anticipates that it will need to provide security for the financing of the property and the buildout of the property by way of a mortgage on the property as well as a security agreement for the equipment purchased in the buildout.Merger.
We believe that implementing our design model in an existing building or new construction will be a complete solution for the professional cultivator. Our plans will be dependent upon our ability to raise the capital required to acquire properties and remodel or construct such properties. We also intend to offer to our tenant cultivators certain value-added services that will be provided at additional costs. Such services may include but certainly will not be limited to fertilizer, additives, vitamins, and grow consultants.
Generally, the ownership and operation of real properties are subject to various laws, ordinances and regulations, including regulations relating to zoning, land use, water rights, wastewater, storm water runoff and lien sale rights and procedures.
Zoning sets forth the approved use of land in any given city, county or municipality. Zoning is set by local governments or local voter referendum and may otherwise be restricted by state laws. For example, under certain state laws a seller of liquor may not be allowed to operate within 1,000 feet of a school. There are similar restrictions imposed on cannabis operators, which will restrict where cannabis operations may be located and the manner and size to which they can grow and operate. These zoning restrictions vary in each State, County, City and Township. Zoning can be subject to change or withdrawal, and properties can be re-zoned. The zoning of our properties will have a direct impact on our business operations.
In addition, other laws, ordinances or regulations, such as the Comprehensive Environmental Response and Compensation Liability Act and its state analogs, or any changes to any such laws, ordinances or regulations, could result in or increase the potential liability for environmental conditions or circumstances existing, or created by tenants or others, on our properties. Laws related to upkeep, safety and taxation requirements may result in significant unanticipated expenditures, loss of our properties or other impairments to operations, any of which would adversely affect our cash flows from operating activities.
Our property management activities, to the extent we are required to engage in them due to lease defaults by tenants or vacancies on certain properties, will likely be subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.
The properties that we acquire will be leased to tenant cultivators who will use their leased properties primarily for cultivation and production of cannabis and thus will be subject to the laws, ordinances and regulations of state, local and federal governments, including laws, ordinances and regulations involving land use and usage, water rights, treatment methods, disturbance, the environment, and eminent domain.
In addition, state, local and federal governments also seekComparison of Nine Months Ended September 30, 2023 to regulate the type, quantity and method of use of chemicals and materials for growing crops, including fertilizers, pesticides and nutrient rich materials. Such regulations could include restricting or preventing the use of such chemicals and materials near residential housing or near water sources. Further, some regulations have strictly forbidden or significantly limited the use of certain chemicals and materials. Licenses, permits and approvals must be obtained from governmental authorities requiring such licenses, permits and approvals before chemicals and materials can be used at grow facilities. Reports on the usage of such chemicals and materials must be submitted pursuant to applicable laws, ordinances, and regulations and the terms of the specific licenses, permits and approvals. Failure to comply with laws, ordinances and regulations, to obtain required licenses, permits and approvals or to comply with the terms of such licenses, permits and approvals could result in fines, penalties and/or imprisonment.Nine Months Ended September 30, 2022
As an ownerResults of the properties, we may be liable or responsibleOperations
Nine Months ended September 30, | Percent | |||||||||||||||
2023 | 2022 | Change | Change | |||||||||||||
Revenues | $ | 964,910 | $ | 1,468,447 | $ | (503,537 | ) | (34% | ) | |||||||
Gross profit | 543,902 | 764,175 | (220,273 | ) | (29% | ) | ||||||||||
Operating expenses | (1,369,388 | ) | (2,340,024 | ) | 970,636 | 41% | ||||||||||
Other income (expense) | 662,259 | (511,450 | ) | 1,173,709 | (229% | ) | ||||||||||
Net loss | $ | (163,226 | ) | $ | (2,087,299 | ) | $ | 1,924,072 | (92% | ) |
Net revenues for the actions or inactionsnine months ended September 30, 2023 were $964,910 as compared to $1,468,447 for the nine months ended September 30, 2022. The decrease is mainly due to intermittent manufacturing interruptions that occurred throughout the third quarter of our tenants with respect to these laws, regulations and ordinances.2023.
Gross profit for the nine months ended September 30, 2023 was $543,902, as compared to $764,175 for the nine months ended September 30,2022. With the Company’s continued effort on improving its margin, its overall gross profit rate has slightly improved from 52% in the nine months ended September 30, 2022, to 56% in the current reporting period.
Total operating expenses were $1,369,388 for the nine months ended September 30, 2023 compared to $2,340,024 for the nine months ended September 30, 2022. The Company has purchased the following domain names (pursuant41% decrease was primarily attributable to the Purchase Agreement):reduction in all major categories of expenses due to the aforementioned manufacturing interruptions.
www.standardcanna.com
www.standardcultivation.com
www.standardgrow.com
Our Products, Services and Customers
We operate in a rapidly evolving and highly regulated industry that, as has been estimated by some, will exceed $30 billion in revenue byOther income was $662,259 for the year 2020. We have been and will continuenine months ended September 30, 2023 compared to be aggressive in executing acquisitions and pursuing other opportunities that we believe will benefit us inexpense of $(511,450) for the long-term.
We plan to provide services and solutionsnine months ended September 30,2022. The income was mainly attributable to the regulated cannabis industry throughoutwrite-off of a salary payable balance of $720,000 during the United States by acquiring and developing growing space and related facilities and leasing areas within our facilities to marijuana growers and dispensary owners for their operations in jurisdictions where such operations are consistent with state and local. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the formfirst quarter of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.2023
Comparison of Three Months Ended June 30, 2018 to Three Months Ended June 30, 2017
Results of Operations
Three months ended June 30, | Percent | |||||||||||||||
2018 | 2017 | Change | Change | |||||||||||||
Revenues | $ | - | $ | - | $ | - | - | % | ||||||||
Operating expenses | (4,310 | ) | (2,060 | ) | (2,250 | ) | 109 | % | ||||||||
Other expense-interest | (996 | ) | (548 | ) | (443 | ) | 81 | % | ||||||||
Net loss | $ | (5,306 | ) | $ | (2,608 | ) | $ | (2,693 | ) | 103 | % |
For the threenine months ended JuneSeptember 30, 2018,2023, the Company reported a net loss of $5,306$163,226 as compared to a net loss of $2,608$2,087,299 for the threenine months ended JuneSeptember 30, 2017.2022. The 103% increase$1,924,072 decrease in net loss for the threenine months ended JuneSeptember 30, 20182023 mainly resultedarose from $4,310significant reduction in generalmarketing, payroll and administrative expensescompensation expenses.
Liquidity and Capital Resources
As of September 30, 2023, the Company had $124,708 in cash to fund its operations. The Company reported working capital deficit of $4,786,697 as of September 30, 2023, represents the decline in working capital deficit by $474,246, compared to a working capital deficit of $5,260,943 as of December 31, 2022,
The Company does not believe its current cash balance will be sufficient to allow the Company to fund its planned operating activities for the next twelve months. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail some or all of its planned activities. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating to professional fees, public listingthe recoverability and registration fees,classification of recorded assets and $986 in interest expense.classification of liabilities should the Company be unable to continue as a going concern.
Total operating expenses were $4,306 forAs the three months ended June 30, 2018 comparedCompany continues to $2,060 forincur losses, achieving profitability is dependent on achieving a level of revenues adequate to support the three months ended June 30, 2017.Company's cost structure. The 109% increase was primarily attributableCompany may never achieve profitability, and unless and until it does, the Company will continue to auditneed to raise additional capital. Management intends to fund future operations through additional private or public equity offering and review service feesmay seek additional capital through arrangements with strategic partners of $2,000 and increases in professional feesfrom other sources. There can be no assurances, however, that additional funding will be available on terms acceptable to the Company, or at all. Any equity financing may be dilutive to existing shareholders, which dilution may be significant depending on the terms of $2,000.the transactions.
Interest expense costs were $986 for the three months ended June 30, 2018 compared to $548 for the three months ended June 30, 2017. The amount relates to interests on continued related party loans as well as interest accretion on convertible loans.
Six months ended June 30, | Percent | |||||||||||||||
2018 | 2017 | Change | Change | |||||||||||||
Revenues | $ | - | $ | - | $ | - | - | % | ||||||||
Operating expenses | (10,592 | ) | (2,710 | ) | (7,882 | ) | 291 | % | ||||||||
Other expense-interest | (1,981 | ) | (1,090 | ) | (891 | ) | 82 | % | ||||||||
Net loss | $ | (12,573 | ) | $ | (3,800 | ) | $ | (8,773 | ) | 231 | % |
For the six months ended June 30, 2018, the Company reported a net loss of $12,573 as compared to a net loss of $3,800 for the six months ended June 30, 2017. The 231% increase in net loss for the six months ended June 30, 2018 mainly resulted from $10,592 in general and administrative expenses relating to professional fees, public listing and registration fees, and $1,981 in interest expense.
Total operating expenses were $10,592 for the six months ended June 30, 2018 compared to $2,710 for the six months ended June 30, 2017. The 231% increase was primarily attributable to expenses from the Company’s edgar service fees of $1,932 relating to SEC filing documents and increases in audit and professional fees of $8,000.
Interest expense costs were $1,981 for the six months ended June 30, 2018 compared to $1,090 for the six months ended June 30, 2017. The amount relates to interests on continued related party loans as well as interest accretion on convertible loans.
Liquidity and Capital Resources
As of this date, the Company has not started generating revenues from operations and has financed its operations primarily through the issuance of capital stock by way of convertible loans from third party and related party loans.
The Company’s objectives when managing its liquidity and capital resources are to generate sufficient cash to fund the Company’s operating and working capital requirements. The Company reported working capital deficit of $21,976 at June 30, 2018 as compared to a working capital deficit of $22,902 at December 31, 2017, representing an increase in working capital deficit by $926.
We had cash of $0 and $0, respectively, as of June 30, 2018 and December 31, 2017.
Operating Activities:
For the sixnine months ended JuneSeptember 30, 2018,2023, net cash flow used forby operating activities was $13,500$(8,010) compared to $-0-$(1,448,818) for the sixnine months ended JuneSeptember 30, 2017.2022. The increasesdecline in cash flow used fornegative operating activities for both periods primarily duecashflows was attributable to increasesreduction in operating expenditures.net loss, improvement of receipts from receivables, delay in payments to suppliers and receipts from related parties (classified in other payables).
Investing and Financing Activities:
Sale proceeds of two leased vehicles caused improvement in investing cashflows. Net cash flows provided by (used in) financing activities for the six months ended June 30, 2018 was an additional borrowingwere reduced from $1,220,000 from sales of $13,000common stock shares in 2022 to $(58,195) in net payments from the third party lender added to its existing convertible note, compared to zero for the six months ended June 30, 2017.borrowings in 2023.
Liquidity and Capital Resource Measures:
The Company’s primary source of liquidity has been from convertible loans and third party and related party loans.
Loans and Credit Facilities:Going Concern
1. A term loan withThe Company has experienced a balancenet loss and had an accumulated deficit of $57,734 which bears interest at 8% per annum, maturing June$4,358,828 as of September 30, 20202023. These conditions raise substantial doubt about the Company’s ability to continue absent raising sufficient capital to fund continued operations. Management expects to incur additional losses in the foreseeable future and convertiblerecognizes the need to common stock atraise capital to remain viable. The accompanying financial statements do not include any adjustments that might be necessary should the lesser of: (i)Company be unable to continue as a 50% discount to market; and (ii) $0.01 per share.
2. A term loan payable to an officer of $6,525 which is unsecured, 7% interest bearing maturing June 30, 2020.going concern.
Transaction with Related Parties:
On November 9, 2017, $18,110 of Advances Payable- Officer covering expenses paid for by the company’s president Dawn Cames relating to public listing, legal and audit fees and stock transfer costs, were reimbursed by the 3rdRelated party holder of the Note Payable and added to its Note.loans.
Critical Accounting Policies
Our condensedRefer to Note 2 in the Consolidated Financial Statements for a summary of recently adopted and recently issued accounting standards and their related effects or anticipated effects on our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations orand financial position are discussed in our Registration Statement on Form 10-12G/A for the years ended December 31, 2017 and 2016, and Note 1 to the Condensed Consolidated Financial Statements in this Form 10-Q.condition.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
Inflation and Changing Prices
We do not believe that inflation nor changing prices for the three months September 30, 2023 had a material effect on our operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
22 |
We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of JuneSeptember 30, 2018,2023, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses discussed below.
Internal Control Over Financial Reporting
Evaluation of Disclosure Controls and Procedures
Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company had concluded that the Company's disclosure controls and procedures as of the period covered by this Quarterly Report on Form 10-Q were not effective for the following reasons:
a)The Company has limited segregation of duties amongst its employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
b) The Company's has a limited number of external board members. This deficiency may give the impression to the investors that the board is not independent from management. Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.
Changes in internal control over financial reporting.
Management of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting that occurred during the period covered by this AnnualQuarterly Report on Form 10-K10-Q and determined that there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
From time to time, we may be involved in various claims and legal actions in the ordinary course of business. We are not currently involved in any material legal proceedings outside the ordinary course of our business.
As of the date of this report, there have been no material changes to the Risk Factors disclosed in our Registration StatementAnnual Report on Form 10-12G/A10-K for the yearsyear ended December 31, 2017 and 2016.2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
NoneWe did not have any sales of unregistered equity securities for the three months ended September 30, 2023 other than those that have been previously reported.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.None other than those disclosed in NOTE 4 and NOTE 5. The Company is currently pursuing discussions with the above note holders for their extension.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Filed | Incorporated by Reference | |||||||
No. | Description | Herewith (*) | Filing Type | Date Filed | ||||
2.1 | 8-K | 8/11/2022 | ||||||
3.1 | Articles of Incorporation | 10-12G | 1/24/2018 | |||||
3.2 | Amendment to Articles of Incorporation | 8-K | 8/11/2022 | |||||
3.3 | Bylaws | 10-12G | 1/24/2018 | |||||
3.4 | Amendment to Articles of Incorporation | 8-K | 11/18/2022 | |||||
4.1 | Series C Preferred Stock Designation | 8-K | 8/11/2022 | |||||
4.2 | Series D Preferred Stock Designation | 8-K | 8/11/2022 | |||||
10.01 | Boot Capital Securities Purchase Agreement dated May 27, 2021 | 8-K | 6/10/2022 | |||||
10.02 | Boot Capital Convertible Promissory Note dated May 27, 2021 | 8-K | 6/10/2022 | |||||
10.03 | Boot Capital Warrant dated May 27, 2021 | 8-K | 6/10/2022 | |||||
10.04 | Boot Capital Securities Purchase Agreement dated July 22, 2021 | 8-K | 8/11/2022 | |||||
10.05 | Boot Capital Convertible Promissory Note dated July 22, 2021 | 8-K | 8/11/2022 | |||||
10.06 | Boot Capital Warrant dated July 22, 2021 | 8-K | 8/11/2022 | |||||
10.07 | Boot Capital Securities Purchase Agreement dated October 4, 2021 | 8-K | 10/12/2022 | |||||
10.08 | Boot Capital Convertible Promissory Note dated October 4, 2021 | 8-K | 10/12/2022 | |||||
10.09 | Boot Capital Warrant dated October 4, 2021 | 8-K | 10/12/2022 | |||||
31.1 | Certification pursuant to Section 302 of the | * | ||||||
31.2 | Certification pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 of Principal Financial Officer | * | ||||||
32.1 | Certification pursuant to Section 906 of the | * | ||||||
Inline XBRL Instances Document | * | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | * | ||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * | ||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * | ||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * | ||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | ||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in | * |
Pursuant to the requirements of Section 13 or 15 of the Securities Exchange Act, of 1934, the registrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | ||
November 14, 2023 | By: /s/ Dawn Cames | |